Market Research: Forex Bonus Campaigns
More than a third of brokers offer various bonuses to their clients to spur demand on specific symbols, attract new deposit funds and increase trading activity. Besides the undeniable advantages of each type of promos, there are also lesser-known modifications that can potentially allow brokers to stand out and achieve their marketing goals. In this article, we will look at some of these competitive bonuses based on our recent study.
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The welcome bonus is one of the most common promotional campaigns that brokers use to accelerate client onboarding. It is focused on acquiring new clients by offering a one-time reward for performing a specific action, e.g., registration or the first deposit to activate a new account. About 20% of the analyzed brokers use such promos, with the terms and reward amount varying from one brand to another.
A simple example of a welcome bonus is an offer when the amount of the client’s first deposit increases by 30, 40, or even 50%. The percentage of bonuses may increase in proportion with the volume of the deposit. Thus, due to the one-time nature of this promotion, brokers can incentivize their clients to charge their accounts for a large amount at once and receive bonus payouts.
There are other, more sophisticated, and interactive models for paying the welcome bonus. For instance, a broker may allow new traders to create a welcome (demo) account, where they can trade without risks for 30 days. After this term, traders can transfer the traded revenue in whole or in part to a live account, after depositing a certain amount, for example, $100.
A welcome bonus can be used when brokers want traders to keep depositing for a specific period of time after registration. A broker can allow new clients to start trading with the desired amount right after account activation and deposit it gradually in several installments. For example, a client would like to invest $1000 but does not have a full amount, so he/she agrees with the broker to deposit $200 for the next 5 months and receive $1000 as a bonus in their trading account.
Pursuing other goals, the welcome bonus may be executed in simpler forms. To facilitate the KYC process, some brokerages offer clients a fixed payment of $10-15 for their address or phone number verification.
To spice up, brokers can create theme-based campaigns, such as birthdays of the registered users or the broker’s company anniversary. They can offer a reward as a percentage of the deposit or as a fixed payout. This flexible type of promotional campaign provides brokers with ample opportunities for customization and unique offer creation.
The deposit bonus, similar to the welcome bonus, is a popular approach used by brokers to entice clients to add funds to the trading platform and increase the sum of a single deposit.
The deposit bonus corresponds to a temporary (e.g., 30 months) payout of additional funds for a received amount on a trader’s account. Such a bonus provides traders with an opportunity to operate with higher volumes and increase profits. Payouts may differ between 30-50% of the deposited funds, but in some cases, it can go up to 100% — for deposit doubling campaigns.
Such bonuses are often paid on a multi-tier model, depending on the invested amount. In other words, the broker can offer a 50% bonus for deposits up to $1000, 25% for installments between $1000-3000, 10% for amounts above $3000. Usually, the credit cannot be withdrawn, although some brokers provide traders with an opportunity to take out $1 of the bonus after closing 1 lot trade.
Also, some brokers offer the balance interest bonus, a periodic (daily) interest payout for funds that the trader doesn’t use in trading, i.e., free margin. By specifying the terms of deposit promotional campaigns, brokers can achieve different goals, such as keep traders from unexpected Margin Calls & Stop Outs due to higher free margin, or encourage them to make a larger first deposit by calculating interest based on its sum.
More than 20% of brokers use deposit bonuses. Consequently, traders expect their brokers to provide such offers at least a few times annually. In other words, the deposit bonus is a common courtesy, which allows brokers to stay competitive and attract new funds to the trading platform.
A rebate, sometimes referred to as cashback, is the third most common type of bonus campaign. One in five brokers offers this promotion. Unlike welcome and deposit bonuses, a rebate depends essentially on the volume of trading.
In the standard rebate model, a broker assigns a certain coefficient to each symbol, which is then multiplied by the number of closed lots. In other words, a broker can offer a trader $2 for each closed lot of EUR/USD and $3 for USD/JPY. If a trader closes 10 lots for EUR/USD and 20 for USD/JPY, his rebate bonus will be $80. This way rebates help brokers to not only increase general trading volumes but also draw their clients’ attention to specific symbols.
Rebate conditions can change from one case to another. For example, with a simple rebate model, a broker can offer traders bonuses for active trading, regardless of the traded symbols (e.g., $5 for every 20 lots). Moreover, some brokers calculate the rebate as a percentage of the spreads, thus reducing trading costs for active clients. There are also offers with unusual rebate types, such as gifts: traders receive virtual points by closing a certain number of lots, which they can exchange for various gifts offered by the broker like an iPhone.
Some brokers use elaborate rebates, where bonus scales with the size of the trader’s deposit: the larger the deposit, the higher the rebate payout. There are also rebate models with tiers based on closed lots during a specific period, e.g., if a traded volume is less than 100 lots, the bonus equals $2 per lot; if it is between 100 and 1000 lots, then $3 per lot; if it is above 1000 lots, then $5 per lot; and so on.
Since the rebate model focuses on trading volumes, it is a powerful tool for influencing the trading behavior of clients. Rebates can help increase the total trading volumes, the number of trades for a specific symbol or incentivize traders to deposit more. It is effective both by itself and in combination with other bonus offers, providing brokers with ample opportunities to customize their promotional activities.
Risk Management Practices
For a broker, the provision of virtual funds to a trader is associated with specific risks. Brokers can minimize potential risks caused by inflated accounts by proportionally withdrawing credit funds if a trader takes out part of his deposit after receiving a bonus. Additionally, some brokers even require clients to trade a number of lots before allocating the bonus to learn more about their clients’ proficiency.
In the case of high market volatility, a trader may start going into a negative credit balance, eventually losing the funds of the broker. These practices are usually non-compliant with the requirements of regulating authorities, like the ESMA and the ASIC. To protect themselves and their clients, brokers can automate gradual withdrawal of bonuses before stop-out and margin-call events using MT4/MT5 Margin-Credit Tracker by calculating margin levels excluding credit funds.
Besides the described advantages, each bonus campaign has certain limitations. For instance, a welcome bonus can hardly entice a client to continue deposit after registration, while a deposit bonus does not ensure continual trading activity.
According to the research, the number of brokers that offer one bonus type equals the amounts of brokers that offer two or more promotional campaigns. The deposit bonus is the most popular option for the first group, whereas the second group uses a combination of welcome and rebate bonuses. Overseeing and setting up multiple bonus campaigns can be challenging. In this case, brokers have to manually calculate bonuses, track credit funds from several campaigns for one trader and withdraw them simultaneously with deposit funds.
This process can be conveniently automated with MT4/MT5 solutions: Marketing Suite, Margin-credit Tracker, and Bonus Manager. These solutions cover almost all existing bonus types, allowing brokers to customize their offers and upgrade their marketing strategies.
Schedule a presentation via firstname.lastname@example.org to learn more about bonus management solutions.
Data Collection Methods
The study is based on a sample of 100 broker companies around the world. Public information about bonus programs was taken from the websites of these companies, collected, researched, and analyzed. Statistics and conclusions from this study are interpreted in the text and illustrations.