A study from Forbes found loyal customers spend on average 31% more and are 50% more likely to try new products. What store wouldn't want more of those 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 risks. The risk lies in fraudsters taking advantage of the loyalty program, a type of program those savvy to the industry or company know are likely low on a company's radar to monitor abuse.
While tracking and resolving loyalty fraud from external parties is an agreeably lower priority in the realm of loss prevention, 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 is no incentive for the employee to communicate the program to customers because few checks & balances are in place at the store level. And we often see that once one employee decides to engage in this activity others follow. Aside from the personal gain, these employees are also undermining the loyalty program results for the location they work in.
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?
Here are the most common types of internal loyalty program fraud:
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 'stealing' the reward points
Stealing available loyalty 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 personal capture rate
- Signing up fake or random customers to a loyalty program to earn the reward or incentive from the company
- Creating and managing several fake loyalty accounts, even as fraudulent ones are found and deactivated
Knowing is half the battle. With a simple solution, it's easy to find and resolve loyalty issues.
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 get a spot-check of the team's performance. It's also a powerful tool for accountability when parameters of mystery shop criteria are consistently communicated to teams.
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 & analytics for deeper insights.
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 is an amazing tool to more objectively assess the execution of selling and loyalty behaviors, coach for improvement, and secure proof if needed to support fraud investigations.
EBR (Exception based reporting)
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 3 a day). We can even save your teams the time & effort of an investigation by sending in one of our forensic investigators to resolve the fraudulent incident.
Don’t believe us?
Ask for a demo of these solutions and more from DTiQ here…