Warning Signs of Coupon Risks & Abuse

Overly Successful Coupon Codes

It is generally a plus if your coupon code is generating lots of traffic. After all, this is often a goal of the coupon strategy. But when a code is far more popular than anticipated, it may have found its way into unexpected channels.

Some sample cases where this might come into play:

A) If the coupon was sent out as a targeted email campaign, the number of redemptions might be greater than the number of people it was sent out to.

B) The entire site is experiencing an abnormal spike in visitors.

C) The code is being used on accounts that it was not issued to. For example, if it was distributed to specific email addresses but then redeemed on accounts associated with different email addresses.

Throwing a Wrench in Your Campaign Data

Unfortunately, any unanticipated coupon distribution can invalidate the data you use in your coupon evaluation process. That makes it very difficult to track success of special email offers, offline mailings and other promotions.

If coupons are showing up in unexpected places, it can be nearly impossible to get any meaningful insights from the campaign. With such compromised data, everything from ROI analysis to evaluations of your affiliates can be rendered fruitless.

Anomalies in Website Behavior

Coupons should change your visitors’ habits. They are supposed to. However, if you start experiencing a dramatically different response from what you expected, there is cause for concern.

For example, if coupons intended for loyal customers have resulted in high traffic from one-time shoppers and new accounts being created, perhaps your coupon channels need a closer look. Likewise, if a coupon targeting recent shoppers ends up being redeemed on many accounts that had not logged in for months, be on alert.

It’s useful to create a set of expectations based on behaviors observed in the past. By approaching a coupon campaign with a good idea of what you should be seeing, you will be more prepared to respond early.

High Incidence of Coupon Failure or Rejection

If coupon entries are failing at an abnormal rate, this is probably not attributable to user error. What’s more likely is a fraudulent or expired code appearing somewhere online. Unaware that the code will not work, customers go through to checkout and fill in the code box—only to end up disappointed. This can even happen a few times in a row for a given customer, who may be cycling through a list of fake or old codes found on a particular website.

When this happens, customer experience suffers. New visitors and long-time customers alike can be turned away—either by a single event like this or by a series of such events over time. But with a more proactive approach, a merchant can intercept most of this traffic and ensure a better outcome.

Extra High Commissions for Certain Affiliates

If you distribute specialty codes through certain affiliates, you may see some interesting results when coupons are copied by other sites.

Let’s say you negotiated a special partnership with an affiliate. In exchange for being featured in the affiliate’s “Top Deals” on their homepage, you provide the affiliate with a unique code that includes an extra discount (your normal discount code is 20% off, but you gave them a 25% off code). To balance out that extra discount, the affiliate takes a lower commission than normal.

Other websites would clearly be interested in providing that code to their visitors. 25% off is a better deal—and therefore more likely to result in conversions. And for systems that assign commissions based on cookies alone (either a first click wins or last click wins basis), this could cause some trouble.

If any of your other affiliates happened to copy the code, they would get their full commission and the sales they generated would be at an extra discount. Even worse, because of the higher conversion rate from the 25% discount, they would generate more sales. Highly discounted sales with a full commission. That’s a double-hit that most merchants cannot afford.

If You Use Commission Overrides:

One way to prevent those double hits is to automate commissions based on the code entered. Overrides can ensure that every time the specialty 25% off code is entered, the commission goes to the affiliate with the special agreement.

In these cases, you are unlikely to notice extra high commissions. Your system should prevent affiliates other than the special affiliate from cashing in on that code. And that special affiliate’s commissions will not jump too high, since they originally accepted a lower commission rate.

But while overrides can prevent unearned commissions, they cannot stop coupons from being redeemed at unexpectedly high levels. Excess coupon traffic from those unauthorized affiliates can turn your carefully targeted promotion into public knowledge—meaning no one pays full price. In other words: even if those other affiliates are not profiting, they can still cost you.

Resorting to Code Cancellation

Canceling a code is not an ideal outcome for a merchant. It generally means two things have happened:

A) the merchant was either about to lose, or was already losing money, and

B) customers who try to use the code later will be frustrated.

In such cases, coupons can become a liability for marketers. They persistently inhibit marketing efforts. And although codes may sometimes be canceled simply because demand was higher than expected, the coupon channel can often be responsible. If this is common, it might be a sign that some change is needed.