Method in the madness

The 2016 Cheltenham Festival week was widely considered to have been an industry-wide disaster, with losses estimated to have exceeded £60m. It may have been unfortunate that many races were won by the favourite but could some of the exposure that bookmakers experienced been of their own making?

Ciaran O’Brien, spokesman for William Hill, qualified the week as a “bloodbath”. Jim Mullen, CEO of Ladbrokes said: “The sector went mad,” during the four-day Cheltenham spectacle. He also added that rivals “abandoned bookmaking principles” – that competitors’ offers, such as giving customers their money back for wagering on a loser, were “far too expensive” to deliver a sustainable return. Uncharacteristic language maybe but then this was an uncharacteristic time.

So what was actually going on? We took a look at Oddschecker to see what offers were available. BetBright was offering 50/1 on any horse to win the Supreme Novices Hurdle, the opening race of the Festival. NetBet was giving
five times the odds on a selection of the day one favourites. Sky Bet was offering money back as a free bet if you were to back a loser on the first race of each day. And the list goes on, and on.

Free bets and money-back are proven marketing strategies to attract customers and it doesn’t seem unreasonable to be using them to attract customers for one of the biggest betting events of the year.

Everyone likes a bargain, and even though there is always the small print for customers to be aware of, these sorts of promotions can offer an enticing prospect for the average, casual punter wanting to feel part of this iconic racing event. In addition, these sorts of offers are eye-catching as they allow for differentiation between what otherwise could be very similar product offerings. An additional benefit is that they can also attract valuable online and offline coverage in the wider media.

Building work

We need to ask the question though, is this kind of gimmicky marketing the best way of building a relationship with customers? What sort of message does it send and what will the long-term value be of those customers. We recently wrote about the promiscuity of casino customers and whether the “bonus” offer that forms the bedrock of casino marketing is really cost-effective in the long-term. Does the bonus-hunter mentality actually encourage promiscuous customer behaviour? It could be argued that free bet and money back offers from bookmakers does little to encourage long-term customer value. Is this “one night-stand” approach the basis of good business?

In the short term, this predatory approach to pricing will put pressure on smaller competitors. While Ladbrokes and William Hill have complained, they at least have the resources to absorb their losses when things go badly wrong, as they did at Cheltenham. Jim Mullen, in his recent update to Ladbrokes’ shareholders said that his company “wanted no part in the race-to-the-bottom offers seen at Cheltenham”. It was the smaller, less well-resourced operators who seemed to be guilty of the most ill-advised promotions but also it is more understandable that they should do so, in order to try and steal a march on the bigger brand industry leaders. What’s surprising to me is that Mullen chose to speak out about it. Surely if smaller rivals were intent to press the self-destruct button that must be good for his business too in the long term, no?

Well, no it isn’t actually. If bookmakers bankrupt themselves with unsustainable and high risk offers, for questionable, potential long-term gain then the whole industry suffers. While online sports betting is now generally accepted, a couple of badly timed scandals could set things back. Prudence and trust are some of the most important characteristics that customers look for when choosing to hand their credit card details over to an online gambling company. If that trust is misplaced then the whole industry suffers. The furore over four Isle of Man online bookies withholding payouts over suspected bonus abuse after Cheltenham spilled out into the tabloids and a bad day was made worse.

Customer safety is one of the principal concerns of regulators, and in many countries strict rules exist on what offers can be made to customers. In the UK, regulation is more measured and although it may not always seem like it, we have greater freedom to stimulate our customers with interesting offers than almost anywhere else. This results in a more varied and interesting landscape and a more vibrant industry as a whole.

At the beginning of the 2015-16 football season, odds were being offered of 5,000/1 for Leicester to win the Premier League. The fact that the y did it, and these odds were widely reported, was actually a great boost to the industry. It will inevitably mean more interest in betting on football next season. Nevertheless, it has been reported that their win will have cost bookmakers up to £20m.

Prices for Leicester for the 2016-17 season currently stand at around 25/1, yet was offering 200/1. Was this another example of sensationalism trumping common sense? Well no, the terms were limited to a restricted time period and restricted stake. The media value attached to this stand-out offer and the subsequent new customers acquired as a result, was carefully judged and the risk stacked up.

Race to the bottom

So, if not a “race-for-the-bottom,” what should bookmakers be doing to stimulate interest? As TonyBet has demonstrated, a more measured, controlled approach to special offers has a place. But so does a long-term strategy that develops a relationship with customers that goes beyond merely throwing free bets at them.

The Paddy Power 50ft “Hollywood Sign” on Cleeve Hill, above Cheltenham racecourse in 2010 was a marketing tour-de-force without a free bet in sight. The stunt, which holds a record for the largest freestanding advertising hoarding, and taller even than the Hollywood sign it was inspired by, prompted a tidal wave of content, national news coverage and a social media phenomenon. It was also cheeky, witty and totally in line with the Paddy Power brand. In 2012 they followed up by putting a Jockey on the Uffington White Horse, a donation to the National Trust helped assuage the chorus of disapproval that followed and the result was again clever and shareable content.

Last year Coral, while still offering aggressive bonuses, ran the #cheltenHAM campaign, recreating the festival as a series of races featuring micro-pigs – funny, cute and gloriously viral. The campaign gained the highest share of voice in the bookmaker category on Twitter, made national TV with an appearance on The One Show and won the social marketing campaign of the year at the EGR Marketing and Innovation awards. Content really can be king and it has a lasting power to continue to influence customer behaviour long after the event itself. With notable exceptions, the gambling industry seems reluctant to embrace the idea, fixated as it is by questionable and, according to Jim Mullen, “mad” free bet offers.

What disappoints me most is the sheer witlessness of the free bet tsunami that threatened to overwhelm the Cheltenham Festival. Surely as an industry we can think a little wider than just free bet offers? Content is really important, so is taking a few risks with that content, standing for something and finding new and engaging ways for your customers to understand what that something is.

One of the joys of sports betting is how passionate customers are about their betting picks, having skin in the game really does heighten the excitement. If the narrative is just about using cash to engage with a customer then it’s not a proper relationship at all. Paying for passion – isn’t there a word for that?

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