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3 Retailers Working to Minimize Discount Fraud

Posted on Jun 6, 2016 · 4 min read

With most consumers always on the hunt for a good deal, it’s no surprise that discount fraud is on the rise. Too often we see stories about managers buying hundreds of dollars worth of products at a discount in order to sell them for full price and make a profit. Discount fraud also occurs when consumers claim they qualify for an exclusive discount, like a military discount, but have never actually been in the military. With so many coupon sites available with viral codes, it is too easy and tempting for any customer to redeem a military member coupon code in order to receive a discount.

While the numbers for profit and margin loss due to discount fraud are on the rise, there are steps your company can take in order to prevent it. Here are a few companies who are taking action against discount fraud:

Fathead, the industry leader in graphics for large and small spaces, offers an everyday discount to the military community, but needed a way to protect their discount from going viral. By incorporating eligibility verification into their online shopping cart, they were easily able to verify that a customer was affiliated with the military, without having to ask for sensitive information.

Besides protecting their bottom line, Fathead also saw other benefits from adding eligibility verification to their military program including:

  • 700% increase in military member engagement on their site
  • 70% of verified military members were new Fathead customers
  • 60% increase in unique visitors to their landing page

Read the full Fathead success story

Spotify, one of the world’s largest music streaming companies, wanted to offer a deep discount to students on their premium service, but needed a way to verify that each applicant was actually a current student. Through adding eligibility verification, Spotify was able to successfully launch their student pricing program with a gated offer.

Within hours of the launch, the discount had gone viral and students as well as non-students were applying from the discount. Thanks to student eligibility verification, Spotify could rest assured knowing that only students enrolled in a current term had access to the discount, and as many fraudsters soon found out, they couldn’t cheat the system. A reporter at Mashable.com said:

“However, as I found out trying to apply as a non-student, Spotify may ask for additional information and documents such as college email address or a copy of a student ID card, class schedule, letter from a college official, transcript or tuition receipt.”

Read the full Spotify use case

Grizzly Industrial, one of the largest machinery companies in the U.S., prides themselves in offering their customers the best quality products at the lowest prices. Since they offer everyday low prices, they rarely offer any other discounts, but as a thank you to the military community, Grizzly, wanted to offer occasional discounts through their military appreciation program. In order to go through with the military appreciation program, Grizzly needed a way to verify that only military members were able to gain access. With eligibility verification, Grizzly was able to verify the eligibility of military members and coupon codes were only sent to customers who truly qualified.

With eligibility verification, Grizzly found that 17% of customers who tried to redeem the exclusive discount did not actually qualify as a military member.

Read the full Grizzly Industrial success story

As you can see, companies can no longer rely on the method of just “taking their customers word for it,” to redeem a discount due to a high risk of fraud. Incorporating eligibility verification into your sales process is the best way to protect your company from discount fraud.  Eligibility verification gives you the power needed to verify that your customer does in fact qualify for a discount only offered to a certain target market.

Looking to launch an exclusive discount or start protecting your current discounts? Contact [email protected] today to get started.

Madeline Boehmer by Madeline Boehmer