10 easy ways to fight coupon fraud

Coupon security is an ever-pressing issue for businesses wanting to increase their return on investment in sales promotion campaigns. 

Coupon fraud has moved from the realms of print rooms and persuasion techniques to the exploitation of bugs, poor programming, and password cracking software. If you need a secure password generator we have something for you.

Statista's report on coupon redemption rate shows that the number of redeemed digital coupons in the U.S. amounted to a total of over 337 million coupons in 2021, up almost 40 million from the figure in the previous year.

In large enterprises, the potential losses can be astronomical and with such large amounts of coupon users and coupons being redeemed digitally, the need to to take preventative measures against coupon fraud and coupon abuse is greater than ever.  

We’ve put together a list of some of the most important changes you can make to your promotion infrastructure and coupon generation process to help you combat this problem.  

Let’s start simple. Tracking coupons needs to be possible for instant customer support and troubleshooting. With decent tracking software, you should be able to view the following:  

Your method of distribution must be moderated and controlled by your employees so you know exactly how your coupons are being used at all times.

It doesn’t matter if it’s on your own app or platform, using coupon wallets to allow your customers to store their e-coupons, or in combination with 3rd party tool integrations such as Braze or Mailchimp to deliver coupons directly to customer inboxes. Either way you and your team have to be the ones controlling the delivery. 

To prevent any possibility of overspending you should always have budget limits on coupon campaigns so they end automatically, without any input from your developers or business team. 

This can be based on either the overall campaign budget you have, or more specifically a limit on the total amount of coupon discounts that you give out.  

Just like budgets, you also want to limit the total coupon redemptions that can be made in a campaign, so that you don’t fall prey to coupon abuse. 

Typically all coupons should be single-use, however, at times you might want to offer some of your premium or dissatisfied clients more redemptions. In this case, setting a campaign coupon redemption limit is a good idea to have an automatic failsafe.  

There are a number of different ways that you can customize your code generation. 

Of course, randomly generated codes will reduce the amount of times that coupon abusers could make an educated guess at your coupon code.

Using prefixes and suffixes allows you to set targeted attributes to batches of coupons, but they also allow you to create even more complex codes. This is not ideal if your customers have to type the entire code into a field though.     

Applying postcode, city or country data to coupons is an important part of tracking and analyzing where redemptions are made, so you know when campaigns don’t go to plan and if you need to use different targeting methods to get new prospects interested. 

A very helpful tool to help limit the spread of coupon is a geofencing software. By drawing geofences around areas on the map you would like your coupons to be redeemed, or not redeemed in some cases.   

A simple trick fraudsters will take advantage of if you let them is going to the cart and leaving without paying to get the cart abandonment coupon every time.

Arguably this is more of a life-hack than it is malicious fraud, but it’s something you can protect yourself against by only rewarding customers on their first purchase, or setting specific conditions that must be met before a cart abandonment becomes available. 

If you’re interested in finding out more about setting these conditions up, you can get a quick demo of our software by clicking the book a demo button anywhere on the website.  

You should already be setting up your coupons attributes so they only become valid after specific conditions are met. 

Setting clearly defined Profile, Device or Payment data as conditions for validation can help you track who is cashing-in your coupon codes, as well as where and when they’re being redeemed. 

One of the best ways you can stop silly accidents from happening is by making sure to test all of your campaigns in ‘sandbox’ mode. 

A staging environment allows you to check for any potential weaknesses your coupons will have, and make coupons with testing codes like ‘TEST-123’ unavailable to the general public and even your employees, which can unfortunately be a problem too.  

Accountability is very important in cases of in-company fraud and genuine mistakes in deployment. 

You must always clearly define user-roles among your team and deployment should get the go-ahead from higher level staff. Always ask yourself: Who should have access to your promotion system. What should people see? 

1. What are the common signs or indicators that a business might be experiencing coupon fraud before implementing these security measures?

Common indicators may include an unusually high volume of coupon redemptions from a specific user or location, repetitive use of the same coupon code, or a sudden spike in redemption rates without a corresponding increase in sales. Anomalies in customer behavior, such as a surge in multiple accounts using identical coupons, could also be indicative of fraudulent activities. Regularly analyzing redemption patterns, closely monitoring customer accounts, and conducting thorough audits on coupon usage can offer a more nuanced understanding of potential fraud signals. Additionally, feedback from customer support regarding disputes or complaints related to coupon validity might serve as an early warning, emphasizing the importance of maintaining open communication channels with users.

2. Can the suggested coupon security measures be integrated with various e-commerce platforms, and are there any compatibility issues to be aware of?

A crucial aspect for businesses is ensuring that the recommended coupon security measures seamlessly integrate with their existing e-commerce platforms. Understanding any potential compatibility challenges can facilitate a smoother implementation process.

3. Are there legal considerations or regulations that businesses need to be aware of when implementing coupon security measures, especially in terms of user data and geolocation tracking?

Given the focus on geolocation tracking and user data, it's essential for businesses to comprehend the legal implications and regulatory requirements associated with implementing these coupon security measures. Ensuring compliance with privacy laws and safeguarding user data is paramount.