A new retail trend: Companies offering customer incentives are increasingly devoting resources to discover internal fraud in the way loyalty rewards are distributed. The result of suchaggressive detective work: Fairer, more profitable affinity programs.
A company’s loss prevention department can reap great rewards by closely monitoring the integrity, goals, objectives and incentives of loyalty programs, according to Ted R. Jagielski, the north east regional loss prevention manager for Hallmark Cards.
Customers have grown accustomed to retailers who seek their loyal business – Sixty years ago, S&H Green Stamps pioneered the national affinity craze. Airlines, gas stations, grocery stores, hotels and others followed.
Today, most companies offer some sort of affinity program, free of charge, to encourage prospects to become customers, customers to become repeat buyers, and repeat buyers to buy more and to buy more often.
As companies began to focus internal training efforts on driving these programs, many offered incentives to employees, adding an element of performance pressure that in many cases led staff to create fictitious sign-ups to reach goals.
Issues of honesty and ethics, once created, can lead to more widespread undesirable and dishonest behaviors, which can significantly damage a business’ profits and reputation. Enter the Loss Prevention Department.
Jagielski said loss-prevention efforts often lead to the identification of other risk area’s including unscrupulous sales and management staff. Best instituted in cooperation with the loyalty program vendor or internal statistical departments, these investigations begin where the loyalty data is kept and managed. Exceptions and irregularities can lead to interesting patterns of risk, including:
- Employees scanning their own loyalty cards
- Cards activated at Point of Sale and scanned more than four times daily
- Cards activated with no customer information entered
One IT tech in London confessed to rigging loyalty-card accounts with points that would have required more than $10 million in purchases to accumulate – and then cashed in to the tune of $13,000 before being nabbed and brought to court.
Many employers, naturally enough, inadvertently turn a blind eye to these problems. The employees guilty of this kind of internal fraud are exactly those employees who seem to be overachieving – the pride of any manager, or so it would seem.
Ethics rules and clear direction need to be provided during orientation and training, with subsequent spot checks and more definitive investigations as warranted. Those precedents make it easier for employers to identify and correct potential problems later on.
Bottom line, according to Jagielski: Get the word out.
- Establish “Best Practice” rules by benchmarking with other leading retail organizations loss prevention programs.
- Explain to sales staff that pumping up the number is an unacceptable practice, and is monitored.
- Ensure that all store staffs are clear on the acceptable ways to entice new customers.
- Inform district or regional management when problems or suspicions are discovered. Often this awareness can change how they approach sales staff regarding low statistics.
Fail to adequately monitor the implementation of affinity programs, and management may undermine the results of an otherwise well performing loyalty program.
Filed under: Brand Loyalty