Why brokers need a loyalty program

Author: Baiana Kashaeva

A loyalty program is a marketing strategy system designed to retain clients and increase their loyalty to the company with the help of specific incentives, e.g., rewards and rebates, exclusive services and offers, access to private events, and more.

Such programs incentivise clients (traders, in our case) to consume services or products more often and in larger volumes.

Why it’s important for brokerages to have a loyalty program

Long gone are the days when clients would make their decisions based solely on pricing. And while the world of retail trading is very price-driven, there are many factors that traders today take into account when selecting the broker they’d partner with. Nowadays, traders are very knowledgeable and consider branding, convenience, reputation, quality of services, and other things when evaluating brokers.

One factor they consider is whether or not the broker offers some kind of perk to thank traders for their loyalty. Even the little bonuses or cash back is appreciated and encourages traders to stick with their broker of choice.

There is another psychological aspect of gamification that goes into loyalty programs. Many clients enjoy scoring extra points by completing the necessary steps.

Tips for brokers looking to launch a loyalty program

1. With each additional year of a relationship, clients are less costly to serve.

2. As years go by, loyal clients become core clients as they start buying more and paying premium prices.

3. Loyal clients are easier to upsell and cross-sell.

4. They readily recommend you to their circle.

When thinking through the loyalty system, brokers should keep in mind that the benefits they share and the value they receive should ultimately exceed the costs associated with producing and delivering the loyalty program. The program should also align with brokers’ overall strategy.

It is also worth focusing on the long-term benefits for traders rather than one-off promotions. One-time deals tend to attract clients who are likely to hop from one broker to another once the new reward is introduced by the next company. Instead, brokers should look for sustainably loyal traders.

Another tip for brokers is to target attractive clients. Yes, all clients are valuable and essential to the business. However, there is always a key target audience that brokers are trying to reach. Narrowing the focus will help keep the loyalty program under control and profitable.

Designing a smart loyalty program that would take into account all internal and external factors is not easy. When working on the T&Cs, always have your clients in mind. Don’t focus on what your brokerage can provide but what would be of value to traders.

Apart from making the benefits relevant, make them realistic to earn. Some loyalty programs are guilty of setting the bar too high and end up with many heavily invested clients who can’t meet the overly high requirements to get the bonus. It will ultimately be a case of trial and error, but you can run research first to help define reasonable rules from the start.

How TFB can help brokers with building trader loyalty

Tools for Brokers offers a selection of tools that help retail brokers create and maintain a healthy and efficient loyalty. Below are some of the tools that we have built:

Bonus to Balance is an application that motivates traders to be more active by transferring the specified amount of credit to the account’s balance once a certain volume is reached. The application acts as an easy and quick way of attracting new traders and encouraging existing traders to trade more.

Cashback plugin automates the bonus program, e.g., adds cash back to the account once the position is closed or allocates bonuses when a position is reverted.

Multi-level agent commission (MLAC) is an application that helps brokers create a hierarchy or rebate structures with an unlimited number of rebate levels and flexible rebate types.

Credit Management plugin automates a credit granting system.There is an option to set a maximum limit for each type, and brokers can use the Negative Balance Protection feature to guarantee that traders’ funds are protected.

If you’d like to learn more about TFB solutions, please feel free to email us at sales@t4b.com.