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August 12, 2020 - Akshay Sharma

How to Stop Promotion Abuse and Grow Your Business with Real Customers

Most businesses get excited when they see that people are engaging with their new promotion and taking advantage of savings or discounts. More redemptions mean more interest in your product, and it affords your brand more opportunities to turn interested customers into loyal, long-term brand advocates.

However, can there be too much of a good thing?

If those redemptions are actually the result of fraud or promotion abuse, then the answer is “yes.”

Coupon and promotion fraud is a harsh reality that costs businesses thousands of dollars per year. Without proper safeguards or detection methods to stop promotion abuse, fraudsters may continue to milk your promotions for their own gain and leave you to pick up the tab.

What Is Promotion Abuse?

Promotion fraud can take many forms, but the premise remains the same: fraudsters will try to find loopholes or other ways to circumvent your rules to take advantage of your promotion for their own gain. 

For example, if you’re running a one-time coupon on a product, a fraudster may try to create multiple fake accounts to use the coupon more than one time. 

In doing so, they’re violating the terms and conditions you intended for your promotion. In many cases, this leads to higher operational costs for the business, monetary losses associated with the promotion, and a lack of real, loyal customers that the promotion was supposed to attract.

What’s more, the damage caused by promotion abuse may also negatively impact your brand image, the service you provide to good customers, and your desire to offer promotions in the future.

How Does Promotion Abuse Occur?

Any business that runs a coupon, discount, or promotion is vulnerable to promotion abuse, regardless of the promotion itself. In the current COVID-19 landscape, our research shows that more companies are running promotions to generate business, and promotion abuse fraud is rising, too. 

One of the most common ways promotion abuse fraud occurs is by the mass registration of fake accounts. This is usually the result of a botnet attack, wherein one fraudster or an organized crime ring creates multiple accounts to take advantage of a promotion. 

These attacks deploy sophisticated techniques that are often undetected by traditional fraud prevention methods.  By coordinating and changing their attack patterns, their activities often come across as legitimate because the individual accounts look authentic.   

Promo code abuse, referral code rewards, and free gifts with purchase are common targets for promotional fraud. In each of these, something of tangible value is offered to the buyer. For example, Elon Musk’s Tesla referral program was shuttered earlier this year because of its supposed fraud-related impact. Tesla owners were running PPC ad campaigns with their unique referral codes to get thousands of dollars in referral bonuses. 

A similar scam involving Uber allowed one user to amass tens of thousands of dollars in ride credits. Uber claims the person violated its terms and conditions in using email blasts and paid ads to earn the credits.

Promotions that involve physical goods are also particularly vulnerable to abuse. Users can leverage tactics similar to the ones above, then resell their winnings in secondary markets and reap the cash rewards. 

Why Traditional Fraud Detection Is No Longer Enough

Many companies that already have fraud detection software or systems in place may be surprised that promotion abuse still occurs. This is usually due to one or more of the following:

Lack of Scale

Many fraud detection methods are unable to recognize large-scale coordinated attacks. Because individual accounts may look legitimate, larger crime rings often go unnoticed. 

Reactive, Not Proactive, Detection

Supervised machine learning needs constant updating as new information becomes available. The reactive approach means companies must take action against fraud after it occurs rather than prevent it altogether.

Inaccurate Detection

Fraud detection methods may struggle to differentiate authentic users from fraudsters. False positives can be detrimental to a brand, as they may scare away good customers.

No Real-Time Capability

Legacy systems often lack real-time review, which makes it impossible to detect and prevent fraud as it occurs. Real-time functionality can help companies make decisions in milliseconds and mitigate financial and reputational damage related to fraud.

How DataVisor Is Putting Promotion Abuse in Its Place

The fear of promotion abuse shouldn’t prevent companies from running promotions. After all, a good promotion can help to attract the right customers and build loyal fans in the process. Making them less profitable as a means to avoid fraudsters can do damage to your brand. 

Instead, DataVisor is helping companies overcome promotion abuse through AI machine learning fraud detection. 

DataVisor’s unsupervised machine learning doesn’t rely on rules training or labeled data to make accurate decisions. It’s designed to review data on a holistic level to detect large-scale crime rings and mass registered fake accounts to prevent fraud in real time. 

When applied specifically to promotion abuse, DataVisor analyzes user behavior on a large scale to detect suspicious activities. This allows the platform to detect instances of fraud earlier with fewer false positives and mitigate the impact on your organization.

To date, DataVisor has detected 30% more bot-registered accounts that are abusing company promotions. Companies are capturing fake accounts 5-10 days earlier than with previous solutions. Arguably most importantly, DataVisor solutions detect fraud with a 99%+ accuracy rating.

Join Our Upcoming Webinar on Stopping Promotion Abuse

Is promotion abuse killing your profits? At DataVisor, we believe the first step in fighting back is to understand the problem you face and why your current methods aren’t serving your needs in the best way possible.

Join us for our upcoming webinar, Stop Promotion Abuse and Grow Your Business with Real Customers, on August 18. Here, you’ll learn more about DataVisor’s machine learning solution and its application in promotion abuse and discover how we helped one travel platform save $20M in promo abuse scams.

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about Akshay Sharma
Akshay Sharma is a Solutions Architect at DataVisor.