Gaining the Edge

Comparing the sportsbooks of today can be comparable to a game of spot the difference. Most carry an almost identical offering, with big overlaps between competitors on aspects ranging from content and promotions to user experience and interface. The trend is not only prominent in mature European markets, but also in the nascent sports betting states across North America, where habits from the old world have firmly planted their flag. What’s needed for both domestic and multi-national operators is a deeper understanding of delivering localized products, with a focus on differentiation through automation of the pricing and risk management functions.

As more states move to legalize sports betting, attaching hefty compliance costs and regulatory constraints, the common one-size approach often employed no longer works for operators to achieve sustainable profits. White-label solutions may have found a place in the grey to black markets where there’s a route to avoid tax and social responsibility costs. But the model is no longer viable in regulated territories. Data carries a premium; the importance of player welfare has never been greater; licensing, technology and marketing costs have rocketed; and after an era when theoretical margins have declined, commoditized pricing has seen its time.

A belief that “if everyone offers the same odds, they can’t be wrong” has led to most operators copying prices for many years – either directly or via a low-cost “pricing” supplier. The result is that price differentiation driven by expert management of actual book exposure is now a missing piece in most operators’ value chain. By investing in a solution underpinned by expert pricing and risk management, operators can exploit this deficiency to differentiate their sportsbook against mass competition. Differentiation through price provides an all too overlooked opportunity to drive customer engagement outside of typical incentive-lead promotions, and operators rarely look to pricing as a viable marketing tool. Price, after all, is a fundamental part of the marketing mix and sports betting is a consumer market like any other.

Sportsbook personalisation through customer analytics is also vital to enhance customer experience, maintaining competitive advantage and growing margins, but also in being more proactive in areas of safer gambling where historic bet data can be used to identify anomalous customer behaviour. This point is especially poignant in North America, where player protection has been at the forefront of the legislative agenda. We’re not talking about the rudimentary analytics based on overly subjective and manual processes, either. These rarely go further than leveraging data on customer preferences to push targeted content and promotions. Instead, what’s needed is a fully automated, integrated and intuitive set of analytics that keeps up with the rapidly expanding scale of operations, and appropriately accounts for the complex, dynamic and skill-based nature of sports betting.

Integrated alongside automated risk adjusted price management, this progressive approach allows operators to optimise their odds in real-time. It’s a tried and tested method borrowed from financial markets. The world of equities and hedge funds have long embraced automation of human expertise to improve volume and margins. Also, it’s proven that these same benefits can be gained when applied to sports betting. Adopting econometric techniques, such as the workings of revealed preference theory, into risk management algorithms ensures profitable decision-making and consistently enhanced returns. It also provides a way out from only offering static, blanket odds scraped from other sportsbooks that feed the void of differentiation. With odds that move progressively, in line with changes to liability and according to where the operator wants to position their brand in real-time, comes discernible market advantage.

While this may sound the death knell for manual trading services and those who rely on them, for those who embrace automated risk adjusted pricing and enhanced customer analytics, the benefits are huge. Considering increased volume, enhanced margins, differentiated pricing, a stronger brand position and more consistent returns, opting for automation is a sure route to gain market share. If your eyes are set on success in the North American market, then only with an innovative approach to pricing and risk will you have a solid foundation for success.

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