How to Secure Your Referral Program in 2019

One of the worst things that can happen to your referral program is a customer getting rewarded for cheating the system. Not only will this make you lose money, it will make your referral program highly ineffective as well. When a customer makes fake referrals, you are not exposing your brand to new people.

Instead, you are only known to one person, the referrer. With this, security measures must be applied if you want to continue having an effective referral program. Today, I will go deeper into the topic of referral fraud.

I will show you what it is and how it is done. Then, I will show you a solution that can prevent it in the future.  

What is Referral Fraud?

Referral Fraud happens when someone wants to exploit your reward system. They’ll do this by participating in the program in an unauthorized way so as to get a reward for ‘free’.

Here are some ways that referrers can do this.

1. Referring Fake Emails

A referral program often asks for two things: the name of the person that you like to refer and their email address. Since email addresses are easy to create, some referrers will create multiple email addresses and input it in your program. The result is that they’ll get the reward without really referring anyone.

2. Creating Fake Accounts

Some referral programs reward the referrer when they get someone to sign up to the website. Again, fraud can be committed by creating multiple emails and signing up with different names. This means that the accounts are not legit.

They are created by the same person. Again, this is done with the reward in mind. Referrers would often do this so as to hit a referral milestone without really inviting new people into the referral program.

3. Using Bots to Receive a Reward

Some referral programs implement contests. This is where referrers with the most referrals are recognized through a leaderboard. These contests often have amazing rewards such as a high end gadget or a huge amount of money.

The reward is more than enough to encourage ‘cheaters’ to join. They have bots that can automatically create emails and new accounts for them and have them all registered under their names. This is all in the name of winning the top reward in your contest.

4. Acting Like a First-Time Customer

You may have decided to release a reward for both referrer and referrals. If the reward for the referrals are attractive, you may find some members creating new accounts just to get the first-time reward. This is a form of cheating for they are not really first-time customers.

5. Spamming Websites with their Referral Link

Some referrers have high hopes of getting more referrals for a short amount of time. This is where they resort to spamming websites particularly discount code or deal sites just to get more referrals. This is the dark side of having a referral program with an attractive reward.

While it can generate conversations about your business, it can also attract people who are not willing to work for the reward. It is natural for people to find the easy way out and this is the reason why cheaters abound in just about any system. From here, you should take the necessary steps to counter this.

If you don’t do this, it can harm your program for you’ll only get fake emails and accounts in your system. You’ll also end up giving up rewards to people that don’t deserve it. This will make you lose money without getting any exposure for your business.

If you want to end this, you should take the following steps. The next section will cover some approaches that you can take in order to lower or eliminate referral fraud in your website.

How to Prevent Referral Program Fraud

1. No Cash Please!

While cash is the reason why small sites have grown bigger, it is not advisable to offer it unless you want to be scammed. Think about it, if you will give away money for every sign-up. Scammers would most likely flock to your site just to make a quick buck.

A good workaround is to work with points instead. These points can then be used for a variety of purposes. They can use it to exchange for a discount code or item in your website.

How is it different from cash? Well, you practically have to force them to use it on your website. Also, you can set a minimum number of points before it can be redeemed. This will discourage scammers from joining your referral program.

2. No Overly High Payouts

There is a danger in offering an extremely high reward. While it can definitely encourage more people to join your program, it can also attract a ton of scammers. The key is to provide a reward that is attractive enough to get more referrers but it is not that over-the-top that scammers come your way.

Remember that you have created a referral program because you want to get more brand exposure and increase your bottom line. Scammers will not help you do that. Instead, they will make self-referrals and make you release rewards that they don’t deserve.

So it may be best to stick with a balanced reward instead of a highly attractive one.

3. Track More Than IPs

Tracking IPs is essential for your referral program protection. It prevents multiple sign-ups because you can track if they are made from the same computer or location. Does this mean that you should automatically block accounts with the same IPs? No.

Some people will ask family members or friends to sign up with the same computer. However, you need to start getting concerned if they have created more than 3 accounts from the same location. This is a signal that they are trying to cheat the system.

For this, you may need the help of a click fraud detection system. This way, you don’t need to manually search for IPs everytime. This tool will automatically block IPs that has some suspicious  activity.

You can look for a good tool or service on Google.

However, tracking IPs is not enough.  It is okay but it not enough. You’ll be surprised that scammers are so much smarter than what you think they are.

They often have a workaround for IP bans. They simply rotate IPs by purchasing them or having a virtual private network or VPN. Because of this, you need to track more than just IPs.

You need to implement cookies in your referral links as well as connect an account to a particular transaction ID or account ID. Cookies help you track the transactions that happens within your system. Cookies are often appended with the links that are shared on social media and on different websites.

By tracking cookies, you can track duplicate sessions easily. Also, you can track the transaction ID. This is the number that comes when the sale is done.

Once there are multiple transactions that are quite similar to each other, your system must raise a red flag informing you about this. A tool that can record this as fraud will be helpful.

4. Have a System that Prevents Certain Referrals

There are certain referrals that you don’t need.

First, you don’t need existing customers. A referral program is designed to get new customers. Getting existing customers into your program is just redundant and useless.

Second, you don’t need referrers who refer themselves. That is like not getting any referrals and still paying for the reward. That will quickly hurt your bottom line.

5. Set Expiration Dates

Another strategy that can prevent scammers from joining your program is to set expiration dates in your discount coupons or rewards. This way, they have to use multiple coupons in a short period of time. This system usually prevents referrers from wanting more coupons.

Since they’ll expire, they will often be contented with just one coupon.

6. Have a Set of Terms and Conditions

It is important that you have a set of terms of conditions for your referral program. You should ask all potential referrers to agree to this before they join your program. In this page, highlight some points of termination.

List the types of violations if you must. This way, you have a written page that you can show in case you decide to terminate a particular referrer. This is essential if you want to protect yourself right from the beginning of your referral program.

7. Manually Review Referrals

I hate to break it to you. But you need to manually review your referrals. While you can set up a system that can review IP addresses, cookies and transaction IDs.

You still need human intuition to know if a certain transaction or referral is legit or not. You’ll get more used to it the more you do it. After all, scammers often follow a certain set of behaviors.

It is also advisable to train your staff to do this as well. This way, you don’t have to review every referral by yourself. You can just ask your staff members to do it.

8. Use a Referral Program with a Security System

The best way to get rid of referral fraud in your referral program is to have a built-in security system in your referral software. This way, you don’t need to worry about manually tracking each referral and extracting the needed referral information from your database. Example, look at how Marin Software handles their referral program.

Though they offer an extremely high referral reward, they have strict terms and conditions in place to help prevent fraud. Using a powerful referral system, you will find that referral program fraud is rarely an issue. In the end, fighting referral program fraud does not have to be challenging if you take a proactive approach to preventing it.

While you can’t eliminate all fraud, there are several things you can do to help prevent it. So, take the time to set up a solid referral program, with fraud prevention strategies in place.  This will help discourage people from trying to take advantage of you, yet still allow authentic referrals to come to your store.

One software that has a built-in protection system is Omnistar Software. OmniStar is a referral program software that aids online business owners to easily implement a referral program or contest online.

It has the following characteristics:

1. Transaction ID Monitor

Tracking the transaction ID will allow you to know where the crime has been committed. It will allow you to see who did it and how it is done. Omnistar has a system that tracks all transaction IDs (or Order IDs) for you.

2. IP and Click Monitor

On top of that, they also have an IP and click monitor that is built inside their system. With this, you no longer need to hire a clicks management service. OmniStar already has it inside their software.

3. An Admin Dashboard for Manual Approval of Referrals

As mentioned, you need a system to manually review your referrals. Omnistar allows you to do this right from their dashboard. With this, you can look for strange activity and train your staff to spot it. This is exactly what you need to weed out the scammers from the real referrals.

4. Duplicate Blocking

As I have told you earlier, you don’t need self-referrers and existing customers in your system. Omnistar has a way to prevent this through its duplicate blocking feature. With this, you don’t need to manually review the email addresses, names and IPs.

The software will automatically do the work for you.

5. Transaction Verification

Aside from verifying referrals, you can also verify transactions before sending rewards. This ensures that you will not be on the losing side when it comes to handing out rewards for your program. That’s how you counter referral program fraud.

Now couple this with a set of terms of conditions and you’re all set.  When you choose a shopify referral software you have to make sure that you choose a software that can help you detect fraud. Battling referral fraud doesn’t need to be hard.

You just need to implement some steps that will prevent scammers from joining your system and protect your referral program from common fraudulent activities.