Paddy Power Betfair to profit from dual-brand strategy

The newly-formed Paddy Power Betfair will look to streamline its marketing efforts by using its two contrasting brands to appeal to different ends of the betting market, according to the group’s chief executive Breon Corcoran.

Speaking on an earnings call with analysts after reporting combined online revenues of ?987m in 2015, Corcoran hinted that the Betfair brand could be used to attract more serious bettors, while Paddys’ could focus on recreational punters.

When asked whether Betfair would still be targeting mass market customers Corcoran said there was “already evidence that we can target different sections of the market using the brands”.

Corcoran said those looking for more insights into its future marketing strategy should examine the brands’ promotional offers for the Cheltenham Festival. Betfair is offering free bets to punters who back a winning horse at 3/1 or better, while Paddy Power is offering money back for fallers and horses that finish second.

“The Betfair offer is about rewarding people for winners, while the Paddy Power offer is more of a loss mitigation thing,” Corcoran explained.

And Paul Leyland of consultancy Regulus Partners said the new-found ability to target marketing campaigns at relatively disparate customer bases made the new company “incredibly powerful”.

“One of the stats that surprised a lot of people during the merger is that there is only a 3% overlap between active customers for Betfair and Paddy Power,” Leyland said. “And that’s because Betfair appeals to more serious customers and Paddy Power appeals to more casual players.

“When you have a dual-brand strategy you can have much more focus. You don’t have to try and cover the entire market with your brand. Betfair can retreat from all the recreational stuff they do, and Paddy Power now doesn’t have to even remotely think about the serious punters. They can simply refer those customers to Betfair,” he added.

The Paddy Power Betfair financial report also suggested a more targeted marketing approach and said it was an area in which it expected to spend cash more efficiently post-merger, although Corcoran declined to give details on how.

“The enhanced efficiency from operating at greater scale means we are well positioned to compete in both existing and new markets,” the report said.

“For instance, the Group’s combined marketing, technology and product spend, which totalled ?429m in 2015, can now be applied more efficiently over a larger number of customers.”

As an example of the type of advantage the newly formed behemoth could enjoy, Paddy Power said it was in the process of developing a “new proprietary bonus engine management system giving us the ability to use customer analytics to intelligently promote our proprietary products”.

Paddys said the system, which would also be shared with Betfair, was expected to drive further revenue growth from its gaming products.

Leyland was also fascinated by the potential synergies behind the scenes in terms of CRM and BI.

“Now you can make sure the right people get the right offers,” Leyland said. “If you know you’re going for a customer group that isn’t worried about price you can be more flexible with your bookmaking and if you know that group wants to be entertained you can give them fun offers that are based around low-stakes but big prizes.

“For Betfair, you know your customers are looking at value and price so that’s where your offers start.”

Leyland added that the ability to appeal to both ends of the market made the partnership potentially more powerful than Ladbrokes/Gala Coral, which he described as being “far less polarised in their target audience”.