In running referral programs, you’ll want to assure that the referrals you receive are legitimate and honestly put forth. While no software system can fully anticipate the vagaries of human behavior, there are many things a referral software system can do to minimize gaming. Let’s look at the types of gaming and then take a three-pronged approach to address the problem.
Observed Gaming Behavior
Gaming of referral programs is generally driven by three different personas: Sales Reps, Advocates, and Prospects. Here are a few examples:
Sales Rep Referral Gaming
Sales reps have inside knowledge of deals, which gives them the opportunity to find ways to reap a referral reward in addition to their normal commission. They may:
- Ask a friend to refer a deal that they have already worked and is close to closing, then split the reward with the friend after the deal closes.
- Pose as a customer to register themselves as advocates, thus setting themselves up to receive a reward for their own commissioned sale.
Advocate Referral Gaming
While loyal brand advocates tend to adhere to the intent of a referral program, less loyal advocates, or non-customers who sign up as advocates, may choose to maximize reward revenue via less-than-admirable means. They may:
- Attempt to do a self-referral to gain a reward for something they were already planning to buy.
- Ask a friend to accept a referral for a service that has a trial period, suggesting that the friend cancel the service after reward payment but before the trial period expires.
- Do email blasts to a large, primarily non-qualified audience. While not inherently fraudulent, this behavior can generate unhappy customers who find that the referred product is not a good fit. For product sales, this generates ill will; for service sales, this creates churn and unprofitable customers.
Prospect Referral Gaming
Prospect gaming is rare, but in some cases prospects who wish to game the system will look for loopholes in the referral offer. For example, if the prospect receives a reward for signing up for a service, she may cancel the service after reward receipt but before service payment.
Amplifinity’ Answers to Gaming
The recommendations that follow are based upon Amplifinity’s experience in supporting millions of referrals that have driven nearly two billion dollars of new business. We’ve learned that successful referral programs address gaming on three fronts to guide the user away from gaming opportunities, block gaming activity, and report on gaming activity that cannot be blocked. Here are some guidelines, as embodied in our platform and our successful referral program configurations, to help you design a referral program that drives genuine referrals.
Start by constructing your referral program to minimize the opportunity for fraud:
- Use Single Sign-On (SSO) to assure that advocates are legitimate customers, employees, or partners. This helps to eliminate sales rep gaming that relies on a friend to make referrals for deals already in the works.
- Similarly, if the customer does not use SSO, validate new advocate registrations against a list of known legitimate customers, employees, or partners.
- Use a validation upon registration to gain assurance that an advocate is using his or her own email address.
- For concern about sales reps that pose as customers to make referrals, consider registration of advocates by invitation only. For example, the Amplifinity platform will import your list of eligible customers, employees, or partners and then invite them into the program. In this scenario, only invited individuals can become advocates, preventing sales reps from posing as customers.
- Select reward types that balance strong incentive value with discouraging fraud. As an example, sales reps will not ask their friends to refer accounts already in the sales cycle if the reward is a bill credit, which the sales rep will never see.
- Use reward retention periods. To prevent advocate and prospect gaming by service cancellation, configure the retention period to be longer that the service cancellation period.
- Amplifinity also recommends that brands make rewards revocable (in terms and conditions) to allow brand to take action if fraud determined after reward payment.
Prevent actions that make it easy for users to game the system:
- Prevent self-referrals by blocking referrals to an advocate’s own name and email address.
- Prevent multiple rewards for the same referral by blocking an advocate’s duplicate email referrals to a prospect.
- Prevent multiple rewards for duplicate referrals to a single prospect from multiple advocates.
- Do not reward referrals that are entered after the sale is closed.
- Block mass emails by limiting the number of referral emails an advocate can send in a single day. Valuable referrals are made by advocates who thoughtfully select their advocates.
Even with programs that guide advocates well and block gaming behaviors, it is important to be vigilant for other types of gaming. Comprehensive reporting helps identify referral actions that don’t fit expected or historical usage and uncovers potential fraudulent activity, such as:
- Shorter-than-usual referral-to-close cycles
- High number of referrals in a short period of time
- High number of successful referrals in a short period of time
- If the brand is observing and of these potential bad activities, withhold reward payment for a brand-defined number of days to enable time for investigation of the flagged activities.
In working with our customers, we’ve found that our referral platform capabilities and operational recommendations described above dovetail cleanly into the referral experience of advocates making genuine, legitimate referrals. At the same time, this approach frustrates the efforts of would-be referral gamers. This enables our customers to maximize referral success while minimizing the impact of gaming.
Questions? Email me at LBloom@amplifinity.com