The first step to effective chargeback management, according to CCBill Vice President for Risk Assessment Mark Greenspan, is taking preventative measures to avoid fraudulent transactions from occurring under your merchant account. Among the most important preventative steps an affiliate program operator can take, Greenspan said, is to pre-screen their affiliates carefully.
"Many webmasters will create an affiliate sign-up process that is quick and easy," Greenspan noted. "This is great for attracting new affiliates, but it can also open up doors to potential fraud. If the sign-up process is that easy, fraudulent affiliates have an easy avenue with which to commit fraud; however, any serious affiliate should be willing to take a little extra time to get in with a solid program that they know will make them the most money."
Greenspan added that affiliate programs should not stop at simply reviewing the information provided by affiliates, to the extent possible, they must verify that information, as well. Greenspan advocates using a two-step authentication process for incoming affiliates.
"The first step is to ask for references," Greenspan said. "If you can get in touch with other websites the affiliate has promoted, you will get an inside look at how well this affiliate will perform for you. The second step is to validate the affiliate's information. Doing a 'Whois' lookup will reveal a lot of information about the affiliate. You can check to see the date the domain was registered, or trace the IP address of the affiliate's login to see if it matches the correct postal address or bank wire receiving location."
Silvercash Albert, the vice president of business development for Silvercash.com and Silver Sinema, concurred with Greenspan, saying that confirming the information provided by prospective affiliates is simply a matter of "due diligence."
"During the webmaster registration, you need to investigate all the information given to ensure that the webmaster legitimately has the ability to send traffic," Albert said.
The need to pay close attention to detail does not end with vetting your affiliates, of course. Greenspan and Albert both emphasized the need for detailed analysis of transaction statistics, and constant monitoring of chargebacks and credits in order to spot potential problems early, before they fester into major chargeback headaches.
"Watching the statistics for refunds and chargebacks for an affiliate is a good indicator of whether or not fraud is being committed," Greenspan said.
According to Albert, the tricky part is in understanding what to look for when analyzing your stats on the hunt for potential fraud.
"The key to chargeback and fraud detection is that you need to know your stats system intimately," Albert said. "I equate looking at stats like any other skill; the more you do it, the better you get at it. As you get more comfortable looking at stats, certain trends that do not look 'correct' should be flagged for further investigation. Again, this goes back to due diligence."
Of course, not all chargeback problems trace back to fraud; many times, a chargeback or credit can be traced right back to your own business practices, advertising, or lax customer service. Vegas Ken, the director of marketing for review sites TheBestPorn.com and PornUsers.com, noted that "many chargeback issues can be resolved with attention to better customer service."
"Most customers who chargeback do so because they feel they have been cheated or because they feel that they have no other options," Ken said. "Try to take care of your customer before it gets to a chargeback situation."
Good customer service starts with being straight with your customers from the word go, including being clear, reasonable and forthright with your advertising and marketing claims.
"The sites that have honest tours, good member's areas and clean join forms tend to have much lower chargeback ratios — it is just good business sense," Ken said. "Once you get 'aggressive,' you should expect your chargeback ratios to increase in proportion to how 'aggressive' you are."
Ensuring that your site functions properly, and that content is always accessible to your customers, can go a long way toward reducing user frustration and the chargebacks that come with it.
"One of the leading causes of chargebacks for online businesses is customers feeling unsatisfied with the content of a website, whatever the reason may be," Greenspan said. "Typically, the best way to prevent this from happening is to make sure the customer experience on your website as good as it can be. Is the content on your site accessible and available? Do all the links work, and when videos and images are placed, do they show up properly to the user? Can the website accommodate different browsers and configurations?"
Accessibility isn't just about making sure your content is viewable and that your login scripts work, Albert added.
"Having accessible and friendly customer service representatives are important to ensuring a client can cancel a membership if they choose to," Albert said.
Speaking of when users choose to end their subscription, Greenspan said that companies sometimes overlook the importance of having a clear, user-friendly cancellation process.
"It is worth examining your account cancellation procedure to ensure it is fair and easy to do," Greenspan said. "Are the links easy to get to, and do they point to the right place? Potential customers are often hesitant to sign up for recurring billing subscriptions because they have been burned in the past by programs looking only to make cash quickly."
Greenspan noted that it is a misguided and shortsighted notion to think that you will make more money in the long run by making it difficult for your customers to cancel. Ultimately, managing your chargeback rate comes down to providing your members with something of value, and an experience that leaves a good taste in their mouth.
"Retaining members, and thus reducing chargebacks, is best accomplished not by discouraging cancellations, but by ensuring that the customer will have the experience they desire on your website," Greenspan said.