Why Client Retention is a Focus for FX & CFD Brokers in 2019

FX & CFD Brokers utilsing Carrots Plus Rewards Technology

Increasingly Competitive Marketplace

Foreign exchange & CFD trading is an incredibly competitive global marketplace. Traders often have multiple accounts with different brokers and lack loyalty to one single brand.

Establishing a brand in this market and finding a niche is difficult with competitors often targeting consumers with offerings on spreads, trading tools, platforms and service.

To make things more difficult, recent ESMA changes affecting European brokers are limiting trading conditions on offer to traders with leverage limitations and restrictions on incentives.

Expensive Acquisition Costs

Following a digital acquisition strategy across networks such as Google, Facebook and leading finance industry websites such as Bloomberg and Investopedia can quickly take your acquisition costs from $200 per client to $2,000.

Supporting this with the nurturing service needed to onboard clients creates an expensive proposition for building a strong client base.

This digital landscape is increasable competitive, and brokers can expect their acquisition costs to continue to climb over the next 12 months.

With the old-fashioned mentality of ‘churning and burning’ clients clearly on the way out, FX & CFD brokers can focus their attention on retention as their key to growth.

Why Client Retention is the Answer

You can pick from a range of studies, but in the end, you’ll find it costs anywhere from five to 25 times (Harvard Business Review) more to acquire a new client than retaining an existing one.

This makes total sense. You don’t have to find 100% or more new clients to replace the constant flow of clients leaving your company. Instead, focus on incremental growth in your retention rate.

Further studies show that an increase in retention rates by 5% increases profits by 25 – 95%.

Calculating Client Retention Rate

The traditional CRR calculation needs to be modified slightly for brokers as a client on your CRM doesn’t necessarily constitute an actively trading client.

Actives Calculation for FX & CFD Brokers

The key for brokers here is actively trading clients. Taking aim at a monthly actively trading clients (Actives) is a simple approach to measuring Client Retention.

For any given period of time CRR = {A / C} x 100

Where:

  • CRR is your Client Retention Rate for the time-period, as a percentage
  • A is the number of clients that traded in that month
  • C is the total number of clients that could have traded in that month

A consideration here includes limiting how far back you go in terms of your total number of clients that could have traded that month. Is a client that hasn’t traded in 2 years still to be considered a client?

Following this metric year on year can create a strong indicator for how well your business retains traders.

Retention Strategies

We’ll be covering this topic of retention strategies for FX & CFD brokers in another article shortly, but something not yet properly utilised by FX & CFD Brokers world-wide is the use of rewards programs.

Rewards programs are proven to enhance retention rates in a wide range of industries such as retail, aviation and specific for brokers – finance. Not only do they enhance internal metrics, clients love rewards and are increasingly expecting them.

Accenture – “Members of loyalty programs generate between 12% and 18% incremental revenue growth per year than non-members.”

Nielsen – “66% of European’s say they belong to one or more loyalty programs”

Roy Morgan – “71% of the Australian population are members of at least one loyalty”

Integrating Rewards with Carrots Plus

Carrots Plus Rewards Technology allows brokers to integrate a rewards program into their client facing channels with ease.

Issue clients with points for trading on products such as forex, indices, cryptocurrenices, commodities and more. Create your own and select rewards that your clients will be aiming to redeem.

Create a unique rewards program branded as your brand’s very own rewards system. Make an impact on company performance by putting a focus on increasing retention rate in 2019.

 

Michael Shea

About Michael Shea

General Manager Sales Development at Carrots+

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