Coupon Fraud: What are the common forms of promo code abuse?
Updated: Apr 21
Based on actual business experiences, “creative” individuals have devised several ways to misuse and abuse promo coupons. For voucher codes distributed online with the intent of attracting new customers only, abusers have learned several workarounds. There are even numerous websites, blogs, and videos dedicated to teaching users how to work the system. Check out common forms of coupon fraud we've discovered while working on Vouchery.
Naturally, it’s not a big deal if one of your users will take advantage of the code several times by creating 2 or 3 accounts with different email addresses. The real problem starts when the company’s employees, affiliates, or partners are the ones involved in the coupon profiteering. I will cover more fraudsters tactics in future articles, but here are a few examples of the most common types of coupon fraud:
The refer-a-friend program is a great incentive to create fake accounts or post the referral code on social media. In the second case, you at least increase your database, however, such practice increases your Customer Acquisition Cost (CAC); those users could sign up directly on your site. Here is a famous Uber example.
Cart abandonment voucher:
Customers already noticed that each time they abandon the basket before finalizing the purchase, you send a retargeting campaign with a discount. Such a coupon incentivizes to finish the purchase, but also to do it again when buying next time.
Solution: Set the Customer promo limits to once or a few times per quarter (or a year, if you prefer).
In order to increase their margin, affiliate networks and agencies register each order as a new customer, using the voucher. The customer pays the full price, the agency gets the discount value.
Solution: Monitor and benchmark Coupons used in each Distributor and flag anomalies for manual review. Set the redemption or budget limits per Vendor if needed.
Reselling own inventory:
It is common in various marketplaces that sellers to buy their own inventory using discounts, and... put it back on sale. They earn a discount value, decreased by your margin. You earn, hmm, fake KPIs.
Solution: As above, monitor and benchmark Coupons redeemed to buy the products of each vendor and limit the coupon use to a unique device ID or browser user agent data. If possible, use promo abuse scoring to flag suspicious Vendors for manual review.
Generating fake orders:
Some vendors go even further, especially when they are the ones responsible for the logistics; they simply generate a fake order. Common in food delivery and car-sharing services, a service provider - the restaurant or the driver creates a discounted order, which in fact doesn’t have to be delivered. Again, they earn a discount value decreased by your margin.
Solution: Monitor and benchmark Coupons issued to be used in a particular vendor and limit the coupon use to a unique device ID or browser user agent data.
Abusing apology voucher:
It's a common story: A customer calls the Hotline dissatisfied with the order or the service she received. Your company appreciates the Customers, so the Customer Care Executive sends the Customer a voucher as an apology. It's a great tactic to prevent the churn until however, the Customer notices she gets the voucher every time she calls.
Solution: Use promo abuse scoring to flag the Customer ID as suspicious. Optionally, give your Customer Care Executives access to which voucher campaigns were distributed to the Customer and how often so she can verify that before issuing another voucher.
Not sure if you're prone to any of the forms of coupon fraud above? Get in touch and we will help you to audit your promos. Get in touch with firstname.lastname@example.org and we will help you audit your coupon process.