I received a comment on the "Marketing Paradox" post from a couple of days ago (thanks for all the RT's, and thanks for the link Seth). It's anonymous so I don't think this person will mind me highlighting it:
- I've never understood the focus on how much a customer bets versus how much that customer loses. If Linda's handle does not multiply by 3.5 when her ROI rises from .93 to .98, then she is actually paying less to play the game. That reduction has to come from somewhere: purse reduction, lower ADW or racetrack profits, or another customer losing more money. If Linda manages to get her ROI above 1, then she becomes just another mouth for the game to feed. What the game really needs is more people losing more money, so that Linda's gain doesn't come out of the pocket of the horsemen, the ADW, or the track. That should be the (best unspoken) focus of marketing efforts.
"What we need are more people losing more money"
How does a business get "more people losing money"? You attract more people by getting them to lose at a lower rate. Then you hopefully tweak it and grow. It's not about more people losing more money, it's about more people losing money.
When Vegas takeout on slot machines was 20% in the 1960's and 1970's, a few folks played them, and those few people lost a lot of money. When they dropped that takeout, it attracted more people to the slot floor. They were losing money - but losing money at a lower rate. When the volume exploded to where it is today, you are not multiplying 4,000 or 5,000 people times 15% losses, you are multiplying millions of people at 2 or 5% losses.
Betfair espoused this early on. From their annual report when asked how they arrived at a low takeout (or "win") rate:
- "Racing knows that customers who go racing, and a) feel they had no value for money at the racecourse, and b) don’t win a single bet all day, don’t have much fun. They may not come back. In just the same way, we know that the least valuable customers to Betfair are the ones who lose all their money quickly. They go away and never come back. So, we are happy to take less off our customers per bet. Business is all about offering your customer the product he wants at the price he wants. If you can do that, he’ll spend his money with you."
Similarly, it does not mean racing cannot have a high takeout V75 or Rainbow Six. It just needs to fundamentally offer a punt that puts to rest racing's negative branding of "you can beat a race, but you can't beat the races".
You can never attract bettors to a skill game by asking them to lose more, without attracting them first by letting them know they have a chance to win more.