Binary options call centers approaching obsolescence? O-SYSTEMS launches revolutionary automated sales platform
FinanceFeeds Exclusive The method by which customer acquisition and retention is conducted within retail FX companies and binary options brands differs substantially. Customers of over the counter (OTC) binary options brands, by nature, are usually those with less need to interact with brokerages, and the timescale between conversion from demo to live account, second deposit […]
The method by which customer acquisition and retention is conducted within retail FX companies and binary options brands differs substantially.
Customers of over the counter (OTC) binary options brands, by nature, are usually those with less need to interact with brokerages, and the timescale between conversion from demo to live account, second deposit and then no longer being a customer is often much shorter than the same metrics for clients of retail FX firms.
The proliferation of binary options brands that established operations between 2011, the year that Cypriot regulator CySec began its regulation of binary options as a financial product, and today, have largely operated on the same principle of employing sales and retention teams to call leads and convert prospects to clients, and then almost immediately afterwards, retain them for a second deposit.
This system has been the de facto modus operandi thus far, however there is now an elephant in the room for such companies as the main cause for concern among retail FX firms is now massively amplified among binary options brands.
The elephant in the room, or indeed the elephant in the marketing department’s office, in this case is the cost of customer acquisition and retention combined, compared to the actual combined amount that an average binary options customer will deposit during the entire lifespan.
Currently, the cost of acquisition for a new binary options customer is approximately $700, which includes the cost of sales staff, real estate in the form of an office large enough to accommodate enough human resources, the buying and regenerating of leads, and the bugbear of the true legacy model of a human resource-heavy business – the high cost of staff turnover.
This $700 is a particularly important metric when assessing the monthly profitability of operating a binary options brand, especially when considering that in 2013, the average revenue from a new binary options customer was approximately equal to what is now the cost of bringing a single client on board, but also the average revenue has now dropped to between $500 and $600 per client for many brands, constituting a $200 first deposit, followed by a customer retention call that often results in a further $200 the same or following day, and then a small amount more until the client goes west.
Here in Limassol, Cyprus today, FinanceFeeds CEO Andrew Saks-McLeod met with Haim Lagziel, CEO and Founder of binary options software company O-SYSTEMS, in order to gain an exclusive insight into the firm’s fully automated solution in which no sales or retention team will feature at all.
Very importantly, the method by which traffic is generated for binary options brands is a vital statistic that must be considered. “Currently, most firms in the business are looking at a CPA (Cost Per Acquisition) of between $350, $450, and within that particular customer base, 70% of the live accounts that are opened fit into the category of those which would have played online lotteries rather than those who may be experienced at trading financial markets” said Mr. Lagziel.
“As a result of this, the expectations of this type of client base are considerably different to those of retail FX firms, because within the traditional model of using sales calls, a client who may deposit an initial $250 often thinks that he will be rich and win, rather like in a fixed bet made on an online lottery, as opposed to making strategic analysis about manually trading a financial market. Because of this, the lifetime value of such clients is very very low indeed. By engaging customers via an automated system and not going down the traditional route, lifetime value can be extended exponentially, and the customer demographic can be much more sustainable” – Haim Lagziel, CEO, O-SYSTEMS.
Therefore, the revenue model in many cases is negative, so what is the solution?
Cutting the cost by using automation of customer retention and optimizing what has become colloquially known as a ‘dead lead’ list has been a focus for many retail binary options brands for over a year now, however automating the entire process has not featured, until now.
It could be argued that within retail FX, or exchange-traded binary options, the high-touch, customer service-orientated model is essential however in OTC binary options, is this really the case?
“OTC binary options appeal by their very nature to traders that want to select a fixed outcome trade by clicking once and therefore are often more inclined to respond to automated services, just as they would do with other online products that they may use” said Mr. Lagziel.
“Retail FX customers need to engage more with their broker, they are trading a spot transaction and rely on analytics, news, educational services and signals to make their decisions, however binary options is a fixed bet, therefore it is a quicker transaction, and therefore brokers which understand this can reduce their costs and maximize their profits exponentially by using a fully automated system and not having to have the headache and cost of running a call center” – Haim Lagziel, CEO, O-SYSTEMS.
During the meeting, Mr. Lagziel concurred with FinanceFeeds that only a few FX firms have managed to operate a low-touch model with no sales team, one notable example being Plus500, however in this case, bearing in mind that FX is less given toward a low-touch model than binary options, Plus500 still managed to take their company’s market cap up to $1 billion at the height of spring 2015, with relatively low operating costs and a small operational entity.
Called O-FREEMIUM, the software is a fully integrated binary options platform which specifically highlights its lack of need for sales calls as its unique selling point, and has gone live, its first customer being binary options brand Oboxee.com
Opening a demo account does not require any registration, therefore customers wishing to try the software before trading are certain that they will not be immediately contacted to make a first time deposit, and can do so directly from the platform when they wish to convert to a live account.
“The acquisition funnel is a very important aspect of this product” said Mr. Lagziel.
“Traders get a free initial $35 which is deposited into their live account, without having to provide their contact telephone numbers” he said.
“Once a client goes live, 80% of the features within the platform such as social trading, the list of assets, candle sticks, indicators and more are locked. These features can be unlocked when a client deposits further funds, or reaches a balance of $100 from their initial $35 which was provided to them. This is an interactive method of engaging clients and driving revenue, without having to contact any customers at all, and which customers can be sure that they will not receive any sales calls as they did not need to register their contact details” – Haim Lagziel, CEO, O-SYSTEMS.
Mr. Lagziel explained “I have seen relatively new startup brokerages which rent an office, hire staff, take an end-to-end third party solution and then start to consider their brand successful when they make $200,000 per month in revenues.”
“The metric that is often not considered by many brands is not only the staff and real estate costs, but the cost of acquiring each client, even if every single client is not profitable on their trades. In one case, a firm which is making $200,000 per month is only left with $30,000 pre-tax profit at the end of the month, which is dwindling further as operating costs go up” – Haim Lagziel, CEO, O-SYSTEMS.
Instead of performing sales and customer engagement via calls, O-FREEMIUM does so via personalized behavior messages that aim to keep the specific customer engaged.
On demo accounts, personalized messages regularly pop up, showing the performance of the trader and encouraging conversion to a live account, whilst retention for customers with live accounts takes a similar form.
In this digital age, most certainly efficiency is paramount, and therefore the lean operating model is something which certainly could lend itself well to binary options brands.