Some of the leading suppliers to the sports betting industry offered their insights into the future for sportsbook personalisation based on automated customer segmentation, advanced behavioural analysis and predictive AI-driven models. The third round table participant was Sporting Group, represented by its CEO Simon Trim.
SBC: What role does pricing and risk management have to play in the differentiation of a sportsbook offering?
Simon Trim (Sporting Group): The concepts of differentiating on price and managing your risk to suit your book have been increasingly ignored by operators for most of the past 20 years. The advent of mainstream in-play betting in the mid-2000’s delivered a whole new profit vertical for operators, initially fuelled by largely unofficial (and therefore cheap) data, allied to Point of Supply (PoS) regimes that promulgated tax mitigation strategies.
The result has been many operators (and suppliers) eschewing pricing and risk management as a discipline and offering a sports betting service based on commoditised (often scraped) pricing instead. Price differentiation has been sacrificed on the mistaken basis that if everyone offers the same odds they can’t be wrong, hence you don’t need to employ pricing and trading experts to position you differently.
Simply deploy mass market bonusing and free bet offers to drive volume from a soft customer base, view sports betting as primarily an acquisition tool for casino and you have the “go-to” sports betting business model for most operators over the last 10 years.
The problem the industry now faces is that the factors that gave rise to this model (and the only factors under which it could be successful) have changed forever. Data is no longer cheap. Tax burdens have increased and mitigation has become harder as Point of Consumption regulation has replaced PoS. Licensing, technology and marketing costs have also increased during a time when theoretical margins have declined.
The result has been operators looking to get out from under a burden of cost and declining revenue, either through seeking scale via consolidation or through the adoption of a cheaper “turnkey” option – overlooking the fact that white-labels only work in grey or black markets with low cost overheads. As we’ve seen this year, the casualty list of operators that can’t make it pay is starting to grow.
Price differentiation underpinned by expertly managing actual book exposure is now a missing piece in most operators’ value chain, and one that without deep domain knowledge and skill is an impossible one to replace. This is why we developed our automated Risk Adjusted Pricing (aRAP) service to complement our existing suite of B2B pricing and trading solutions.
As a set of products, these are designed to offer operators a margin enhancing, bespoke pricing service whilst reducing operational overhead. aRAP adjusts prices on a per-operator basis, allowing sportsbooks to differentiate their offering based on the business they see and their own appetite for risk, rather than merely laying a sheet of tracing paper over bet365. The resultant price is bespoke to the operator, enabling both product differentiation and profit maximisation.
SBC: How can operators build on their customer analytics to both enhance player experience and drive higher margins?
ST: Customer analytics is at the heart of delivering the “holy grail” of personalisation to enhance customer experience. Currently it is still quite basic. with industry understanding not going much further than leveraging knowledge of customer preferences (be that sports, bet type) to allow operators to serve users with content and promotions with greatest relevance to them.
Whilst it is natural to look at the likes of Amazon and Netflix for how to develop the concept further, there is again added complexity for sportsbooks. For example, the underlying content of in-play betting is much more dynamic than musical preferences and TV shows, so building engines to generate relevant, real-time personalisation is much harder.
Additionally, unlike casino, the most relevant metrics in sports betting are skill-based. These are often the hardest behaviours to objectively identify and analyse, resulting historically in sportsbooks making decisions on customers via an overly subjective, manual process. Add in the increased regulatory requirements tasking operators to be proactive in the areas of safer gambling and AML prevention and it becomes clear that access to a fully automated, integrated, deeply intuitive set of scalable analytics tooling is a necessity.
Whilst the area of customer analytics has become a recent industry buzz term, making objective decisions that optimise business benefit and maximise user experience often require solving exceedingly complex questions. Unless it has already been iterated over several years, any current solution that claims to objectively quantify client behaviour is likely to be sub-optimal.
At Sporting Solutions, we originally developed “Profile” as an objective analytics engine capable of identifying skill on an anonymised customer data set, which we’ve now integrated into aRAP to support real-time price optimisation based on specific customer activity. This allows the operator to refine prices based on the activity of their own client base and drive margins further.
This real-time view of player behaviour can also support player safety requirements (we’ve developed and continue to iterate a “welfare” rating to flag customers who may be at risk of gambling harm) and supports Compliance and Credit processes in relation to AML.
SBC: A lot has been said recently about gamification, what can it do for sportsbook?
ST: The value of gamification is similar for sportsbooks as it is for many other industries. In the broadest sense, it helps widen the acquisition funnel and creates increased customer engagement with the brand. At Sporting Index, it has often been used to help educate customers on how sports spread betting works (which at first sight can seem quite a complex betting product), giving them increased understanding and the confidence to trade more readily.
Gamification is more likely to attract younger audiences, which is as important for sportsbooks as any other industry. This is especially the case when the “traditional” elements of the sector that previously attracted first-time bettors – such as horse racing and retail – are in long-term decline.
However, there is also an irony here that leads back to the importance of price differentiation. While brand innovations and new front-end products (such as bet builder for example) can drive increased acquisition and higher margins in the short-term, they are products and techniques that quickly become adopted across the wider sports betting landscape and therefore only have a transitory impact on the bottom-line.
For the reasons outlined above, the barriers to entry around the adoption of pricing and risk management excellence are much higher, so operators that can transition their business model and re-introduce differentiation in this way will have a sustainable competitive advantage.
There is a paradox that the operators who will ultimately win the battle for the new generation of customers are the ones that look to adopt the industry processes last seen as relevant in an age before many of those customers were born.