Friday, February 27, 2009

Questions II

In our post below called "Questions" we sparked some good chatter, and posters made some excellent points. One of which spoke about traditional racing working on a model of "if the customer loses more, racing makes more." Mathematically this is correct. However, when racing was a monopoly it is true. Get as many people to bet with you, get them to lose and they have no outlet to go somewhere else.

My Question II goes to the changing world and racing losing that mindset. We posted about betfair and their answer to the "get as many people to lose" question in terms of their business. They said the following:

But shouldn’t we want customers to lose money as quickly as possible?

Slot machine operators around the world routinely return a higher percentage to punters than they are required to under regulation. Altruism, or commercial nous?

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. For us, that means offering a whole new range of products (inrunning betting, for example, or the ability to trade a position), to attract a whole new audience.

They are not a charity, they are a business. It is irrelevant what their 'gross' costs are. This is what they believe, through testing and knowing gamblers, is their optimal profit making price-point - just like any other business does; like McDonald's knowing that they make more money at a $3 Big Mac instead of an $8 one (and guess what, McDonald's have higher gross costs than racing does too!). So, I wonder. If a new business like this has found their optimal price point in only 8 years of existence, why have we not changed price points in racing with 108 years of experience? Does racing actually believe that what they charged in takeout in the pre-internet age is optimal, or is the business too fractured to even try to find a proper price point?


Anonymous said...

Someone, somewhere, sometime will actually study and implement a proper price point for racing in North America. But I think it will not be in my lifetime.


Wind Gatherer said...

I would be surprised if any racing jurisdiction had a clue what their price point was or cared about competing jurisdictions.