25 Nov 2020

From acquisition to retention

Ewa Bakun

11 members participated in the last Ampersand speakeasy in this series, focused on the topic of the shift from the acquisition to the retention model in online gambling. Here is the recap of what they discussed:

 

Why are we still talking about the need to shift to retention?

In a mature market, such as Europe, the need to shift to retention has been identified and discussed for a decade now; yet, it is causing challenges and this approach hasn’t been adopted by all. Many operators are still very much investing more in acquisition than retention.

Acquisition, due to its more instantaneous results, is perceived as an easier exercise to achieve goals, while retention is ‘hard work’, which takes time to achieve success; progress is more difficult and much slower to track in comparison with acquisition.

 

Regulatory pressures in favour of the shift to retention

Progressing regulatory restrictions make acquisition more difficult and limited in many markets. For example new regulatory regime in Germany is requesting operators to cut all performance based marketing deals – a move possibly dictated by big operators who wanted to get rid of their reliance on affiliates. Therefore, affiliates, a large part of the acquisition marketing, will need to think about their model, while the importance of retention increases in the operators’ strategies. Also with lockdown, it’s important to keep your existing customers live and spoken to as it won’t be that easy to get new customers. In other markets, such as Italy or Spain, that have some form of advertising bans, retention becomes key as well.

 

How can affiliates adapt?

With this growing pressure for, and a progressing, shift to retention, affiliates will need to rethink their business model and find ways to adapt to safeguard their business. They need to keep hybrid deals or need to work out methods for re-activating players and be paid for that – but how would that work? This is likely to happen as the supply of big players will dry up due to market maturity and over-regulation; there will be more reliance on moderate spenders so operators will need to focus more on retaining them to achieve player ROI.

Affiliate retention might be easier on some products, e.g. lottery, bingo, where affiliates know their customers better. Most casino affiliates don’t know much about the leads they send to operators, so it’s tricky for them to move to retention. However, much as in migration from retail to online, the advantage is the connection between the property and the end user, which opens up opportunities for campaigns based on the existing relationship and trust. E.g. one could continue conversation past their first deposit by forming communities around players. These work well in Asia, without the use of email, and through whatsapp/telegram only – club based operation, which could be even turned into a white label.

 

Acquisition vs. retention in the USA

Given the valuations in the US now and capabilities to raise money for the likes of DraftKings, focus on acquisition is likely to prevail for a long time as these leading brands have a lot of money to spend on acquisition and indeed they’re in the acquisition mode. If you don’t have the cash for acquisition, as your competitors do, how do you survive in this market? US needs to look at Europe for lessons on when it is a good time to shift towards retention.

 

When is a good time to shift towards retention?

At the early stages of market developments, operators tend to spend a lot on acquisition, e.g. via TV ads and affiliates. As the markets mature and operators achieve a level of profitability, they slowly shift towards retention. It also usually becomes more difficult to acquire new players, therefore the existing players become more valuable. When acquisition is cheap, there is no need for retention; when competition rises driving acquisition costs up, then shift to retention needs to occur.

Retention also plays bigger role when operators’ target market is lower value players who need to continue to engage with an operator’s brand for longer to achieve ROI.

 

Acquisition and retention should work in tandem, not in silos

Gaming is based on data. Performance marketing works well in both acquisition and retention and we are able to monitor the effectiveness of each of the approaches to switch easily between acquisition and retention – in theory. The obstacle is often the internal set-up in which acquisition and retention sit in separate departments. Ideally there should be a marketing manager who sits on top to manage both and who understands and guides the entire customer journey, but in practice it’s often not structured this way and acquisition sits with marketing, while retention is relegated to product or operations. That means that these two functions don’t work in tandem.

Retention depends on how much is known about the player, which isn’t the case for acquisition. What has proven to work in retention are loyalty systems, surveys to convert and reactivate players, gamification, clear offers, direct contact with players, rewards. Be prepared to offer something extra to your big spenders.

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