The key to success in a saturated market is differentiation, brand distinction and margin-enhanced trading, says Simon Trim, CEO of Sporting Group.
The maturing landscape of the global sports betting market boasts significant pressures, and these are impacting operators in a wide variety of respects. The squeeze on margins caused by a loss of pricing and trading skill in the industry has been exacerbated by a growing wave of tax and regulatory pressures. International operators (and parts of their supply chain) increasingly need to compete in a newly emerging, regulated market landscape. This is a very different proposition to the grey and black markets, where large parts of their revenues have historically been generated.
As an industry, we have witnessed several responses to this. Corporate overhaul with a view to building scale has been prevalent, with M&A frequently turned to by established operator groups aiming to build and maintain their market positioning. Equally, there has also been a pronounced phase of land grab-style marketing techniques such as free bets, largely driven by short-termism.
Alongside tighter overrounds and spiralled operating costs, this approach has left incumbents searching for ways to reverse declining sportsbook contribution. The industry is now much more competitive than it was just a few years ago, and those damaged by the structural decline of retail or a failure to achieve sufficient scale in the online space are increasingly faced with a traditional business model that no longer works.
The third-party proposition
Outsourced pricing and trading services are a well-established feature of the sports betting industry today. Initially, traction for outsourcing was around speed to market for new products. More recently, however, it has been seen by operators as a response to the questions of cost and complexity – especially around challenging areas such as scaling in-play betting.
When choosing where to outsource trading services, some market incumbents have eschewed the long-term benefits of differentiation through pricing and trading excellence in favour of immediate cost reduction and the consumption of scraped data or copied prices.
However, the commoditised pricing that results has only served to reduce customer satisfaction, damage the brand, shrink market share and ultimately dilute these operators’ ability to react to today’s changing market dynamics. This is especially true of the adopters of the white-label ‘turnkey’ supplier model, who historically can only find success in unregulated markets. For operators in regulated markets, a “one-size-fits-all” proposition leaves them exposed to a lack of quality across the whole value chain, especially in the areas of brand and product differentiation.
Therein lies the key to success in regulated markets – differentiation. In a saturated marketplace, expert pricing and trading and a smartly balanced, well-formulated risk management capability must be at the core of an operator’s growth strategy. Without this, there is no sustainable foundation for a recognisable brand tone of voice to endure outside of marketing ‘noise’. The outcomes of a differentiated strategy are sustainable margins, a satisfied customer base and control of your own destiny.
The challenge for operators currently is how to follow this optimised strategy when they no longer possess the skills (or capital resources) in-house to run a business in this way, and large parts of the supply chain do not possess the heritage or expertise to deliver a bespoke pricing, trading and risk management solution.
Winning the game of fine margins
At Sporting Solutions, we have developed and successfully launched our Risk Management Services (RMS) product to remedy the systemic industry issue of poor pricing, which has ultimately led to a dissatisfied customer base with a high CPA. Our highly-automated Risk Adjusted Pricing means operators have access to pricing, trading and risk management techniques that are customised to their business. RMS is built around their own appetite to exposure and is reactive to the actions of their own customer base – meaning they regain control of how to position and run their own business rather than rely on sub-optimal white-label partnerships and commoditised content that can only ever deliver a ‘me too’ sportsbook.
RMS’s in-built ‘self-trade’ mechanism also allows operators to maintain a local pricing strategy for their own market, using the differentiated knowledge that is so important in a competitive, regulated landscape. Local expertise allied with market-leading trading and risk algorithms ensures product differentiation, brand distinction and margin-enhanced trading in a cost-efficient manner.
When utilising Profile, our in-house customer analytics tool that underpins our automated processes, operators have a new dimension on which to manage their client base – both from an integrity and CRM perspective.
Our techniques are highly automated, objective and based on the methods most closely associated with portfolio management in financial markets. The result is that RMS is both a cost-saver and a margin enhancer for operators, who can now drive brand success through cost-effective differentiation and ensure they have a business model that is sustainable for the long term.