Free bets, luxury jets and Airmiles

The latest advertising slogan from City Index is “Take a new position by the pool.” The company has started rewarding regular spread betting customers with free Airmiles.

Until recently many spread betting firms, including City Index, had offered up-front cash incentives in a bid to bump up customer numbers and draw in those new to spread betting.

But following a period of strong growth in account openings, some firms have ended these one-off deals and introduced offers that benefit existing as well as new customers.

Providers that offered cash incentives – like a free initial £100 ($203) credited to each spread betting account – found that a proportion of customers were opening accounts just to capitalise . Some opened several accounts and showed little loyalty to any provider.

Betting companies are keen to attract those who have not spread bet before rather than those who hold accounts elsewhere and are after the latest offer. They want to build longer term relationships and so offer on-going incentives.

“Cash offers have worked well for us in the past, but as the market matures we’re focusing on rewards that are attractive to traders,” says Alexis Webster, commercial development director at City Index.

City’s new scheme, launched last month, gives traders 1,000 Airmiles when they sign up and up to another 20 with every qualifying trade. Account holders also receive 500 bonus miles if they refer a friend.

There is no limit on the number of miles earned. Mr Webster says the scheme is intended to attract experienced traders who have not yet traded with City Index.

CMC Markets, another betting provider, has also pulled back from cash incentives.

“We’ve offered these in the past as a way to get more people interested in us,” says Gary Thompson, head of sales trading. “But now we are focusing more on providing education about financial markets.”

The group says cash incentives can attract people who do not plan to become frequent traders.

“No one wants a client for just three weeks,” says Mr Thompson. “We are focusing more on retaining clients.”

CMC now offers a free day’s training when clients open a spread betting account. It offers courses with information on how to spread bet, the financial markets and technical analysis. New customers also receive free educational DVDs.

ETX Capital gives new customers a free copy of The Beginner’s Guide to Financial Spread Betting, worth £12.99.

As well as trying to appeal to less experienced traders, CMC has a reward scheme for high-end clients offering the chance to earn luxury experiences, such as time on a private jet.

“We want to encapsulate the whole market and provide benefits for new and experienced traders,” says Mr Thompson. “High-end clients want to be looked after, while educational courses bring in new people.”

SpreadEx offers new customers free bets – financial or sporting – after they place a certain number.

Once a new customer has opened an account and placed five qualifying financial bets on the FTSE-100, they receive a free £10 bet that they can place on the FTSE. Alternatively they can choose two free sports bets.

Some betting providers still offer free money to customers. Capital Spreads gives clients £100 if they recommend a friend, and £100 to the new customer.

Simon Denham, managing director, says the scheme, launched over a year ago, has been “moderately successful” in attracting new customers. But he does not believe cash incentives explain the rapid growth of spread betting.

“More people are interested in spread betting as a result of what’s happening in the news and because they are becoming more familiar with market movements,” he says. “Spread betting offers a cheap and flexible route into trading and the cash offers … are just a little bonus, not a reason to get involved.”

Any free offer is likely to carry conditions designed to encourage new customers to keep on betting. These could be tie-in periods or minimum deposit requirements.

Mr Denham says no matter how attractive the initial deal, it pays to shop around.

“You’ve got to explore a little deeper before jumping in,” he says.

“The real benefit to a new customer is the dealing platform, customer support and above all the cost of the spread.”

Tags: City Index, cityindex

This entry was posted on Friday, March 14th, 2008 at 1:05 am and is filed under Broker News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.