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The following guest post is courtesy of Yael Warman, Content Manager at Leverate. Yael is a creative writer with a strong background in marketing and advertising. Yael has been a writer for over 10 years and has worked for clients in various industries as well as her own companies.
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It may sound complicated, but the decision between spending an effort retaining a loyal customer versus acquiring a new client is much simpler than the chicken and the egg conundrum.
Once you figure out the annual sales generated by a client, multiply it by the number of years he has been a client, add the value of the referrals this client has given you (yes, only existing and satisfied clients will recommend your service), subtract any commissions, referral fees or bonuses you have given the referring client and subtract your cost margin, you have a pretty clear idea of what your current lifetime value of a certain client is.
If this number is much higher than the value of a new client in proportion to the cost of acquiring/maintaining them, then you know for a fact that retaining clients is the way to go for a lasting business.
Still unsure of whether you should make an effort in retaining clients versus acquiring new ones?
According to a recent study by Kissmetrics, the average value of a lost client globally, is $243 and another study by Marketing Metrics found that the probability of selling to an existing client is 60-70%, whereas the probability of selling to a new prospect is between 5 and 20%.
If you are convinced now that one loyal customer can generate far greater revenues than a new one, let’s evaluate how a Forex brokerage can successfully increase customer lifetime value by using social trading:
- Help traders produce good results. A happy trader is more likely to become loyal, and winning traders are certainly happy traders. A newbie trader with little or no knowledge about the industry can burn their capital quickly, however, if a newbie trader can watch, follow and copy successful traders while they learn to trade, then they are more likely to generate profits and become happy, satisfied customers. Even before a trader opens a real account, the ability to engage in social trading while using a demo account can prove extremely valuable. Demo accounts are a great way to ease clients into trading, but if the trader’s experience is not positive, it could backfire. Social increases the chances of a trader generating profits. Having this positive experience, will in turn make them more likely to convert into a real traders.
- Personalize the account. Social trading platforms allow traders to personalize their accounts based on featured and/or selected masters, instruments, and other criteria. Once a customer invests time and effort into personalizing their account, they are less likely to abandon your company, since doing so would mean having to repeat the effort in your competitor’s platform.
- Trusting customers are typically loyal customers. The transparency provided by social trading, where a trader can see a master’s open trades, closed trades, pending orders, P&L statements, etc, helps build strong, long-term relationships.
- Using social-related CTAs to create a sense of urgency can be a great psychological motivator. Look at the success behind companies like Groupon. The fact that their deals only last 24 hours, drives a greater immediate response. Social-related CTAs such as “Master A has an average winning rate of x%. He just bought $1000 in EUR/USD. Do you want to copy his trade?” can generate immediate response from a passive trader.
- Massage a master’s ego. Did you know that the most popular feature on LinkedIn is the “Who’s Viewed Your Profile”, according to a Forbes Report? OkCupid, the popular dating site has similar results. Use this premise to keep masters around. Letting a master know when new traders begin following or copying them, boosts their ego and once they have enough copiers and followers, they are less likely to go away.