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Since there is some modicum of justice in the world, “most punchable face” candidate Martin Shkreli was convicted of fraud for price-hiking and lying to his partners.

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Affiliate marketing isn’t quite as big as pharmaceuticals yet, but it’s headed toward $16 billion, and it’s prudent to be on the look out for any Shkrelis that may come looking for a quick payday. Here are a few tips on how to avoid fraud in affiliate marketing.

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Define What Fraud Is to You

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To identify affiliate fraud, you need to know what fraud is. At its base, fraud is when affiliates knowingly (or even unknowingly) violate your terms and conditions. This means that your first line of defense is to clearly convey your T&Cs to each of your affiliates, in writing, and acknowledge that they have indeed read them.

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Usually, this takes the shape of an “affiliate agreement form” that outlines the do’s and don’t’s of your program. Use this opportunity to convey your company’s morals and values as well. Here is a good sample of one that Gravity Forms uses for their affiliate program:

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\"Gravity

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Be vigilant concerning the top types of fraud

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Now that you’ve set the ground rules, the next step is to watch for the big areas of fraud. Here are three to be wary of:

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  1. Your trademark.
    2. \n
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The worst thing that could happen is damage to your brand by a rogue affiliate. Losing sales is one thing, but losing confidence in the eyes of potential customers can be devastating.

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One thing we hear about constantly is trademark bidding on Google AdWords (and other paid search platforms), which is something you should make clear in your terms and conditions that it is never allowed by your affiliates. Trademark bidding is when an entity other than your business bids on your brand’s keyword(s) and similar keywords (misspellings, etc).

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If an affiliate does this, they are effectively making commissions off customers who are already interested in your brand. So to avoid this, regularly search for your own trademarks on Google (and other paid search platforms) to make sure affiliates aren’t bidding on these keywords.

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2. Spamming.

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This is usually in the form of emails. In this case, an affiliate may send out hundreds, thousands, even tens of thousands of unsolicited emails brandishing their affiliate link to every email address they can find. Again, this is a tactic that will hurt your brand; even though you’re not the one emailing, the recipients won’t know that. They’ll just associate your brand with spam emails.

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Two things to do here: 1) If possible, sign up for all of your affiliates’ newsletters using an email that is not your company’s email (a savvy spammer will not send to your company’s domain, of course); 2) Make sure your affiliate is CAN-SPAM compliant from the get-go.

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3. Stolen credit card transactions.

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Particularly evil affiliates may go so far as to use stolen credit cards to make purchases. This way, you’re out both commission and the eventual refund you’ll have to make.

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To protect against this, a good KPI to monitor is “time-to-conversion”. You should have a general idea how long it takes for a lead to convert into a sale. If this is much quicker for one affiliate than the average, there might be something fishy going on.

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Vet your affiliates well

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At the end of the day, the best way to protect against fraud is to know and have a good relationship with your affiliates. This is hard to do if you just sign up to partake in an existing affiliate network, so this is another good reason to implement your own program.

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Once you know and trust your partners, monitoring their KPIs will alert you to anything odd. Also, in many cases, they can help police your brand and the activities of other affiliates as well. If you cultivate the right group of partners, it’s a lot less likely for any sort of fraud to occur.

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