Analysis: Time for a rethink of the Ladbrokes brand?

Ladbrokes Coral’s third quarter results were a puzzling mix of positives and negatives with the biggest question mark falling over the Ladbrokes brand. There remains a sense that the merger is a little less than the sum of its parts right now, and Ladbrokes in digital at least is not quite pulling its weight.

Digital net revenue for the group was 12% ahead of last year but this was led by the consistently impressive Australia division and a revival of fortunes in Italy. Gaming revenue was up 6% with Gala Bingo in double digits and Gala Casino suffering more of a blip, but the bright spot in the core UK market was Coral with 13% revenue growth year-on-year.

In a competitive market where Paddy Power Betfair couldn’t find growth, recording double-digit increases in the midst of a major integration is no small feat. And trying to unpick the results it appears both sportsbook and gaming performed well for the boys in blue. In the red corner, however, it was a very different story with Ladbrokes revenues down 9% year-on-year as it shifts from volume to value. Where have we heard that before?

Retaining profits

The drop in revenue wasn’t by itself unduly alarming although it felt a little like a missed opportunty. During the period Ladbrokes moved from a “get them through the door” acquisition strategy to one focused more on player value and retention. The firm also noted “product and feature releases were suspended, as planned, as Ladbrokes.com was successfully migrated onto one digital platform”.

New product development is now kicking back into gear and there was also a “significant reduction in the use of affiliate acquisition channels across all UK brands”, which will doubtless have an impact on revenues in the short-term. But the aim is more to focus on profit growth than adding topline numbers with the stated plan to “grow scale through the acquisition of recreational customers and then peel back that spend to focus on retention and yield management”.

The firm is using the proven CRM tools Coral had developed to maximise yield and continue to drive more profitable acquisitions in digital through more detailed LTV analysis as it outlined in its H1 results. And this remains the plan with in Q3 the firm adding: “We continue to transition our approach to customer acquisition and retention in Ladbrokes.com to focus on improved profit conversion.”“

Operationally this is hard to argue with, and is what the most successful operators in the sector have long been doing, but we’re going to have to wait a few more quarters to see if it’s managing to achieve the promised bottom line improvement. What we can see in the interim is it appears to be driving down revenues in a period where market share gains were surely achievable for a brand that’s still some way behind its peers in terms of scale.

Dual brand strategy

In its H1 results Ladbrokes Coral CEO Jim Mullen talked at length about using the tools Coral has developed to provide insight into the most profitable customers and cohorts and how this is a benefit across its brands. “The data is providing insight to allow us to determine not only which channel spend should be applied to, but also where the best value and yield is to found by channel and customer cohort,” Mullen said. And he added this allowed them to focus on differing strategies for each brand.

Management have previously talked of “multiple brands offering points of difference to the customers” but from a subjective point of view as a consumer in the UK it’s not clear what those are. Coral and Ladbrokes appear to have more similarities than differences at the current time and Ladbrokes continual reinventions haven’t yet led to any major breakthrough in the UK market.

The Ladbrokes brand was relaunched in Q2 14 with multi-million pound Ladbrokes Life campaign, clearly aimed squarely at the 18-30 recreational market. It was part of a total revamp of the Ladbrokes offering focusing on its mobile product but results were decidedly mixed with some posters forced to be withdrawn and sportsbook revenues at the end of 2015 only 16% ahead of 2013 numbers and down on the previous year.

A new campaign featuring UK football personality Chris Kamara was launched in time for the 16/17 football season but from the cheap seats it’s hard to see how this differs markedly from the Coral proposition.

Spot the difference

“Coral can offer 8 places [on golf Majors] and look for the each-way punter — the customer who wants to have a shot and gain something back even if the prices are slightly skinnier. Ladbrokes can offer 6 places to offer real value at the ante-post market, appealing to those customers driven by price,” Mullen said in the H1 results. But looking at the sites on a typical weekend you really need to squint to see the points of difference.

Ladbrokes have acca insurance while Coral have an acca boost, both lead with their user-generated odds selections, Ladbrokes has a William Hill style daily odds-boost and Coral leads with Skybet-like enhanced multiples. The differences where they exist are somewhat more subtle than you may expect and appear to rely on a more detailed level of analysis from prospective consumers.

A similar argument could be made over the Paddy Power and Betfair brands, which spent two years trying to be ever more similar and now are trying to be entirely distinct. But the differences are even less stark at Ladbrokes Coral. And the use of the same successful acquisition and CRM techniques and porting the multi-channel strategy from Coral over to Ladbrokes in its entirety is potentially not aiding establishing these points of difference to the consumer.

A radical rethink?

Applying best practices from Coral on the same tech platform doesn’t seem like the most sure-fire way of developing two distinct brand propositions, although that is not necessarily the aim. There is a very large recreational market to aim after in the UK and should be plenty for both brands to take, but the drop in Ladbrokes revenue in the period suggests they are not grabbing as much of it as they should be.

Is the solution a more radical rethink of the Ladbrokes brand and offering? The Betdaq exchange is still an underutilised asset and could provide Ladbrokes with more of a USP as could the much-promised return to basic bookmaking principles. There is also the possibility of Ladbrokes becoming more of an international brand or even a B2B proposition. But there is the sense that any change will be more gradual and incremental.

Ladbrokes Coral executives will argue, as they have done for the best part of a decade now, that Ladbrokes is in a period of transition and adjustment and good times are just around the corner. And, this time, they may be correct. But in a market where Sky Bet and bet365 are knocking it out of the park, it doesn’t seem an ideal time to be playing forward defensives just to get their eye in. If ever there was a time for some bold shots to be played then arguably it’s now, the question is, does Ladbrokes have the desire to go for the fences?