What store wouldn’t want more loyal customers? A proven tactic for driving loyalty is a well-designed and well-executed customer loyalty program. From retaining existing customers to attracting and converting new customers to loyal ones, a rewards/loyalty program is an easy way to ensure your customers continue to visit your locations.
But business owners and managers know that customer loyalty programs also come with certain risks. Fraudsters can take advantage of your loyalty program — a type of program those savvy to the industry or business know is likely low on a company’s radar to monitor abuse. Find out more about loyalty program fraud and what you can do about it.
What Are the Pros and Cons of a Loyalty Program?
Retaining current customers is just as important as attracting new ones, and implementing a rewards program is a powerful tactic on the customer journey. A study from Forbes found that loyal customers spend, on average, 31% more and are 50% more likely to try new products. It sounds like a win-win scenario, right?
Rewards programs make it easier for companies to invest in their customer base and remain engaged. Some of the benefits of loyalty programs include:
- Customer Appreciation: Loyalty programs don’t just boost your profits — they also help customers save. Rewards show your clientele that their business truly matters.
- Incentivized shopping: When customers sign up for a loyalty program, you can gather their information and turn it into a mailing list. This makes it easier for you to remain at top of your mind and also advertise with your target audience. This can be especially helpful in boosting sales during slower seasons.
- Increased brand awareness: In terms of marketing, loyalty programs help ensure your brand is easily recognized and remembered by your customers. With updates on their current reward status, they’ll think of you first when it’s time to purchase.
Like many other programs, rewards come with certain drawbacks. Discounts of any kind will eat into your bottom line. What’s more, this is a competitive tactic — making your loyalty program stand out among the others that exist everywhere else is hard. And if it’s not implemented and monitored properly, the profitability can be inconsistent.
What Is Loyalty Program Liability?
Loyalty program liability is an estimate of the total amount your company will need to reserve to pay for redemption. Accounting rules indicate that this should appear on the balance sheet for the expected costs of redemption for all issued points.
If you consider this eventual debt properly, your rewards/program will have done its job — help you maintain a clientele and increase your profits. If not, this failure can have a sizeable impact on your company’s financial health.
What Are the Risks of a Loyalty Program?
The primary risk lies in fraudulent behavior, which could be on the part of an employee or customer. While tracking and resolving loyalty fraud from external parties is a lower priority in the realm of loss prevention solutions, one area that’s fast and easy to identify and resolve is internal loyalty program fraud.
Some employees will try to take advantage of the system for their own benefit. And the danger with internal loyalty fraud is that employees may justify this activity as not doing anything wrong. The most common instance of internal loyalty fraud we find is the creation of fraudulent accounts.
If a customer did belong to the program, the points would have been earned and used anyway — right?
This is especially true when there’s no incentive for the employee to communicate the program to customers because few checks and balances are in place at the store level. And once one employee decides to engage in this activity, others often follow. Aside from personal gain, these employees also undermine the loyalty program results for their location.
Examples of Loyalty Program Fraud
Not resolving internal fraud can ultimately impact your P&L. So why not know what to look for and take some easy preventative measures to prevent internal issues? The most common types of internal loyalty program fraud include:
Creating Fraudulent Accounts
- Creating their own loyalty account and collecting rewards from customers not using the loyalty program at the time of purchase
- Creating loyalty accounts for friends/family members, then entering that loyalty account onto customer purchases and taking the reward points
Stealing Rewards Points
- Finding receipts of transactions not added to a loyalty program and adding them onto their own accounts after the fact
- Using available loyalty rewards from a customer’s account on their own purchase
Gaming the System
- Entering fake customer data to increase their capture rate
- Signing up fake or random customers to a loyalty program to earn a reward or incentive from the company
- Creating and managing several fake loyalty accounts, even as fraudulent ones are found and deactivated
Loyalty Program Fraud Prevention in Action
The good news is that knowing is half the battle. With custom solutions, it’s easy to find and resolve loyalty issues. Here are some things you can do to help prevent loyalty fraud at your business:
Mystery Shops
You’re probably already doing mystery shops in some or all of your locations. Adding or editing one criterion of that secret shop is simple and probably free. It’s a great way to spot-check the team’s performance. It’s also a powerful tool for accountability when parameters of mystery shop criteria are consistently communicated to teams.
Remote Audits
As more solutions go virtual, so have mystery shops. At DTiQ, our expert auditors are trained to scan thousands of hours of video so they can virtually and anonymously spot-check complex, multi-step operational procedures and selling behaviors. And depending on how we integrate with your systems, we can layer on audio and analytics for deeper insights.
Audio Surveillance
The simple addition of audio to select surveillance cameras (normally the ones at your register areas) empowers any of your team members with access to take a quick listen to what employees and customers are saying during a transaction. This tool more objectively assesses the execution of selling and loyalty behaviors, coaches for improvement, and secures proof if needed to support fraud investigations.
Exception-Based Reporting (EBR)
The most technically advanced solution also offers the broadest benefit. By integrating your POS system with a smart tool like DTiQ’s analytics, our machine learning and expert auditors review transaction trends and flag those that are out of the norm (like 10 rewards account created in a row when your location averages only three a day). We can even save your teams the time and effort of an investigation by sending in one of our forensic investigators to resolve the fraudulent incident.
Trust DTiQ for Loyalty Fraud Support
Let us help you craft a comprehensive loss prevention strategy that incorporates your business’s loyalty program. Our personalized business intelligence solutions help improve the customer experience while providing the detailed insights you need to expertly manage your company. Book a demo today for more information about loyalty fraud prevention, our subscription pricing, and our services.
What store wouldn’t want more loyal customers? A proven tactic for driving loyalty is a well-designed and well-executed customer loyalty program. From retaining existing customers to attracting and converting new customers to loyal ones, a rewards/loyalty program is an easy way to ensure your customers continue to visit your locations.
But business owners and managers know that customer loyalty programs also come with certain risks. Fraudsters can take advantage of your loyalty program — a type of program those savvy to the industry or business know is likely low on a company’s radar to monitor abuse. Find out more about loyalty program fraud and what you can do about it.
What Are the Pros and Cons of a Loyalty Program?
Retaining current customers is just as important as attracting new ones, and implementing a rewards program is a powerful tactic on the customer journey. A study from Forbes found that loyal customers spend, on average, 31% more and are 50% more likely to try new products. It sounds like a win-win scenario, right?
Rewards programs make it easier for companies to invest in their customer base and remain engaged. Some of the benefits of loyalty programs include:
- Customer Appreciation: Loyalty programs don’t just boost your profits — they also help customers save. Rewards show your clientele that their business truly matters.
- Incentivized shopping: When customers sign up for a loyalty program, you can gather their information and turn it into a mailing list. This makes it easier for you to remain at top of your mind and also advertise with your target audience. This can be especially helpful in boosting sales during slower seasons.
- Increased brand awareness: In terms of marketing, loyalty programs help ensure your brand is easily recognized and remembered by your customers. With updates on their current reward status, they’ll think of you first when it’s time to purchase.
Like many other programs, rewards come with certain drawbacks. Discounts of any kind will eat into your bottom line. What’s more, this is a competitive tactic — making your loyalty program stand out among the others that exist everywhere else is hard. And if it’s not implemented and monitored properly, the profitability can be inconsistent.
What Is Loyalty Program Liability?
Loyalty program liability is an estimate of the total amount your company will need to reserve to pay for redemption. Accounting rules indicate that this should appear on the balance sheet for the expected costs of redemption for all issued points.
If you consider this eventual debt properly, your rewards/program will have done its job — help you maintain a clientele and increase your profits. If not, this failure can have a sizeable impact on your company’s financial health.
What Are the Risks of a Loyalty Program?
The primary risk lies in fraudulent behavior, which could be on the part of an employee or customer. While tracking and resolving loyalty fraud from external parties is a lower priority in the realm of loss prevention solutions, one area that’s fast and easy to identify and resolve is internal loyalty program fraud.
Some employees will try to take advantage of the system for their own benefit. And the danger with internal loyalty fraud is that employees may justify this activity as not doing anything wrong. The most common instance of internal loyalty fraud we find is the creation of fraudulent accounts.
If a customer did belong to the program, the points would have been earned and used anyway — right?
This is especially true when there’s no incentive for the employee to communicate the program to customers because few checks and balances are in place at the store level. And once one employee decides to engage in this activity, others often follow. Aside from personal gain, these employees also undermine the loyalty program results for their location.
Examples of Loyalty Program Fraud
Not resolving internal fraud can ultimately impact your P&L. So why not know what to look for and take some easy preventative measures to prevent internal issues? The most common types of internal loyalty program fraud include:
Creating Fraudulent Accounts
- Creating their own loyalty account and collecting rewards from customers not using the loyalty program at the time of purchase
- Creating loyalty accounts for friends/family members, then entering that loyalty account onto customer purchases and taking the reward points
Stealing Rewards Points
- Finding receipts of transactions not added to a loyalty program and adding them onto their own accounts after the fact
- Using available loyalty rewards from a customer’s account on their own purchase
Gaming the System
- Entering fake customer data to increase their capture rate
- Signing up fake or random customers to a loyalty program to earn a reward or incentive from the company
- Creating and managing several fake loyalty accounts, even as fraudulent ones are found and deactivated
Loyalty Program Fraud Prevention in Action
The good news is that knowing is half the battle. With custom solutions, it’s easy to find and resolve loyalty issues. Here are some things you can do to help prevent loyalty fraud at your business:
Mystery Shops
You’re probably already doing mystery shops in some or all of your locations. Adding or editing one criterion of that secret shop is simple and probably free. It’s a great way to spot-check the team’s performance. It’s also a powerful tool for accountability when parameters of mystery shop criteria are consistently communicated to teams.
Remote Audits
As more solutions go virtual, so have mystery shops. At DTiQ, our expert auditors are trained to scan thousands of hours of video so they can virtually and anonymously spot-check complex, multi-step operational procedures and selling behaviors. And depending on how we integrate with your systems, we can layer on audio and analytics for deeper insights.
Audio Surveillance
The simple addition of audio to select surveillance cameras (normally the ones at your register areas) empowers any of your team members with access to take a quick listen to what employees and customers are saying during a transaction. This tool more objectively assesses the execution of selling and loyalty behaviors, coaches for improvement, and secures proof if needed to support fraud investigations.
Exception-Based Reporting (EBR)
The most technically advanced solution also offers the broadest benefit. By integrating your POS system with a smart tool like DTiQ’s analytics, our machine learning and expert auditors review transaction trends and flag those that are out of the norm (like 10 rewards account created in a row when your location averages only three a day). We can even save your teams the time and effort of an investigation by sending in one of our forensic investigators to resolve the fraudulent incident.
Trust DTiQ for Loyalty Fraud Support
Let us help you craft a comprehensive loss prevention strategy that incorporates your business’s loyalty program. Our personalized business intelligence solutions help improve the customer experience while providing the detailed insights you need to expertly manage your company. Book a demo today for more information about loyalty fraud prevention, our subscription pricing, and our services.
What store wouldn’t want more loyal customers? A proven tactic for driving loyalty is a well-designed and well-executed customer loyalty program. From retaining existing customers to attracting and converting new customers to loyal ones, a rewards/loyalty program is an easy way to ensure your customers continue to visit your locations.
But business owners and managers know that customer loyalty programs also come with certain risks. Fraudsters can take advantage of your loyalty program — a type of program those savvy to the industry or business know is likely low on a company’s radar to monitor abuse. Find out more about loyalty program fraud and what you can do about it.
What Are the Pros and Cons of a Loyalty Program?
Retaining current customers is just as important as attracting new ones, and implementing a rewards program is a powerful tactic on the customer journey. A study from Forbes found that loyal customers spend, on average, 31% more and are 50% more likely to try new products. It sounds like a win-win scenario, right?
Rewards programs make it easier for companies to invest in their customer base and remain engaged. Some of the benefits of loyalty programs include:
- Customer Appreciation: Loyalty programs don’t just boost your profits — they also help customers save. Rewards show your clientele that their business truly matters.
- Incentivized shopping: When customers sign up for a loyalty program, you can gather their information and turn it into a mailing list. This makes it easier for you to remain at top of your mind and also advertise with your target audience. This can be especially helpful in boosting sales during slower seasons.
- Increased brand awareness: In terms of marketing, loyalty programs help ensure your brand is easily recognized and remembered by your customers. With updates on their current reward status, they’ll think of you first when it’s time to purchase.
Like many other programs, rewards come with certain drawbacks. Discounts of any kind will eat into your bottom line. What’s more, this is a competitive tactic — making your loyalty program stand out among the others that exist everywhere else is hard. And if it’s not implemented and monitored properly, the profitability can be inconsistent.
What Is Loyalty Program Liability?
Loyalty program liability is an estimate of the total amount your company will need to reserve to pay for redemption. Accounting rules indicate that this should appear on the balance sheet for the expected costs of redemption for all issued points.
If you consider this eventual debt properly, your rewards/program will have done its job — help you maintain a clientele and increase your profits. If not, this failure can have a sizeable impact on your company’s financial health.
What Are the Risks of a Loyalty Program?
The primary risk lies in fraudulent behavior, which could be on the part of an employee or customer. While tracking and resolving loyalty fraud from external parties is a lower priority in the realm of loss prevention solutions, one area that’s fast and easy to identify and resolve is internal loyalty program fraud.
Some employees will try to take advantage of the system for their own benefit. And the danger with internal loyalty fraud is that employees may justify this activity as not doing anything wrong. The most common instance of internal loyalty fraud we find is the creation of fraudulent accounts.
If a customer did belong to the program, the points would have been earned and used anyway — right?
This is especially true when there’s no incentive for the employee to communicate the program to customers because few checks and balances are in place at the store level. And once one employee decides to engage in this activity, others often follow. Aside from personal gain, these employees also undermine the loyalty program results for their location.
Examples of Loyalty Program Fraud
Not resolving internal fraud can ultimately impact your P&L. So why not know what to look for and take some easy preventative measures to prevent internal issues? The most common types of internal loyalty program fraud include:
Creating Fraudulent Accounts
- Creating their own loyalty account and collecting rewards from customers not using the loyalty program at the time of purchase
- Creating loyalty accounts for friends/family members, then entering that loyalty account onto customer purchases and taking the reward points
Stealing Rewards Points
- Finding receipts of transactions not added to a loyalty program and adding them onto their own accounts after the fact
- Using available loyalty rewards from a customer’s account on their own purchase
Gaming the System
- Entering fake customer data to increase their capture rate
- Signing up fake or random customers to a loyalty program to earn a reward or incentive from the company
- Creating and managing several fake loyalty accounts, even as fraudulent ones are found and deactivated
Loyalty Program Fraud Prevention in Action
The good news is that knowing is half the battle. With custom solutions, it’s easy to find and resolve loyalty issues. Here are some things you can do to help prevent loyalty fraud at your business:
Mystery Shops
You’re probably already doing mystery shops in some or all of your locations. Adding or editing one criterion of that secret shop is simple and probably free. It’s a great way to spot-check the team’s performance. It’s also a powerful tool for accountability when parameters of mystery shop criteria are consistently communicated to teams.
Remote Audits
As more solutions go virtual, so have mystery shops. At DTiQ, our expert auditors are trained to scan thousands of hours of video so they can virtually and anonymously spot-check complex, multi-step operational procedures and selling behaviors. And depending on how we integrate with your systems, we can layer on audio and analytics for deeper insights.
Audio Surveillance
The simple addition of audio to select surveillance cameras (normally the ones at your register areas) empowers any of your team members with access to take a quick listen to what employees and customers are saying during a transaction. This tool more objectively assesses the execution of selling and loyalty behaviors, coaches for improvement, and secures proof if needed to support fraud investigations.
Exception-Based Reporting (EBR)
The most technically advanced solution also offers the broadest benefit. By integrating your POS system with a smart tool like DTiQ’s analytics, our machine learning and expert auditors review transaction trends and flag those that are out of the norm (like 10 rewards account created in a row when your location averages only three a day). We can even save your teams the time and effort of an investigation by sending in one of our forensic investigators to resolve the fraudulent incident.
Trust DTiQ for Loyalty Fraud Support
Let us help you craft a comprehensive loss prevention strategy that incorporates your business’s loyalty program. Our personalized business intelligence solutions help improve the customer experience while providing the detailed insights you need to expertly manage your company. Book a demo today for more information about loyalty fraud prevention, our subscription pricing, and our services.
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