How to Safeguard Your Affiliate Marketing Program Against Fraud?

We are now working on setting up an affiliate program for a client, and it is going to employ both a pay-per-sale, and a pay-per-lead model. The Internet Marketing Director of the company has emailed me a very good question which I would like to quickly address for the rest of my readers, as many may be wondering the same thing. He wrote:

I have been thinking lately about PPL fraud since I had a conversation with an acquaintance about his lead fraud and the problems it caused him. He experienced a high volume of leads that were created by fraud and were not qualified leads. How do we guard against this and check/confirm the validity of the leads? I initially suggested the PPL system because a good portion of our site is custom designed products that require quote request. I assumed that most educated affiliates would see this a potential leak if there was not some sort of compensation for leads. Am I thinking correctly? I just want to make sure that we are making the correct decision for PPL and that we are prepared to guard against fraud.

Yes, he is right on the money with the assumption that affiliates will see the fact that the merchant harvests leads, but doesn’t compensate affiliates for them, as a leak [more about leaks here]. If you are selling both stocked and custom-made products, but cannot know the exact value of the latter (to compensate them on commission basis) until much later in the process, you want to at least remunerate affiliates with a set amount of money per each referred lead. However, you also want to make sure you do not pay for “not qualified leads”. To safeguard yourself from fraudulent “leads” as well as mere junk ones, I recommend paying due attention to the following 3 steps:

1. Pre-screen affiliate applications carefully (before approving them) to weed out anyone who doesn’t belong in your program early in the process [more here].
2. Set your locking period at a term that gives sufficient time to reverse payout on any invalid lead [more here].
3. Once fraud is caught, investigate the case to determine the cause of it. If it is the “end user”, reverse the payout, notifying the affiliate. If it is the affiliate, and you are 100% certain they caused it, ban them from the program, and move on.

All of the above principles, actually, apply to all types of affiliate programs. It doesn’t matter if it’s a pay-per-lead, pay-per-sale, pay-per-call, pay-per-click, or a pay-per-download program that you’re running. If you diligently follow the above steps, you’ll safeguard any affiliate program from sinking your money into a fraudster’s pocket.

You may also find my 7 Ways to Detect & Prevent Affiliate Fraud article of help here.

The beauty of affiliate marketing is precisely in the fact that you, as a merchant, set up the conditions that have to be reached for the affiliate to be paid. You may also reverse all (and any) affiliate transactions that resulted from fraud. Just make sure your program is managed closely, and you’ll be fine.