Plenty Of Buckets

As sports betting diversifies, the Hierarchy of Effectiveness can help operators customize and prioritize strategies to appeal to various bettors.

Sports betting is no longer a monolith, and it might be time to retire “sports betting” as a catchall term for what is becoming an increasingly large number of products.

As I recently posited, sports betting has splintered into at least distinct product categories, each appealing to different bettor types with unique motivations. And it’s those motivations that I want to explore today — I’ll revisit the categories too, but you can find my previous thoughts on those here.

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Five years ago, I wrote, Sports Betting and the Hierarchy of Effectiveness (published initially in Gaming Law Review), where I adapted a martial arts self-defense pyramid to explore what makes a sports betting app successful, based on the following five principles (explanations on how they apply to sportsbooks can be found later in the column):

• Mindset

• Strategy

• Tactics

• Technique

• Kit

In a 2023 feature column, I updated my pyramid and looked at how different consumers — Prospects, Explorers, and Sophisticates — prioritize the above:

• Prospects: The lifeblood of sports betting, Prospects are potential customers that need a nudge, often via promotions or accessible platforms, to enter the ecosystem, where they become Explorers.

• Explorers: Explorers are experimenting with platforms and products. They’re finding their place, prioritizing ease of use and excitement over technical details like hold percentages. Most become casual and recreational bettors who gravitate to specific products, though some evolve into Sophisticates.

  • Loyal Customers: Every operator wants their Prospect turned Explorer to wind up in this category. Unfortunately, sometimes they wind up being a loyal customer of a competitor.

• Sophisticates: Experienced bettors who understand products, markets, and industry nuances. They prioritize value, competitive lines, and minimal restrictions.

Today, I’ll complete the trilogy, and look at the why behind those decisions and how these customers now filter into the different sports betting buckets that exist.

The Sports Betting Categories

As noted, the days of a one-size-fits-all sportsbook are gone. Through the Hierarchy of Effectiveness, we can start to understand customer motivations and how operators can build successful businesses by prioritizing the correct elements for each group, understanding what products to offer (linked or segmented), and how to help steer customers to where they want to be — Basically, how can operators reduce their time as Explorers, when their loyalty is most up for grabs.

Let’s look at the four buckets.

• Traditional Betting (Low-Hold, Pre-Game, and Prop Markets)

This is actually two parts of the same bucket, as there are two types of traditional bettors. There are the analytical, value-driven bettors looking to leverage knowledge (real or perceived) or analytics for an edge. And there are the casual and recreational bettors looking to increase interest through pre-game bets. As such, this category tends to appeal to everyone, and it should come as no surprise that the biggest sportsbooks center this model.

• Same Game Parlay (SGP) Betting (High-Hold, Lottery-Esque)

Parlays are the jackpots of the sports betting universe. These products are low-risk, high-reward (and high-hold) wagers that appeal to small stakes customers who want the potential for big payouts, akin to a lottery ticket — losing $5 or turning into $11 is a meaningless wager, but the possibility of turning that $5 into $500 or $5,000 definitely has some meaning. These bets tend to be the domain of casual and recreational bettors and are anathema to Sophisticates. Still, there is a lot of crossover between traditional and SGP bettors.

• In-Game/Prediction Markets (Real-Time, Speculative)

Real-time betting on game events or speculative prediction markets has morphed into its own entity thanks to ever-improving tech interfaces that allow bettors to react to live game dynamics and the emergence of prediction markets. These markets satisfy the everything-at-your-fingertips-every-moment-of-the-day expectations of the social media era. Unlike the bettor placing pre-game bets as a way to increase interest in the game being played, in-game bets and prediction markets are the game.

• Daily Fantasy Sports (DFS) (Strategic, Roster-Based)

DFS, where statistics, not wins and losses are what matters, is also “the game” as the skill-based, peer-to-peer nature of DFS is a battle of wits, combining strategy and community. Like the difference between an isolated slot player and a talkative poker table, community is where it differs from in-game wagers.

These categories reflect the compartmentalization of sports betting, which is being spurred on by technological improvements serving bettors products that no one thought possible just a generation before. I don’t believe bettors are being nudged into high-hold products. These are products they have always wanted; they simply didn’t exist.

(Re)Applying the Hierarchy of Effectiveness