How to minimize online fraud and abuse of marketing promotions |
Posted by
Ken at 2/22/2008 5:44:23 PM
Ken Kilar is a skilled programmer and respected executive manager. Ken works with high-end databases, architects, builds and interfaces high availability e-Commerce and Business Information systems. Ken has a proven track record (both vision and development skills) to conceptualize and deliver complex technology solutions.
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In an earlier post I wrote about business rules for processing online orders. Tight business rules, with well thought out supporting software, are the most important component in significantly reducing fraud and promotional misuse. Another important tool is a smart Order Management application that exposes all aspects of your orders and shoppers.
(my next post will be the perfect Order Management Application… which you can have for FREE)
Business Rules: There are many common business rules that can be applied across any retail business, but many are unique to your particular business. For those (sadly) most discover them the hard way.
Below are some easy, cross-market rules you should consider…
1. Use an Address Verification service along with your credit card authorization. I authorize offline, but flag for review any order that doesn't come back with an address and zip match. I am a big fan of PayPal's PayFlow Pro product (formally VeriSign's).
2. If you only ship domestically, make sure you flag orders coming in from IP addresses outside the U.S. That doesn't mean you cancel the order, rather put it in a bucket so your customer agents can review it before releasing to your distribution center.
For about $600 you can buy a comprehensive IP database from IP2Location. It's a simple one table import that allows you to pull details down to the latitude/longitude of the ISP. You can also use this same table data to serve up regional content at your site (example; store events in your area). Without question, it'll pay for itself almost immediately.
3. Large dollar review is a master of the obvious business rule, but every business differs on what constitutes a large dollar order. A good approach is to define different dollar thresholds based on the customer type. For example, repeat customers that have shopped before (without issue) should have a larger dollar threshold than your first-time customer.
4. Look at new customer orders that are shipping priority (Next Day and 2 DAY).
5. Look for a burst of same-shopper activity. If a single shopper shops multiple times in a short period of time, flag ALL those orders for review.
6. Look for a burst of activity from a single IP.
7. You should flag for review orders that indicate atypical shopper behavior. Over time you'll know what atypical shopping behavior is for your business — take some time and define that behavior and implement those rules.
A few examples…
If you have an obvious active promotion (coupon) and a sizeable order didn't leverage it, be sure to flag that order for review. A real shopper is usually going to take the time to enter a coupon to get the best deal possible.
I've seen quite a few fraud orders come in with obvious bad phone numbers. It's worth reviewing orders that have area codes of 000 or 123.
etc,…..
8. Create a “never ship” table in your database and compare your new order addresses (both bill to and ship to) against that list. If you get a chargeback or experience fraud activity from an address, in a hash like form, store that address and order in a simple indexed table and compare every new address (via your hash function) against that table.
If you have a ONE per household type offer, this is a good way to catch the violators. Most retailers associate these promotions to the shopper (email and/or unique shopper_id). Sneaky shoppers will create multiple profiles to get over on the ONE per household offers.
I take the first 5 ZIP and the ADDRESS, then remove all non consonants and minor address descriptors (RD, ST, AVE, STREET, CIR, etc,…)
1234 E WOODLYN AVE
PASADENA, CA 91104
Becomes…
911041234WDLYN
TIP: you can also use this hash to find out (roughly) how many duplicate shoppers you have in your database
Here is a simple VB sample function of how you might go about creating an address like hash. You can make it much more powerful (in almost any language) using regular expressions, or even do this at the database level.
myAddressGUID = CreateAddressHash(RemoveDescriptors(strZIP & strADRESS1))
Function CreateAddressHash(ByVal strInput As String) As String
Dim x As Integer
Dim strResults As String
On Error GoTo Err_Handler
For x = 1 To Len(strInput)
strResults = strResults & IIf(InStr("1234567890BCDFGHJKLMNPQRSTVWXYZ", _
Mid(UCase(strInput), x, 1)) > 0, _
Mid(UCase(strInput), x, 1), "")
Next
CreateAddressHash = strResults
Exit Function
Err_Handler:
CreateAddressHash = Err.Number & "|" & Err.Description
'log error
End Function
Function RemoveDescriptors(ByVal strInput As String) As String
Dim strReults As String
strReults = UCase(strInput)
strReults = Replace(strReults, " RD", "")
strReults = Replace(strReults, " STR", "")
strReults = Replace(strReults, " ST.", "")
strReults = Replace(strReults, " STREET", "")
strReults = Replace(strReults, " ST", "")
strReults = Replace(strReults, " CIRCLE", "")
strReults = Replace(strReults, " CIR", "")
strReults = Replace(strReults, " AVE.", "")
strReults = Replace(strReults, " AVE", "")
strReults = Replace(strReults, " BLVD.", "")
strReults = Replace(strReults, " BLVD", "")
RemoveDescriptors = strReults
End Function
Once your rules are defined and implemented in your order flow (authorization) process, you need a smart Order Management application that allows your team to quickly manage and review orders, ultimately making the right decision on how to dispense an order.
My next post, The Perfect Order Manager, will cover this in greater detail.
Agree? Disagree? Post a comment, or email me — maybe I can add some updates to this topic if I skipped something super important.
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