Effective Pricing Methods in the Gambling Industry

Rational valuation is one of the key tasks of entertainment brands. The approach to this task directly affects the profitability of casinos, as well as their success and status in the market.

Experts from the Smart Money studio reveal the secrets of correct pricing. You will learn which policy to choose to increase income, improve liquidity, and become one of the leaders in this niche.

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About the Concept

This is a systematic approach aimed at forming optimal prices for each gambling product. The methodology is used to determine the cost of services of operators, bookmakers, poker room owners, software vendors, and suppliers of equipment for land-based halls. Each type of offer has its value.

Choosing this kind of strategy for an online casino platform involves consideration of both qualitative and quantitative business parameters.

Entrepreneurs should consider many indicators, from the projected income from one player to the level of the audience’s loyalty to the iGaming brand. Knowing and understanding all these metrics will help create an effective plan.

There are 2 groups of factors that affect valuation:

1. Internal. These are the provider's current operating expenses, the cost of B2B partner services, advertising costs, and payment for the work of affiliates. The presence of a close-knit team of professionals involved in web development, customer support, and promotion also affects pricing. If the firm does not have such specialists, then in the case of any force majeure, gambling services can become much more expensive.
2. External. This is the demand for betting options in the country or region, the level and prices of competitors, as well as general market trends and economic conditions. Changes in the regulatory framework and the level of taxation affect the formation of the cost, as does the provider's media positioning.

Why Pricing Policy Is Important

The main objectives of the concept include:

1. Return on investment. The value of casino services should be set at a scale that will help entrepreneurs recoup the expenses for their iGaming projects. We are talking about initial spending, marketing costs, and funds transferred for the business scaling and expanding into new markets.
2. Profit maximisation. Choosing the right method will increase the company's income: from the main activity (acceptance of bets), organisation of thematic events (tournaments, seasonal missions, or quests), and advertising services of B2B partners.
3. Winning market share. The reasonable cost of provided offers will strengthen the position of an iGaming brand and help it surpass competitors.
4. Increase in liquidity. A well-thought-out pricing policy guarantees the attraction of new solvent traffic. Interested customers are happy to place bets in online casinos or bookmakers’ offices, thereby making operators earn more.
5. “Survival” of the business. This is the opposite of the previous situation when entrepreneurs are faced with completely different tasks: saving the digital platform, paying off debts, and stabilising the situation within the company. Pressing problems are solved thanks to adjustments to the valuation. It is possible to reduce it or add extra promotions and discounts.

Popular Approaches to Cost Formation

Let us consider the most popular options in the market:

Cost-Plus

In this case, the service’s price is determined based on the self-cost with the addition of a mark-up to ensure a profit. This is one of the simplest and most common methods. Most often, operators include a fixed percentage but an extra charge in monetary terms may also occur.

The basic costs are the following:

• players’ winnings, including jackpots;
• the value of bonuses, promotions, gift coupons, and other types of incentives;
• personnel expenses (salaries and social contributions);
• payments for hosting services;
• advertising costs (independent promotion or affiliate marketing).

By summing up these figures, operators get the expected expenses. By adding a mark-up (fixed or as a percentage) to them, business owners see what gross income they need to receive per month (week or quarter) to cover all costs and make a profit.

Knowing the average volume of Internet traffic per 30 days (Google Analytic and other open sources are used to forecast it) and gross revenue, it is possible to calculate the average planned value per spin.

The “Cost-plus” scheme is a great starting point for those entrepreneurs who are not very familiar with the market, players’ preferences, or demand elasticity.

This method is normally used by gambling content developers or manufacturers of equipment for land-based halls. The price per unit of goods or services is calculated according to the same principle: all initial costs and a mark-up are summed up.

After that, they are divided by the number of solutions produced (for example, stationary slot machines or lottery terminals).

Pricing Based on Competition Analysis

This is a strategy in which the expenditures of other online casino operators and software vendors are considered a foothold.

Entrepreneurs have several options:

• determination of the gambling products’ value, making it lower than that of opponents;
• selection of costs that are equal to those of other firms;
• setting prices higher than the competitors’ ones.

A competitive strategy requires constant monitoring of the value offered by other enterprises and adjusting casino solutions in accordance with market fluctuations.

The approach will be useful for both beginning operators and experienced iGaming brands. Depending on the current situation in the industry, businessmen can gradually reduce prices (for rapid growth of Internet traffic and gaining a larger share) or, conversely, raise the cost of services, emphasising their premium nature.

Manufacturers of content and equipment for land-based halls often used the model when they talk about the highest possible quality of provided products. This approach is chosen by those companies that want to distance themselves from other market participants by positioning themselves as suppliers of the best or unique entertainment.

Increasing in value is justified for vendors who release software with the following features:

• support for blockchain operations;
• original game mechanics;
• recognisable bonuses, etc.

Dynamic Pricing

It involves cost formation for different groups of goods (as well as jurisdictions and categories of customers) using:

• analysis of market trends;
• changes in supply and demand;
• improvements in the legislation, and other factors.

This approach is considered one of the most popular in the industry, mainly due to its flexibility and manoeuvrability. It can be used both in different regions and one operating market, providing, for example, customisable prices for different categories of players.

These are special offers for beginners, as well as regular and VIP clients. Audience segmentation is a must.

The main goal of dynamic pricing is to determine the competitive cost of entertainment services at the moment. It will include the maximum possible profit of operators, taking into account the current state of affairs in the segment.

The strategy is suitable for owners of online casinos, bookmakers’ offices, and poker rooms, as well as the developers of software and gaming systems. Enterprises with a long production cycle of goods (for example, equipment for offline locations) should probably consider other methods.

Skimming

This means setting a high price for a solution and then reducing it over time.

The approach is most often used when companies launch a unique or innovative release. They seek to maximise their profits from the first customers, so such firms set a high starting cost. Over time, the value decreases, especially when alternative solutions appear.

For skimming to work, the offered goods or services must have exclusive features. In gambling, these are:

• innovative mechanics;
• slots with NFT assets;
• software with support for virtual and augmented reality, etc.

High cost is typical for security systems with built-in artificial intelligence tools. The release of modern equipment for land-based halls (with touch panels, multiple monitors, and emotion tracking function) also fits into the strategy.

How to Choose a Pricing Method

Let us consider the key points typical for the casino and sportsbook industry:

Volatility of the regulatory framework

Gambling is more subject to legislative changes than other sectors of the economy, which has a strong impact on the cost of services.

The most striking example is Europe, where local authorities want to tighten the rules. In many countries, regulators decided to perform the following actions:

• limit the maximum bet size;
• define the duration of spins and acceptable breaks between rounds;
• introduce bans on advertising on radio and TV during the daytime;
• restrict the payment of bonuses to players.

All these points complicate the establishment of reasonable prices that would cover all expenses of companies and bring them profit.

High Competition

Well-known gambling holdings have large audience coverage, so they can quickly change costs without losing income. Among such brands, we can name:

• 888 Holdings;
• Bet365;
• Entain;
• Kindred Group;
• Betsson, and others.

Many of them cover several areas at once (casino and sports betting fields), which makes it possible to attract additional Internet traffic with minimal advertising expenses.

It is difficult to compete with large iGaming enterprises. However, they can be used as a guide when choosing a pricing strategy. International firms are well-versed in popular trends, technologies, and seasonal changes, which allows them to offer better rates.

The Main Things about the Cost of Entertainment Services

The value is the basis of any policy that casinos and sports betting companies adhere to.

Key aspects that operators need to take into account:

• The right approach helps to maximise profits and quickly return the invested funds. Thanks to this, entrepreneurs can expand their customer base, reduce operational risks, and make their brands more liquid.
• Among the popular strategies, we can highlight the cost-plus and skimming methods. Dynamic pricing and cost formation based on competitors' offers give good results.

The Smart Money studio offers the following useful services:

• turnkey casino creation;
• development of unique HTML5 slots;
• assistance in obtaining licences in reputable jurisdictions;
• integration of payment systems and security software;
• supply of equipment for land-based halls, and much more.

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