Inventory Management is a Critical First Step
The average consumer likely gives little thought to fraud when they redeem a coupon or apply for a rebate. What’s the big deal over a 50-cent coupon? Quite a bit when you scale up the potential losses. One of the more notorious coupon fraud cases in the U.S. resulted in a conviction and lengthy prison term for a woman and her husband who were behind a counterfeit coupon scheme that resulted in $31 million in losses for retailers and brands.
Fraud is a risky business for bad actors, but too many can’t seem to resist the lure of what they hope will be a big pay-off. That’s why Arrowhead works closely with its clients to observe best practices that help prevent fraud in the first place. The first steps can begin long before you even dream up that award-winning campaign.
Securing Coupon Validation Through Inventory Control
Too often we work in silos, with one department not really involved in the work of another. For manufacturers intent on getting products into the hands of consumers, the marketing team is integral to creating campaigns that delight and engage customers.
In the world of best practices, your marketing team should also be aware of the job your inventory management team is doing. Case in point, the need for an orderly product catalogue. Why? Because if your product catalogues and GS1 numbers (which identify and track your products as they move from inventory to physical and online stores) aren’t well organized, you can’t adequately target specific products for validation.
This becomes critical at the point of sale to ensure the product and offer match. It can also give you the tracking data you need to create more complex offers, such as bundled offers.
A Case Study in Unintended Consequences
The risk in not having a tight rein on inventory became apparent in the 2010s when certain Family Codes were created to give brands a way to offer coupons on products that couldn’t be properly validated using conventional methods. One Family Code created a kind of bypass that allowed for a deduction without an item scan validation – opening the door for fraudsters to copy, resell and mass-redeem coupons for any purchase. Some retailers now ban coupons using some Family Codes, which can create a poor customer experience when they find out at the cash register their coupon won’t be accepted.
Arrowhead offers family code management to all our clients with the belief a well-organized product catalogue is foundational to fraud mitigation. It is not an exaggeration to say it has saved our clients significant money, not to mention headaches when offers can’t be adequately targeted.
Your promotions partner should be working with your team to ensure your product catalogues are up to date, and orderly. Think of it this way – on the surface, coupons and rebates are a great way to incentivize consumers. They are also mechanisms to pass data back and forth. Good data going in creates good data coming out. A properly organized product catalogue means you have good data, which allows you to properly target and validate specific products, making it harder for bad actors to intervene.
Taking Action Against Coupon Fraud is an Ongoing Battle
We’re far from the day we can declare victory over bad actors when it comes to promotions. However, we can make progress by observing best practices, even as technology is providing fraudsters with more tools to commit fraud. By looking at your marketing efforts wholistically and working with a partner with expertise in this area, you can be in the best possible position to mitigate fraud and enjoy more successful campaigns.
