Small businesses are a tempting target for scammers. By nature, small business owners and entrepreneurs are often pressed for time and many lack the resources to thoroughly investigate or fight fraud.
Just how great is the risk? According to the Federal Trade Commission, marketplace scams were responsible for depleting the U.S. economy of over 1.4 billion dollars in 2012, the first year that it received over 1 million marketplace fraud complaints. Even though the FTC has taken steps to reduce the risk to small businesses and occasionally shuts down a scam operation, it seems many more are just waiting in the wings for an opportunity to pounce.
A recent Canadian study found that 45% of small businesses had been affected by advertising fraud, while another 51% and 68% had fallen victim to internet-related and email fraud, respectively. Further, those small businesses had spent an average of $3,071 on fraud prevention and suffered annual costs of $7,594 (on average) related to fraud and scams. In the vast majority of cases (68%), no losses are recovered.
One of the top five scams affecting small businesses, according to the National Association of Small Business Professionals, is Internet-based service schemes (see above). This includes online marketing scams like fake Yellow Pages listings, unauthorized invoices and more.
Small businesses are particularly susceptible to bogus marketing schemes and unethical providers – after all, they’re often looking for an expert to trust. Unfortunately, scammers have become increasingly sophisticated, warns the FBI. They may have legitimate business services, lead lists, communications tools, payment processors, fraudulent identification documents, and counterfeit financial instruments at their disposal.
How can you protect your small business? Be aware and leery of these 5 common small business marketing scams:
1. Fake Yellow Pages Ads
This is one of the most common marketing scams targeting small businesses in the U.S., says the Better Business Bureau. Have your bookkeeper or accounting team be on the lookout for solicitations disguised as invoices for Yellow Pages or directories ads you did not order.
By law, companies are required to mark solicitations like this with “This is not a bill,” but that hasn’t stopped unethical scammers from trying to pull this one off. Yellow Pages fraud is so common that Yellow Pages Group recently released an anti-fraud guide, to help small business owners identify and report scam invoices and pitches.
2. Directory Listings Scams
Yellow Pages is big and recognizable, but there are literally millions of other online directories. A common small business fraud occurs when a person believes they are purchasing directory listings, but are signed up for additional “services” or put on a recurring billing plan. You may alternately receive a phone call notifying you that your listing somewhere on the web needs to be updated – for a fee, of course. Always, always read the fine print before signing any online marketing contract and if it seems to good to be true, it probably is. Do not give any business or billing information over the phone, or you may end up invoiced for directory listing services you did not agree to purchase.
3. Bogus Vanity Publishing Deals
This scam, once employed against authors, is now a viable threat to small businesses, especially given the popularity of content marketing. You might receive a phone call, email or postal letter offering publishing services, or asking if you would like to be featured in an upcoming publication. Basically, scam vanity publishers count on the fact that small business owners may be flattered and want to see their name in print. However, the target will be asked to pay fees upfront and may incur hidden fees if a contract is signed. Reputable publishers will not contact you, offer a print deal, then send you an invoice for the privilege. If you want to get into content marketing, work with a reputable agency or bring talent in-house to help you get started.
4. Phishing Emails
Scammers go phishing for all types of information and small businesses are an attractive target. The scammer’s goal might be to swindle you out of money, or simply hack your computer and gain access to valuable information. Emails can be designed to look incredibly official and convincing; scammers can pose as the BBB, legitimate B2B service businesses, banks, government organizations, licensing bureaus and more. If you’re ever in doubt of the identity of a sender, do not click on any links in the email. Call the organization represented in the email on the phone to confirm they sent it. If a phisher is trying to sell you SEO or online marketing services, remember that reputable online marketers respect privacy law and don’t send unsolicited email. If you didn’t subscribe or ask them to contact you, it’s probably not legit. If you are hiring out your marketing needs, see Moz’s very comprehensive list of things to look for in a reputable SEO or online marketing company.
5. Unethical Affiliate Marketing
Affiliate marketing can be a great tool for small businesses, if done properly. Affiliates market your products and services for you, taking a commission only once there is a sale. However, like anything, it can be gamed using tactics like cookie stuffing or hijacking traffic that was already on the path to purchase. It’s important that you do your homework. If you know nothing about affiliate marketing, it may be worth investing in an expert to help you vet potential affiliates. You’ll also need to decide whether to outsource the management of the program or keep it in-house – be sure to consider whether you have the time and expertise to police your own program.
Scams can make the online marketing landscape feel like a bit of a minefield. Small businesses have marketing budgets and tend to outsource a lot of their marketing needs; they will always be tempting targets for scammers. Do your due diligence by investigating any online marketing services providers you are considering using. Don’t respond to cold calls or unsolicited emails.
For more information on preventing and fighting small business marketing scams, see the Little Black Book of Scams from the Competition Bureau (for Canadians) or visit the FBI’s Internet Fraud resources (for Americans).
Title image from sxc.hu