Loyalty Marketing -- How Much Fraud is There?

What exactly is loyalty marketing It39s a program that rewards customers for their repeat purchases or interactions with a brand Think about airlines hotels and QSRs Loyalty marketing programs are offered from both national brands as well as local ones For the latter perhaps your neighbor pizza shopAccording to a 2024 report on the Loyalty Management Market from Fortune Business Insights the global loyalty market is projected to grow from 1331 billion in 2024 to 4121 billion by 2032 exhibiting a CAGR of 152 during the forecast period I39ll take a 152 growth rate in my 401k any dayFurther according to the report US Retail Loyalty Programs 2024 from eMarketer both total loyalty program memberships and active loyalty program memberships reached new highs in 2023ANA and Human formerly known as White Ops have a long history of working together on advertising bot fraud also known as invalid traffic or IVT We partnered on four studies together That first study was released in 2014 and put the issue of bot fraud squarely on the radar screen of the advertising industry The level of fraud was high ten years ago As a result of our work buyers now proactively manage fraud and there are multiple ad verification companies who work with marketers and agencies to address the issue It all began with the awareness generated from our work together We are now curious to learn about fraud in loyalty marketingTo help set a foundation there is currently a survey in the field to understand marketer attitudes about loyalty marketing and loyalty fraud specifically Preliminary findings are outlined below we have kept them broad for now and will provide details after the survey closesLoyalty marketing is three times more likely to be quotmore importantquot over the next year than quotless importantquotTop benefits of loyalty marketingAbility to collect customer data and insights to improve products services and customer experienceIncreased customer lifetime valueTop challengesMeasuring ROICost to run the programNote that there were six options for challenges offered potential for fraud ranked next to last and privacy concerns ranked lastIn response to the question quotWhat types of fraud most concerns your organizationquot the top responses wereCustomers exploiting loopholes or errors in the program39s rules or system to gain unfair advantages or access to rewards that they are not eligible forFraud via professional hackersIn response to the question quotHave your organization39s loyalty programs ever been subject to fraudquotAbout onethird said quotyesquot while the majority quotdon39t knowquotRecently at Cannes Human hosted a panel discussion on fraud in loyalty marketing Thanks to MediaVillage39s Jack Myers for hosting a vibrant discussion that had participants from Human The Weather Company Merkle United Airlines and ANA me Comments of interest from that session follow but without attribution to specific speakersLoyalty marketing programs are important because of the quality of first party data they generate And they don39t just generate first party data in the moment they generate it and build it with customers over timeLoyalty marketing programs build longterm relationships with customers That is done by adding value to the customer When there39s an experience where that value is eroded in any way ie if fraud occurs it puts things at riskCompanies need to consider the potential for fraud from the very start and build protections into their loyalty marketing programsFraud protection can be expensive That protection is all built around the end game of a better customer experience that39s going to drive value And the relative costs are therefore rounding errors in that contextThe most common type of fraud in loyalty marketing is email account takeover That is when customer accounts their email account that39s associated with their loyalty account and their bank account is compromisedSometimes there can be just an account to email takeover where the fraudster has taken over an email account and is able to see all activity flowing through to that accountMultifactor authentication is one solution to combat fraud Multifactor authentication is a multistep account login process that requires users to enter more information than just a password For example along with the password users might be asked to enter a code sent to their emailOne participant recently retooled the underlying fraud systems to track and monitor device type for login looking for patterns that are different than the normGenerative AI is really good at identifying patterns of attack that look different than a regular customer outreach and has been quite helpful in protecting loyalty marketing programs There are playbooks that fraudsters use And when the attacks look like the playbook then that will trigger a block and the company will put a hold and then attempt an outreach to the customer directlyLoyalty programs in general are going to move from transactional to more emotional Generative AI allows us to get much more personal on those connections So the barista at Starbucks should know my name they should know that I39m in there every day they may because it39s my neighborhood store They may not because I39m in a new city but they still should know that I39m a valued customer And they should make that connection with me Generative AI allows that level of personalization and customization at a much more interesting and important levelAI is both friend and a foe of loyalty marketing It39s a foe because the bad guys are using AI tooWe learned so much in our work with Human on advertising bot fraud We are just in the initial phase of our work on fraud in loyalty marketing I can39t wait to see what we find outClick the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillageorgMyersBizNet

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Loyalty Marketing -- How Much Fraud is There?

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Bill Duggan

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