Video: Do I need to worry about fraud in my referral program?

With any rewards program there is a risk of users attempting to game the system. In this section we go over – Do I need to worry about fraud in my referral program? And the reasons a user would want to do this.

Why Should You Worry About Fraud In Your Customer Referral Program from SaaSquatch on Vimeo.

Full Transcription

Hi, welcome to our bonus chapter on customer referral programs. What we want to cover here is a topic that’s not talked about enough in online marketing, why should you worry about fraud. When it comes to a customer referral program, we’d all love to believe are customers are good, honest people that just want to help us succeed, but it’s built in to human nature that when they see a shortcut to help them complete the referral program, they’re going to take it.

Example of Fraudulent Behavior

I’m just going to use a simple example of what we’ve all seen or at least thought of doing with any sales compensation structure. The way sales compensation structures work is we put a big pot of gold at the end of the maze and say ok, go through this complicated path in the maze and end up with something that helps my business and gets you the compensation. An example of this might be “Hey, go sign up a new customer, and for every new customer I’ll give you $1000.” and that’s a pretty simple comp structure, but what ends up happening is sales people, just like the rest of us, start to notice there’s actually a shortcut, and you might have seen it too in this maze.

Why they do it

Instead of going through the complicated process where they qualify, where they determine the decision maker, they ensure that there’s a good fit, they make sure that there’s budget, timeline, authority, all these other things, they’ve actually noticed there’s a shortcut they can take, which is, they’ve found a way they can take a potential customer from zero to sold in lets say a month in this case.

Bringing in bad customers

However, because they’ve skipped all those other steps, they’ve actually brought in a really bad customer, this is a customer who is going to have lots of support problems, this is a customer who is going to have a very small lifetime with us in fact, they’re going to have such a bad experience.They’re going to leave very quickly, they’re going to say bad things about us because they never really were a qualified customer, but the salesperson still got the compensation.

Wrapping Up

This is not to nag on salespeople, this is just to say it’s part of human nature that if we don’t constantly watch the rules, change the maze and block off the path leading to these accidental ways to win, then we’re going to end up bringing on this lot of customers we probably don’t want or we’re going to reward people for doing a lot of actions that didn’t really help us. That wraps up our session on do you need to worry about fraud in your customer referral program.