The Marketing Gamble That Led to a $12 Billion Sale
How Paddy Power courted controversy and won
There’s an elephant in the room — an office where every day is a gamble for the marketing team at Paddy Power in Dublin. Slogans extolling the “fun” element of the brand are feverishly thrashed about to uncover the latest “shock and awe” campaign. In fact, a former product owner at the company told me that “there would be blood on the floor” after every daily standup.
Paddy who?
Paddy Power operates in the gambling industry, it’s a business formed by the merger of three small independent bookmaking firms in Ireland in 1988.
Viral advertisements are commonplace at Paddy Power. Their aim is to catapult the brand on the coat-tails of topical-events, with a humorous undertone.
The brand uses words like “gaming,” “play,” and “win” for added appeal.
If business was a game, betting parlance like “short-priced” and “favorites” would convey the Paddy Power brand perfectly.
The brand's cheeky ethos is even hosted on the company website, a “Hall of Fame” for the world to see.
Introduction
Paddy Power is a service provider, so they don't sell tangible products so much as an experience. They sell entertainment, a mechanism through which customers can engage in gambling activities across various channels, online and offline.
Last year the Dublin-based business embarked on a new merger with Bet365 owner, Flutter, in a 12 billion-dollar deal.
This article will look at Paddy Power’s strategic marketing before the latest merger.
Segmentation, Targeting, and Positioning
The segmentation strategy used by Paddy Power employs an aggressive approach, fuelling its expansion through diversification.
As the company grows, so does its many different customer offerings. Not every customer is interested in the selection of services that Paddy Power offers, but each segment makes use of particular services.
To appreciate the brand's diversification, its channel evolution is a good starting point:
- The 1980s: licensed betting shops and telephone betting
- The 2000s: online betting: apps, casino, poker, bingo, games
- From 2010: sports betting
- Recently: business-to-business
Segments
Paddy Power uses segmentation marketing techniques to traverse each consumer profile and associated channel.
Licensed shops are traditionally a mainstay for any betting brand, the cash cow from which Paddy Power diversified.
Telephone and online betting were set up as an alternative service for consumers that bookmaking firms had always attracted — the first segment identified by the company for marketing purposes.
The company identified this segment using behavioral and demographic segmentation analysis. Peak demand for these services occurs during the horse racing and football calendars, a distinct behavioral pattern.
In terms of demographics, working-class males are in the crosshairs. That said, the female audience is growing online.
Casino apps, poker, bingo, games, and sports are service dimensions that were developed to attract a new profile of customers.
Data analytics can now identify consumers whose lifestyle affords them the ability to use online services, portrayed as entertainment rather than gambling.
In Ireland, late-night TV adverts are saturated with online casino propositions that clearly target a female audience.
SportsBet is the Australian company that Paddy Power acquired in 2009. This acquisition was considered a natural fit for Paddy Power due to marketplace and consumer similarities. SportsBet operates on a different continent, too. At the time SportsBet didn't share the same vehicles that Paddy Power uses to transport consumers, but geographical expansion was a safe bet.
The business-to-business arm allows partners to offer fixed odds sports betting to their customers through Paddy Power’s managed service.
Also, risk management, a second B2B dimension, enables Paddy Power to cream off the top of partner firms.
B2B services are aimed at big business, typically multinationals in the gaming space identified by Paddy Powers' socioeconomic segmentation reach.
Segment penetration opportunities exist in segment three above. As this matures, the offerings described above will target lookalike consumers.
Note: Just as I wrote that last sentence a Paddy Power sting-advert appeared on my TV — “Paddy Power, sponsoring comedy primetime central.”
Targeting
Paddy Power became Europe’s largest bookmaking firm in terms of share value. This came to pass through the use of undifferentiated marketing techniques with respect to segments one and two.
Brand diversification induced cross-segment targetting and conversion.
To attract new users, a cross-pollination approach was deployed. A tailored marketing mix and customized marketing techniques targeted high potential customers, methods to grow the company to its current standing.
Also, to capitalize on the earnings made from the Australian acquisition, the company is well-placed to explore the American and South African markets to target further geographical segment opportunities.
The B2B Segment is a significant departure from Paddy Power's core business. This is an underwriting service, with potential from smaller business partners that are exposed to lower risk, spreading their bets.
Positioning
Paddy Power pulled away from its competitors in Europe in the last decade. Gambling, for some, is a habit, and a bad one at that. Paddy Power, however, markets its brand on attractiveness. Social appeal. A technique to alienate the darker side of gambling.
In fact, Paddy Power positions its brand as an entertainment provider.
While they claim to offer value for money, in reality, Betfair often provided a far superior proposition in the UK and Ireland (both owned by Flutter now).
Reliability is an attribute conveyed in Paddy Powers' marketing campaigns. This is mere rhetoric as they were outclassed by Ladbrokes who, unlike Paddy Power, didn't shirk from their responsibility to honor large, unexpected customer pay-outs.
Paddy Power refused to pay out on a 3000-to-1 bet when Shane Lowry won the Irish Open in 2009.
Reliability could cause problems for the Paddy Power brand in the B2B segment, but don't hold your breath — money doesn't need oxygen.
To position the brand as the B2B partner of choice, service and reliability will underpin Paddy Power going forward. That and their vasts sums of cash.
Integrated Marketing Communications
With diverse service offerings, segments, and targeting strategies the following will discuss the IMC mix under five distinct headings:
- Advertising
- Sales promotions
- Direct marketing
- Sponsorship
- Public relations
Despite courting controversy, exponential growth indicates a successful IMC strategy.
What underpins Paddy Powers' marketing expertise is their ability to position that brand as a household name, synonymous with fun and entertainment.
Controversy is at the core of Paddy Powers’ marketing strategy.
The company accepts drawbacks. The negative association with gambling is outweighed by the benefits the brand proposes to bring to entertainment seeking consumers — Promotors that affiliate and enjoy the humorous shock tactics used by Paddy Power. Most fit the target demographic.
Media
The company uses a multichannel advertisement approach — online, radio, print, TV, and outdoor ads.
TV advertisements are topical, more frequently placed at breaks during major sporting events like horse racing, and football being the most popular.
Some campaigns have attracted interest from advertising standards authorities in the UK, who forcibly withdrew some risky adverts due to complaints.
For example, in one advert, a football game played by a team of blind footballers resulted in a cat being accidentally kicked by a player.
Another saw the company seemingly offering odds on which of two elderly ladies attempting to cross a road would get hit by an oncoming truck.
The company often uses innuendo and slapstick humor with a mischievous edge. Whenever challenged, the company is careful to deflect the confusion their advert caused, and apologize for any offense caused. They are celebrating a great result — people are talking about the brand. The benefits of this approach are clear to see from the financial results.
Outdoor advertising is a way the company often portrays its mischievous side with large, spectacular ads. In 2010, the firm erected a 270-foot sign on the hills overlooking the Cheltenham racecourse to mark the start of the racing festival.
Two years later, to celebrate the start of the same race festival, the company drew criticism by adding a jockey to the famous hillside carving of a white horse at Uffington in Oxfordshire, UK.
Paddy Power is well-known for launching its hot air balloon at horse racing events. The inflated balloon takes the shape of a pair of men’s underwear.
The company has used this method to great effect. Numerous opportunities exist at other locations or sporting events to deliver the brand’s message to a vast audience of prospective customers.
Hot air balloons or oversized signs are attractive to potential business partners. For this, Paddy Power uses print media, like trade magazines in target segments. Print media adverts are placed in football magazines, gameday programs, and horseracing papers.
Paddy Power partnered with Viagogo in the past, a ticketing company. They offered a money-back guarantee to all customers for the Ireland versus England match at Twickenham — if England’s number ten scored a try, a drop-goal, a conversion, and a penalty.
Sales promotions used by the company fit into two categories:
- Consumer-oriented, aimed at segments one and two
- Trade-oriented, which is aimed at the B2B segment
Consumer promotions include money-back offers. For example, customers are guaranteed the return of their stake (bet) should a random event occur, like a player being sent-off.
Bonus offers, targetting gamers, promote bonus credit if the consumer bets a predefined amount, like £20 or €20.
Enhanced odds and time limits are used to convert engaged gamers. Punters are offered a higher return on a bundle offer if they bet within five minutes.
The company portrays these promotions as an opportunity for their customer for a discount or a free bet — something for nothing.
In reality, the Paddy Power wizardry traders are meticulously evaluating probabilities to measure risk and exposure at every moment.
Consumer-oriented sales promotions have increased revenue, similar to the airline industry’s ancillary revenue — selling overpriced drinks to a captive audience.
Trade-oriented promotions are difficult to track due to confidentiality agreements with business partners and lack of advertising in this sphere.
Direct marketing is not used. Regulations restrict the gambling industry from contacting customers who have not expressed an interest.
Sponsorship
To further enhance the brand ethos as an entertainment provider, Paddy Power has sponsorship deals with professional sports clubs. Manchester City and Swansea City football club partnerships align the brand as an energetic, vibrant, competitive, and fast-moving company.
Paddy Power sponsors novel events, too, like:
- A wife-carrying competition
- A charity skinny-dip in 2009
Both deals conveyed the fun side of the brand.
Publicity is where Paddy Power differentiates itself from its competitors. As noted, they court controversy, generating free media from news reports thereafter.
Other publicity stunts include:
- Hosting the world’s largest strip poker tournament in 2006
- Arranging a Father Ted festival (A ‘90s satirical show about Catholic priests)
- Arranging for a Tongan rugby player to temporarily change his name by deed poll for the duration of the rugby world cup
- Setting up a stall at the Vatican City following the death of Pope John Paul, offering odds on his successor
These stunts create PR challenges, but also web traffic and sales benefit. The brand recognizes this, but rather than improve public relations in exchange for fewer risqué publicity stunts, they use other mechanisms to soften the controversy, such as:
- Early payouts before a sporting event has even ended
- Charity fundraising efforts (the sponsored skinny dip raised funds for breast cancer awareness)
Pricing
Intangibility associated with service providers like the gambling industry means that they do not charge customers to use services, like their app, until they place a bet. This means that Paddy Powers’ pricing strategy is highly reliant on marketing promotions and other market conditions — competitors and consumer demand.
Pricing is an integral part of the marketing mix. Paddy Power employs a cost-plus pricing method to challenge the more traditional bookmaker style of competitors.
When a bookmaker opens a market at an event like a horse race. The odds offered on each runner are set based on form and predictive analytics that forecasts the outcome of the race. And changes according to demand. The bookmaker banks sufficient funds, staked by customers, to payout on wins with a dividend to the bookmaker.
Paddy Power could extend this cost-based pricing method and reduce the size of the dividend it is willing to take on a particular market to allow the return being offered to its customers to be greater than the return offered by competitors.
Paddy Power deploys five pricing strategies:
- Bundling: This is the most popular. Paddy Power offers customers the opportunity to place a bet on multiple markets, with the ability to roll over winnings from the first market as a stake for the second market and so on. Examples of this are double, treble, four, or fivefold bets. Paddy Power advertises how a bet on a short-priced market could improve exponentially in an effort to promote this type of proposition.
- Captive: This is evident where Paddy Power advertises attractive odds on a particular race or match at the event, offline.
- Optional product: This strategy offers optional extras in the online games segment, targetting regular customers by offering free credit to match the value their stake if they opt to use a casino.
- Promotional: Heavily used in football markets, Paddy Power offers customers the chance to have their losing stake refunded in the event of a predicted outcome taking place. For example, money back on all losing bets if Christian Ronaldo scores next.
- Dynamic: made possible by the continuous examination of given markets. Paddy Power changes the price of a given entity in a market at a moment’s notice to attract customers to a shortening (lower) price, which indicates a greater likelihood of the event occurring. In contrast, a lengthening (higher) price would indicate the potential of a greater return to the customer but a reduced probability.
Consumer Behaviour
Paddy Power enjoys a mix of customers, from professional gamblers to hobbyists who enjoy the fun element of a bet.
At the extreme end of the spectrum, there are those who cannot cease gambling when it becomes an addiction.
In 2012, “a post office manager who gambled €40,000 on the Norwegian women’s soccer team” was jailed for four years. During the course of his addiction, he bet €10 million, winning €8.3, leaving a €1.7 million deficit.
Decision-making
The consumer decision-making process encompasses five steps consumers make in their purchasing decisions:
- Need recognition
- Search
- Alternative evaluation
- The consumer choice process (purchase)
- Post-purchase evaluation
Paddy Power entices recreational customers during need recognition, triggered by internal stimuli of either boredom or desire for excitement.
Paddy Power generates external stimuli in the form of cues like adverts and convenience online.
For gambling addicts, internal stimuli are to satisfy a state of discomfort arising from money worries, chasing that elusive win.
Search
Search behavior is both internal and external. Internal customers draw upon past experiences. The Paddy Power brand is well-positioned in this space.
External search behavior derives from information gathered from outside sources, such as:
- Personal: friends or associates, Paddy Power customers
- Commercial: online and offline campaigns
- Public: public sources, like a newspaper report or advert
- Experiential: recent experiences
Alternative
Alternative evaluation involves similar or substitute services. Paddy Power is a search alternative for customers of other companies, their competitors.
The consumer choice process is influenced by sub-decisions about quantity, immediacy, timing, and payment options.
Quantity includes attractiveness. Paddy Power places special price offering in front of the target audience.
Timing is dynamic, coupled with multiple payment methods to influence customer conversion by channel.
Post-purchase
Post-purchase behavior is dependent on consumer need recognition match. Those seeking fun are usually satisfied, given the low involvement purchase (transaction), and display little or no cognitive dissonance thereafter.
Those gambling professionally, or those addicted to gambling display joy if a wager is successful, or regret from loses. The latter convince themselves of a near win, discount the loss to chase the next win.
To influence consumer decision-making, Paddy Power deploys association to target young working-class males. The glamorization of the “lad culture” is prevalent throughout the marketing mix employed by the firm.
Survey
As part of this research, I visited a couple of Paddy Power outlets to ask random punters seven questions:
- Why have you chosen Paddy Power as your preferred bookmaker?
- How often do you visit Paddy Power?
- Do you use Paddy Powers’ App?
- Do you use other betting brands?
- What is your motivation for coming to Paddy Power?
- Do you enjoy the Paddy Power service?
- How much do you spend per week (under €10, €11–€50, or more than €50)?
The aim was to collate 50 replies. Many customers were reluctant to participate, so they declined to comment. Also, I was asked to leave some stores by members of staff.
In the end, 28 respondents shared the following insights:
Why have you chosen Paddy Power as your preferred bookmaker?
- Location — 90%
- Convenience — 5%
- Other — 5%
How often do you visit Paddy Power?
- Once a week — 30%
- Two to three times a week — 50%
- Every day — 20%
Do you use Paddy Powers’ app?
- Yes — 20%
- No — 80%
Do you use other bookmaker brands?
- Yes — 100%
- No — Nil
What is your motivation for coming to Paddy Power?
- Fun/enjoyment — 85%
- Unable to stop — 10%
- Other — 5%
Do you enjoy the service?
- Yes — 100%
How much do you spend per week?
- Refused to say — 90% (daily visitors)
- Less than €10 per week — 2%
- From €11-€20 per week — 8%
- More than €50 per week — Nil
It was clear from the data that gambling consumers are unwilling to share how much they spend each week on this activity, their hobby.
What was interesting is that just one in five store punters also play online. So based on the limited sample data, this indicates two things:
- There are two distinct customer profiles: online and offline gamblers, with a 20 percent overlap.
- Most customers are reluctant to gamble online.
The latter point could further indicate that:
- Gamblers are inclined to hide their spending from their partner given that 80% participate offline (mostly cash).
- In Ireland, banks do not lend (car or home loans) to customers who have gambling transactions on their bank statements.
On reflection, the experience highlighted two things: that the impact of Paddy Powers’ marketing machine is undeniable, and that Gambling incites secretive behavior when money is concerned. The second point is worrying from mental health and social point of view.
Services Marketing
Services marketing, in which Paddy Power operates, can be defined as “any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything.”
Allow me to list the “7Ps” of service marketing for discussion:
- Product
- Price
- Promotion
- Placement
- People
- Process
- Physical evidence
Paddy Power focuses a great deal on their digital product, in terms of technology — website mobile apps.
The place offline is evident from their choice of high street locations, and online from over one million sporting app downloads.
Promotion and price were discussed in detail above.
So for the purpose of this section people, process, and physical evidence dimensions of the marketing mix will be discussed.
Ignoring marketing and tech development teams, people play a vital role at Paddy Power. This is visually evident in stores. While I was asked to leave, due to perceived harassment of customers, employees are helpful, friendly, and engaging.
In fact, I overheard workers address most punters by their first name.
Also, the phone betting service is operated successfully by the call center. These employees display a high level of professionalism, capability, and discretion over the phone — especially important given the secretive nature that many customers displayed during the offline survey.
The process cannot be faulted. Both channels are customer orientated.
Nor can online processes be faulted. Paddy Power was awarded the “Best Mobile Gambling Operator” at the M-Gaming awards in 2013.
Like any business, Paddy Power is innovative. One innovation is the automated in-store betting stands, reducing the cost and need for store staff, although this will diminish the impact of the people factor offline due to reduced interactions.
Physical evidence is something Paddy Power takes seriously. Online tools are evolving at a breakneck speed whereas offline stores have been equipped to a very high standard:
- Comfortable seating
- Plenty of independent data
- An endless supply of free and betting slips
- Complimentary water and coffee services
- Wall to wall viewing screens
Quality
From observation, Paddy Power scores highly across the ten criteria that customers use to measure service quality:
- Accessibility — Yes
- Credibility — Yes
- Responsiveness — Yes
- Courtesy — Yes
- Security — No offline, yes online
- Competence — Yes
- Reliability — Yes
- Understanding the customer — Yes
- Communication — Yes
- Tangibles — Yes
The marketers at Paddy Power use each of the above to a varying degree:
- Accessibility in unsurpassed given the various channels on offer.
- Credibility was brought into question following the failure to pay out on a high-value Golfing bet, discussed above, but from a consumer quality inference viewpoint, Paddy Power is a credible brand.
- Responsiveness is easy, all bets and payments are immediate.
- Courtesy displayed by store and call center staff is faultless.
- Security is a concern offline due to lack of door security, but for those gambling online, Paddy Power operates secure payment technology.
- Reliability is not an issue. The app works, the website never crashes, and store opening hours are available as permitted by law.
- Understanding the customer is a particular strength. Paddy Power marketers developed a “We hear you” campaign to capture feedback from customers, which they act.
- This is heavily advertised in the marketing mix. Communication is seen through many avenues, with the highest prevalence placed on online sites.
- Tangibility is peppered across the physical environment where Paddy Power offers its customers through the comfortable shops that are provided, but also online via the app as customers can touch and navigate the virtual product.
Paddy Power operates in an industry built on winning and losing.
Paddy Power is winning, financially.
Recommendations
The bottom line is that Paddy Power is a highly successful business. After all, Flutter paid $12 billion to acquire the brand in 2019.
That said, it would be unwise to take this success for granted due to the highly volatile environment and global economy today.
With that in mind, the following recommendations would bring about further growth:
- Sportsbet should be developed to offer all the European services to the APAC marketplace.
- The company is well-positioned to expand its EMEA market offering.
- Diversification opportunities exist from cross-segment pollination.
- The B2B segment should be developed to include smaller business partners, with lower risk.
- Social responsibility will attract attention, so Paddy Power advertising campaign should deviate from the working-class male segment.
- Paddy Power should analyze their promotional data insights to protect the most vulnerable in society.
- The industry must play a bigger part as corporate citizens, Paddy Power falls short of this accolade and could be more active in this space given their dominance in the UK and Ireland.
- The business could benefit by retaining offline staff instore to better serve the community, feeding into corporate responsibility.
Furthermore, Paddy Power could set itself apart from its competitors by publicly addressing and acting to combat the darker side of the industry. Thus far, industry players tend to shield themselves from the true social impact.
Adopting this strategy would attract customers to the company through the sense of security this public acknowledgment would bring.