The popularity of affiliate marketing programs have the potential to help SaaS companies win big. However, this has made them a prime target for fraudsters. SaaS companies are particularly vulnerable because of the high payouts and commissions associated with their products. Affiliate fraud detection is key for SaaS companies to save guard affiliate referrals.
In this article, we’ll share the best tips on how to carry out affiliate fraud detection in your SaaS affiliate program and ensure that you receive legitimate leads and sales. First, let’s look at why it’s crucial.
Importance of affiliate fraud detection
SaaS companies with affiliate marketing programs are 3.5 times more likely to experience fraud than those without one, according to a study by Sift Science. Here’s why you should take extra care to prevent fraud in your affiliate marketing program.
Affiliate fraud detection prevents financial loss
Research by SaaS Affiliate Programs found that SaaS companies lose an average of $22,000 per month to affiliate fraud. According to the Association of Certified Fraud Examiners, SaaS companies lose an average of 5% of their annual revenue to fraud. This number will only continue to increase as SaaS companies become more popular and profitable.
Affiliate fraud impacts brand reputation and integrity
When SaaS companies experience affiliate fraud, it doesn’t just impact their finances. It also damages their reputation and integrity. In the Sift Science study, SaaS companies that experienced affiliate fraud were 27% more likely to have their brand reputation damaged.
So, don’t take any chances and make sure your program is air-tight. Remember, it can take time to recover and rebuild trust with customers and future affiliates.
How to Prevent Fraud in SaaS Affiliate Programs
Now that you know the importance of preventing fraud in SaaS affiliate programs, let’s look at 10 tips to make sure your affiliate’s referrals are legitimate.
1. Have solid affiliate marketing agreements and policies in place
This is the first and most important step in affiliate fraud detection and preventing fraud. SaaS companies with affiliate marketing programs, should have a well-defined affiliate agreements that sets out the rules of the affiliate program. Furthermore, SaaS companies should have policies in place that affiliates must follow.
Strictly enforce your policies to weed out bad actors. Otherwise, you run the risk of being taken advantage of.
Some important policies you want to put in place are:
- Privacy and cookie policy
- Data processing agreement,
- Program terms and conditions
- Paid and organic search policies
- Advertising and creative guidelines
- Prohibited activities policy
Privacy and cookie policy
The privacy and cookie policy should outline how you collect, use, and disclose personal information. Be clear about what type of data they collect and why they need it. Furthermore, explain how you use cookies and track user activity. This is important because SaaS companies are required to get consent for cookies under the General Data Protection Regulation (GDPR). More about affiliate cookies and Google cookie ban here.
Data processing agreement
The data processing agreement should set out the terms of how you process personal data. This can have legal ramifications. For example, SaaS companies that process the data of European Union (EU) citizens must comply with GDPR.
The terms should outline the SaaS company’s obligations, such as data security and retention.
Program terms and conditions
The affiliate marketing program terms and conditions policy should outline the rules of the affiliate program and what is expected of affiliates. It sets the tone for the affiliate program and could help deter fraudsters.
You want to make it crystal clear that you have the right to terminate affiliates who don’t follow the rules or engage in fraudulent activity. Be sure to review this policy periodically to ensure it’s up-to-date and covers all bases.
Check out our template for creating affiliate terms and conditions.
Paid and organic search policies
It’s important to have a policy that speaks directly to traffic sources. That means having a paid and organic search policy in place. This will help SaaS companies avoid paying for low-quality traffic that doesn’t convert. It also helps them become less susceptible to click fraud.
If you accept paid searches, you want to indicate:
- What advertising platforms are accepted.
- The quality standards for the traffic.
- Whether affiliates can link directly from ads to your site.
- Forbidden keywords and bidding on company name.
- Whether they can include your brand name in an ad.
Your SaaS company’s organic search policy should also be clear. Some areas you want to cover include:
- What practices do you prohibit, such as buying links or using black-hat SEO techniques?
- What do you expect from affiliates in terms of link building?
- How often can they add links?
- What banners and visuals are they allowed to use (brand protection).
Advertising and creative guidelines
Your advertising and creative guidelines should outline the do’s and don’ts for affiliates when creating ads and other marketing materials. This will help ensure that they represent your brand in a positive light.
Prohibited activities policy
This policy should list the activities that are strictly prohibited. These activities could be considered red flags and should be avoided at all costs. Some examples of prohibited activities are:
- Bidding on branded terms
- Creating fake reviews or testimonials
- Spamming
- Making unsubstantiated claims
- Using bots or automated scripts
These are just some examples to get you started. However, the above is not a complete list. Also, prohibited activities can vary from SaaS company to SaaS company depending on what they offer. So take time to think about what applies to your company.
2. Affiliate fraud detection for discount codes
Discount codes can be a great way to attract new customers and boost sales. However, fraudsters can also abuse them. When discount codes for your products or services are floating around the Internet, it’s hard to control how they’re used. Overusing discounts could also erode your company’s profitability.
That’s why SaaS companies need to be careful about how they use discount codes and set clear guidelines for affiliates. Some things to keep in mind are:
- The purpose of the discount code.
- Who is eligible for the discount?
- How long the discount is valid for.
- What type of discount it is.
- How many times the discount can be used?
Some red flags to look for when it comes to discount codes include:
- A high number of redemptions in a short period
- A high percentage of new customers using the discount code
- Affiliates who have a higher redemption rate compared to others
- Discount codes that are used outside of the intended country or region.
You can learn more about affiliate discount codes in our article: coupon affiliate marketing for your saas program.
3. Screen affiliates before approving them
Another way to nip potential fraud is to vet potential affiliates thoroughly. This step will help you identify red flags. As a result, you’ll get a chance to weed out problem cases before they cause damage.
Here are some things you want to look for when vetting affiliates:
- Do they have a professional-looking website?
- Is their website relevant to your SaaS products?
- Do they have an excellent reputation?
- Do they have a history of spamming or making unsubstantiated claims?
- Is their online presence aligned with your brand?
If you decide not to screen affiliates when entering your affiliate program, you can take other measures for affiliate fraud detection such as screening at the moment of referral. This can help you save time if you have many affiliate sign ups.
4. Educate Your affiliates about affiliate fraud detection
Educating your affiliates about your SaaS company’s policies can go a long way in preventing fraud. However, don’t stop there. Affiliates can also be targets if they’re not well-educated about affiliate marketing in general. So, teaching them best practices is key. By educating your affiliates, you can create a more fraud-resistant network. And that’s good for everyone involved.
Here are some things you want to make sure your affiliates know:
- What constitutes a valid lead or sale?
- What kind of marketing campaigns are allowed in your program?
- What kind of language is forbidden in ads?
- What type of claims are unsubstantiated?
5. Affiliate fraud detection – keep tabs on your affiliates
Keeping tabs on your affiliates ensures that they are playing by the rules. There are a few different ways you can do this:
- Use affiliate tracking software to track leads. This doesn’t mean that you need to micromanage them, but you should keep an eye on their activity.
- Review your activity logs regularly. This will help you spot any unusual activity.
- Track the kind of traffic each affiliate brings in. Make sure you’re looking for quality over quantity.
- Pay attention to your conversion rates. If you see a drastic drop in conversions, that’s a red flag.
- Keep in touch with your affiliates: This will help you build relationships and get a better sense of what’s going on.
Take Action Against Fraudulent Affiliates
Once you’ve identified a fraudulent affiliate, it’s important to take action. This sends a clear message that fraud is not tolerated. It also protects your business from further damage. Promptly addressing fraud also builds trust with your affiliates. If customers have been scammed, you’ll also want to take steps to help them.
There are a few different ways you can take action against a fraudulent affiliate:
- Suspend their account pending investigation
- Remove them from your program after you’ve investigated and found concrete evidence of wrongdoing. You may ban them instantly if they’re caught red-handed.
- Report them to the authorities if they’ve committed a crime.
- Press legal charges if they’ve defrauded your company.
Here are a few tips on how to help customers who may be victims of affiliate fraud:
- Offer to refund them in full or give them a discount on their next purchase
- Advise them to change their passwords and update their security settings if they’ve been compromised.
- Offer them customer support to resolve any issue that crops up.
- Help them report the fraud to the authorities if necessary
Conclusion
SaaS companies need to be extra vigilant regarding affiliate fraud as losses can be steep. Affiliate fraud detection becomes more important ad fraudsters get better at their schemes. By following the above tips, you can avoid being taken advantage of. By taking measures to prevent affiliate fraud, you’ll not only save yourself money but also protect your SaaS company’s reputation.
Find our full guide on starting an in-house affiliate program here.