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Preacquired Account Marketing

December 3, 2009 Leave a comment

Tens of millions of consumers have fallen prey to “free” trial offers and membership clubs offered by preacquired account marketers. These companies insert themselves into your everyday transactions, hoping to trick you into letting them charge your account. In simple words, Preacquired Account Marketing can be defined as [1]:

… The practice at issue is called post-transaction marketing, which involves the presentation of offers during the online checkout process. When done to deceive, these offers typically appear to be a required part of the checkout process, in order to trick consumers into accepting charges for unwanted products or services.

A particularly pernicious form of post-transaction marketing is known as “preacquired account marketing,” a process by which the third-party marketer acquires a customer’s credit card information from the online merchant where the customer is making a purchase.

Using this tactic, the third-party marketer only needs an e-mail address or a click as purchase authorization. The retailer, in effect, sells the customers’ credit card information because the retailer, as a partner, will get a cut of whatever extra charge the customer can be duped or pushed into accepting. …

As Michael Arrington explains in TechCrunch [2]:

… Background: hundreds of well known ecommerce companies add post transaction marketing offers to consumers immediately after something is purchased on the site. Consumers are usually offered cash back if they just hit a confirmation button. But when they do, their credit card information is automatically passed through to a marketing company that signs them up for a credit card subscription to a package of useless services. The “rebate” is rarely paid. …

What shocked me was the report from the USA Senate hearing some weeks ago, which focused on the controversial marketing companies that allegedly dupe consumers into paying monthly fees to join online loyalty programs [3]:

… Vertrue, Webloyalty, and Affinion generated more than $1.4 billion by “misleading” Web shoppers, said members of the U.S. Senate Committee on Commerce, Science and Transportation, which called the hearing. Lawmakers saved their harshest rebuke for Web retailers that accepted big money–a combined sum of $792 million–to share their customers’ credit-card information with the marketers. …

… Many of those who complained say they don’t fear the ad because they aren’t being asked to turn over credit-card information, according to the Senate report. But buried in the ad’s fine print is notification that by entering their e-mail address, the shopper is agreeing to join a loyalty program and allowing the store to authorize marketers to charge their card each month, between $9 and $12. …

Fraud, even of this magnitude, is a commonplace in the internet. That kind of scams rely on the fact that most consumers usually don’t notice 10-20$ charges in their monthly credit card statements. So, why bother? If you check the list of companies that are working with Affinion, Vertrue, and Webloyalty, you’ll find some highly reputable web sites that I would never think that they could be part of such a scam: Expedia, Hotels.com, US Airways, Classmates.com, MovieTickets.com, etc…

… Retailers doing business with the companies are also aware that customers are likely to be angered once they notice the charges but do it because they are paid big bucks. Classmates.com has pocketed $70 million from partnering with all three companies, according to the report. The government says that 19 retailers have made more than $10 million through the partnerships with e-loyalty programs, while 88 retailers have made more than $1 million ….

I have used Expedia and Hotels.com in the past and, even if they are not guilty, I’ll think twice before I’ll use them again. A huge reputation hit for such businesses (in the end, they are not just a fast growing gaming company [4], so they should be more careful), but a good lesson to learn for web 2.0 startups.. Unfortunately, electronic transactions are still defined and dealt through a ‘lighter’ moral viewpoint from many companies. I am sure that, for example, a traditional hotel booking company would risk less its reputation through that kind of deals. I believe that the transfer of credit card data in post-transaction offers must be restricted by law, and improved disclosure requirements and easier charge reversal must be regulated.

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