Ladbrokes-Coral – a good bet on how to do post-merger digital integration

SUMMARY:

With the corporate merger completed, Ladbrokes-Coral focused on digital and technology integration. To date, it’s a wager that’s paid out.

Months after the completion of Ladbrokes and Coral’s merger, the combined betting operator can see some clear trends emerging, summed up by “very strong growth in digital” offset by reductions in the traditional retail business.

In financial terms, that translates, for the most recent quarter, to a fall in retail revenues of £5.2 million, while digital is up £24.2 million. In strategic terms, it affirms the company’s focus on getting an integrated digital platform in place for the merged entity and continuining to invest in new technology, back and front of house.

That said, there has been a focus, certainly in the domestic UK market, on moving from volume to value in the online sports area. What that has meant in practice is a reduction in actives at both ladbrokes.com and coral.co.uk, but that reduction being compensated for by an increase in net revenue per active at both the brands.

Overall CEO Jim Mullen is able to point to some significant successes in pulling together an integrated digital strategy post-merger. There’s a long history of mergers failing or running into difficulty due to problems with integrating disparate technology platforms.

But Ladbrokes Coral has migrated its UK digital systems to one platform within six months of the merger closing and continues to align the back office operational systems. Mullen is correct to point to the need for some credit here:

Perhaps the most ambitious targets we set ourselves for the year was the plan to quickly migrate our UK digital systems to one unified platform, thus unlocking the benefits of developing one product and rolling out across brands.This was substantial and for those who may be inclined to brush this over, it’s probably worth reminding that very few have achieved such a feat in such a short space of time.

He adds:

Please do not underestimate the hard work involved and importance of delivering against these targets. What we are doing here has been instrumental in identifying the opportunities that we see for our business going forward. As we said back in March, we took a specific approach to delivering synergies and integration. Our original estimates were based on high-level assumptions and their initial upgrade results was only because of a few months of working together, and therefore, getting to know a respect of operations.

For the next 6 to 12 months, the priorities are:

  • Roll out of a new retail EPOS system, currently being trialled.
  • Introducing new customer service tech, following an investment in Salesforce.
  • A single wallet connected to Ladbrokes Grid.
  • Integrated Business Intelligence and CRM.

Multi-channel value

All of this matters as it enables Ladbrokes Coral to bet on capturing more and more revenue from multi-channel customers, whose lifetime value is estimated to be around twice as high as their single channel counterparts. Over the past six months, multi-channel customers have delivered 53% of digital revenues for coral.co.uk and 36% for ladbrokes.com. Mullen says:

We now have over 1.3 million multi-channel customers, and we continue to demonstrate loyalty and value above the normal customer behavior. With an average lifetime value of 2x higher than non-multi-channel customers, we continue to help drive our digital growth.

The discrepancy in the proportion of [first half] digital revenues provided by multi-channel customers to the Ladbrokes brand compared to Coral, in my mind, reflects what I said at the merger, Coral were 12 months ahead of Ladbrokes in multi-channel. So I don’t look at this as a gap, but a clear opportunity.

There are also some longer term considerations in all this that have led to some short term pain, most notably around the mobile Sportsbook offering, where new iterations and upgrades have been stalled. Mullen explains:

In this case, our decision was to move to one single platform for the UK digital business, and it meant that product development slowed in the first half. That meant, until April this year, we were relatively light in rolling out new product. But now that the integration of the platform is complete, we have been quick to get back into the game.

It also highlights why making this transition early was so important, because with the football season now upon us, our priority had to be to ensure that the product was fit for the season, ready to compete and delivering what the customer wanted. I said that once we had integrated the platforms, the key for us was to get the natural cadence of product improvement back and build that rhythm of continuous improvement… we have.

Also looking ahead, expect increasingly emphasis on exploiting the potential of the sort of data-driven analytics tech used by Coral to create a better and closer understanding of the customer as well as the value of that customer. Mullen says:

Across all brands, we now have a significant player base, with some common and some differing customer cohorts. This may require a different approach to acquisition retention. However, what is common is that there is a clear benefit of the merger. The analytical and optimization tools that are applied are consistent. But of course, the recommended outputs differ according to brand, customer cohort and type.

So 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. On this basis, it provides us with the opportunity to benefit even further when we apply what we believe is a competitive advantage in driving yield and retention, and that is our dual-brand approach.

All told, Mullen pitches the Ladbrokes Coral story as being one of a successful corporate merger followed up by a successful – to date – technology integration. This is, he argues:

a company that is not struggling to digest a merger, but one executing a planned integration, working to build on a scale created and seeking to deliver on those opportunities presented. Our digital performance, the key driver for our merger rationale, is good. And as we maximize the merger opportunity offered by one platform, the best of both and multi-channel, there is more to aim for.

My take

There are still challenges to be met in the traditional retail business and regulatory issues that remain unresolved in the macro-environmnent. But Ladbrokes Coral is as good an example as you can find of a well-planned technology integration strategy to support rather than undermine a corporate merger.

Image credit - Ladbrokes-Coral

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