Peer-to-Peer (P2P) System Innovation

The case of the betting industry

The aim of this report is to outline the characteristics of a good marketing approach as compared to bad marketing, illustrating examples for each case. The first section of the report deals with industry examples of good and bad marketing approaches by applying Sheth and Sisodia’s (2007) framework.

The second section of the report examines the impact of the technological factors from the external environment on the betting industry and the P2P (Peer-to-Peer) radical innovation. Additional the report explores the outcome of technology and the impact it has on society.

Finally, the last section of the report addresses the potential implications on management of the betting companies and in general introduces some key points for further research that might change and impact the industry.

What is Good Marketing?

Marketing is a process, not a function, via which an organisation can create and deliver value for its customers by meeting their needs. Furthermore, McKenna (1991) suggested that marketing depends upon a marketers experience and knowledge of the market and how effectively one can create a market share beyond just selling a product or a service.

According to Kotler and Levy (1973), marketing can be perceived by customers as a function that deals with the issues of a company, in order to achieve sales and increase profits. On the other hand, looking into marketing from scholars’ perspective, it is the process as Andreasen and Kotler (2008) commented of how marketers approach customers’ needs and wants and trying to satisfy them. In effect, Sheth and Sisodia (2007, p.141) state that “marketing practice is driven by pressures of competition whereas the marketing concept is driven by customer needs”. Thus, marketing is defined as the activity for communicating, delivering and exchanging offerings that has value to the end consumers.

Unfortunately, marketing is being perceived in the wrong way by many consumers. It is believed that marketing is a way of creating profits for a company, increasing sales figures only by taking advantage of customers’ needs in an unfair way. Additionally, there are others that believe marketing on some occasions is valuable and effective but it does not meet fully with the expectations of the consumers.

Moreover, marketing is being “taken advantage of” by many corporations in terms of violating it’s principles in order to achieve the company’s goals for short term results and profits. Looking over some other disciplines Sheth and Sisodia (2007) argue that this would have never happened as for example doctors and scientists are dedicated to their goals and would not divert from their moral, medical or scientific codes for the benefit of the firm.

Furthermore, marketing innovations and specifically the term innovation represents something that is new and different. Thus, marketing innovation strategy within companies can be a benefit for the consumers but not always for the firm its self as the competition might imitate their strategy. Additionally, marketing innovations has targeted specifically the consumer with an optimum goal of customer engagement and interaction. On the other hand, innovation is defined as the adoption of an idea or a behavior within an organisation that can enhance both the customer engagement and the firm’s financial performance.

In effect, marketing innovations can be perceived negatively by consumers as well. When there is something new in the market in terms of a service or a product it might disturb the habits and social beliefs of a community and probably the community will resist change.

Nowadays, marketing has three main subcategories with regards to bad marketing according to Sheth and Sisodia’s (2007) framework, the unethical, wasteful and dumb marketing. On one side of the argument, a good marketing approach represents the will for satisfying customers needs in an effective way and at the same time creating benefits for the company in a sustainable and prosper way. The framework in figure 1 outlines the 2 opposing sides of marketing, the good and bad marketing approach. All these types of marketing will be further analysed providing suitable examples for each type of marketing.

           Figure 1: Types of Marketing

Take for example McDonalds and the Olympic games of London 2012. Yes, that’s right, how can McDonald's be associated with sports and exercise? McDonalds within the last two decades is associated with unhealthy food, eating habits and obesity. On the one hand, McDonalds were proactive and started promoting many sports events for kids to take part in. On the other hand, they saw the opportunity to sponsor a major event, the London Olympics of 2012. After long pressures by external parties they have tried to make McDonald’s to rethink their move for sponsoring the event and rethink the message that they are sending across via sports events.

As a result, the association of Olympic Games and McDonalds came to an agreement since the Olympic Games needed a financial boost and support. McDonalds and the Olympic games are a great example of an unethical marketing approach as McDonalds took advantage of the financial support needed by the organizers and took advantage of the customers. As a result of the agreement, the sponsorship of the Games sent the wrong message across to the society.

Beyond unethical marketing, its suggested that wasteful marketing does not reflect positively either the consumer or the marketer. The Hoover fiasco back in the 90’s was an interesting headline for a long time. The company was offering as a promotion to buy a Hoover whose price was over ￡100 and the customer will get 2 free tickets to New York. Paradoxically, Hoover did not realise that they were offering something that was worth more than the product it’s self. Furthermore, that was the lack of understanding of how the promotional offer works and how it needs to be implemented and finally caused the massive breakdown. In addition to their bad marketing approach, the increased demand of Hoovers could not meet the customer needs and of course the company was unable to pay for the airline tickets for the customers that had already bought the product. As a result the company suffered from bad publicity and great financial loss.

Finally, one of the strangest “dumb” approaches was from Tesco with the bananas offer. Tesco offered 3 kilos of bananas for ￡1.17 and 25 points on your club card worth ￡1.25. What happened? People started buying bulk of bananas and giving them away as they made profit from their club card points. Great banana economics by Tesco! :)

What is being perceived then to be a good marketing approach? An example of a good marketing approach can be seen from the multi billion betting industry. Taking for example bet365, they have their own website where people can bet on live sports events, casino and a variety of events. The introduction of online payment through the betting sites has dominated the market engaging even more consumers into using them. This example suggests that the betting company has offered a service that would be easy and conveniently for their customers and at the same time beneficial for the company as they will receive the funds instantly. This can be described as a win-win situation based on the model.

Although the betting industry is a great example of a good marketing approach, in reality there are some drawbacks that need to be considered. For instance, companies in general fail to realise the impact they have on society. Marketing is still being perceived in the wrong way by consumers. However, it is a big challenge to satisfy all the needs of the customers in a profitable way but by setting as a primary goal the customer satisfaction, it will result to a good marketing approach with a long term success.

The impact of the Macro-environment on Marketing Innovation

Innovation and marketing innovations both refer to technologies and the creative side of marketing. Both lead to an invention which will transform a prototype into a product or service that will meet consumer needs in the market. Innovations represent a tangible product or an intangible service. Hence, the types of innovation according to Henderson and Clark (1990) help us to distinguish the differences between each type of an innovation along with their characteristics. Radical, incremental, modular and architectural are the four types of innovation.

Incremental Innovation

• Exploits existing technologies
• Focus on cost improvement on existing products
• Same market/ Industry

Modular Innovation

• New components but there is no change in the system

Architectural

• Improved components and a new configuration/ system

Radical Innovation

• Exploits new technologies
• Focus on product, service or processes
• Transform existing markets/industries or creates new ones

In effect, focusing particularly on radical innovations, represent the technological breakthroughs in the market or the application of new technologies in a completely new concept. Nowadays, P2P (Peer to Peer) systems represent a major breakthrough in the online environment and between consumers’ transactions, hence a radical innovation. P2P systems represent a new way of sharing information and exchange between peers online. P2P systems represent a new business model approach that builds on value co-creation and value propositions between the company and the consumer.

Furthermore, Vargo and Lusch (2006) outlined the shift from the good’s dominant logic towards the new era of service dominant logic. In effect, service dominant logic, represents a new marketing paradigm for the industry and focuses on the exchange of services and the interaction with the consumers, not only in the transaction process but also as the consumers being the main value creators. Vargo and Lusch (2008), also highlight three fundamental premises of the service dominant logic as:

-         The firms can only offer value propositions

-         Value is always intentionally and uniquely determined by the beneficiary and

-         Co-creator of value is always the consumer.

In this respect, P2P systems in the betting industry are defined as an innovation that allowed customers to set their own odds against the outcome of a particular sport event compared to the traditional model of bookmakers setting the odds to buy in as a customer. In addition, P2P systems represent an unfair competition in the market between traditional bookmakers and online platforms. The main advantage of P2P is that it allows consumers to set the odds hence it creates a competition in the market with different odds for the same result/outcome of the event. According to a survey in Laffey's work, bet365 and bet-fair offer 20% better odds compared to the traditional store bookmakers. Thus, the P2P system innovation also known as betting exchange has reshaped the industry because it offers competitive prices and a variety of betting opportunities. Furthermore, P2P systems or betting exchanges is an innovation that lowered the entry barriers for new online companies and offers improved information on bets to consumers. The big question of how marketing links with a business model like the P2P system is clear cut as marketing practice within a company is responsible for creating value through the interaction with customers.

    I.       The betting industry

Betting is associated with the gambling industry and has existed since ancient times and it is likely that there will always be demand for this habit. On the one hand, it is a multi billion industry which is highly competitive but on the other hand, it suffers from bad reputation due to the addiction it can create with consumers and of course the taxation measures that are increasing year by year.

Betting activities are a global phenomenon that enhances economic benefits for the betting companies and potentially for the consumers. Gambling has become almost legal all around the world due to the fact the countries and states recognized that path as a solution for generating profits. Initially betting was linked with horse racing back in the days as an on-course betting at the ground but slowly grew onto off-ground betting and developed. Online gambling has two types, the online wagering-betting and the online virtual gaming. In the UK, 3 main bookmakers dominated the market before the introduction of the online gambling. Ladbrokes, William Hill and Coral were the main competitors that dominated the market with 60% market share.

Europe is considered to be the main region for legal online gambling worldwide whereas years ago betting legally was only on horse races. Although it is a growing phenomenon, many countries in Europe started worrying about this increased habit and started introducing new regulations and restrictions to companies and bettors. An example is Cyprus that since few years ago blocked all the online poker gaming and casino by claiming the protection of its citizens from exposing them to addictive activities. Few years after and now in 2019 ,the official opening of a number of casinos on the island created even more confusion and raised questions based on the initial statement of the government. Thus, betting companies are faced with many external forces from political pressures to industry competition, rules and regulations in each country and of course the technological changes that will be further analysed in the next section.

  II.       Impact of Technology

The rise of internet from the 90’s created even bigger opportunities for betting companies to expand and explore the online environment at a lower cost and become the base for exchanging information. In contrast, the introduction of the new technologies created even more problems for governments trying to regulate that phenomenon.

Technological innovations in oligopoly markets can affect the strategies, marketing and cost-reduction policies of a company. Thus, technology played a major role throughout the increased gambling habit through the new market opportunities. It was outlined in section A of the report that marketing concept is driven by consumer need. Contradictory, McMillen (2000) suggests that technology is the main driving force nowadays and not customer demand.

Furthermore, the deregulation of the gambling industry around the globe is becoming faster and easier due to the fact of the technological innovations. Additionally, the reasons of growth in the online P2P platforms as the excellent financial benefit for the gambler, there are no set odds by bookmakers and the gamblers can bet freely against each other.

Furthermore, companies employing IT and internet into their business strategy can be considered as an investment, which it is not always a cost reduction measure as Montero (2002) suggested but can be seen as an overspending approach. Additionally by reshaping the company’s strategy and employing technologies and technological innovations can create value for the service or product offering long term financial benefits. The "low cost" for setting up a betting company online and the development of a worldwide platform for sharing the odds from each company had led to the emergence of new companies.

Wifi and 3G/4G network availability almost everywhere in the world is another factor that enhances the demand for online interaction. The development of ipads, tablets and smart phones forced companies to develop applications (apps) for reaching out to a greater pool of consumers in order to give them access while they are on the move. In this respect, in order for an innovation within a company’s strategy to be effectively implemented it requires long periods of incremental changes and improvements followed by a radical innovation that can be seen as a revolutionary approach in the industry.

 III.       Impact on Socio-Cultural

Beyond the impact of technology on companies and as a result the benefit for the consumers, it is also evident that technological developments and improvements can have a major impact on gambling behavior and social disturbance that can be perceived as a domino effect. According to Key Note industry reports, gambling presents a major problem in the UK. It is estimated that 350.000 individuals suffer from gambling addiction. The online betting platforms and an increase of the technological improvements along with the wide use of social media and internet are the main cause of addiction.

Contradictory, some others argue that gambling in the UK is relatively acceptable. Thus, one of the main explanations for the cause is the increased habit of families enjoying their leisure time at home using all the digital technology available for their entertainment. The recent economic crisis and the economic condition in the UK has impacted the households and nowadays individuals are looking for other ways and sources of income. In effect, its predicted that consumers might be affected from the 15% taxation on UK betting companies and try to seek new offshore companies available online. On the other hand, this trend might potentially minimize the volume of online consumers specifically in the UK.

The further development and expansion of internet led the appearance of social media and betting websites. The online based betting companies are difficult to regulate them in terms of age restrictions compared to the in-store bookmakers. Furthermore, the online live betting technology and the cash-out at any point option, although it was a major breakthrough in terms of the customer benefit has showed that bets are being placed more often and mainly by impulsive consumers while in some other countries its still restricted.

Beyond that, illegal activities throughout different sport events have created a big disruption in the betting industry in the recent years. In effect, illegal gambling forces people to become part of an organized crime as its being called and fix matches for their own financial benefit. A recent example is the allegations according to Forbes (2015), FIFA along with high ranking officials and referees have been involved with illegal activities and match fixing. On the other hand, the allegations of fixed matches where bets are placed online for the specific matches have developed a negative image and bad publicity for the betting companies in the industry.

 IV.       Implications and future research:

In this essence, the promotion of betting companies has a major financial benefit for them but at the same time they must realise that this growing phenomenon is harmful for the society. Firstly, P2P systems represent a major breakthrough in the era of digital marketing. Thus, companies must adapt to the technological change that dominates the market and is preferable by consumers as well as there is a shift from the traditional consumption to the e-consumption. Furthermore, looking the implication on management and in general on society, companies must realise that the P2P systems offer value to the other end user and to the companies as well. Looking beyond those benefits, there are also some hidden “costs” that need to be considered regarding the responsibility of the companies over society that require further examination. Additionally one of the main limitations from literature and a possible pin-point for research is the lack of content arguing the impact and the implications of the online betting companies on the in-store betting shops. Moreover, the constant changes in the market of betting along with many external forces rules and regulations might jeopardize the industry hence a research on potential implications will be valuable for the industry’s professionals.

In effect, betting exchanges and P2P systems led the betting industry to become one of the most profitable and successful industry in the world. On the other hand, the companies operating in the online environment pose a great threat to betting stores and betting chains in the market if the phenomenon grows in popularity hence; it’s a challenge for the in-store bookmakers to stay “alive”. Betting companies can still remain highly profitable but can also be responsible over the society and respect them by implementing some new policies into their strategies and not just promote their CSR activities. As outlined in section A of the report, betting companies represented an example of good marketing but there are some noticeable drawbacks as well.

Thus, it is recommended:

-         a detailed age verification checks which is already in place by most of the companies, either by a scan of a passport or ID and also a utility bill.

-         There is no limit on deposits - only when you run out of money! If it is not feasible by companies to implement it, they can also set restrictions to the accounts with major bets when it is being active for a longer period than what is expected, in order to protect the customer.

-         As a final point, almost every betting company online when you are in-active for couple of days or you just keep betting for a series of days, they offer you a bonus prices that vary between ￡5 and ￡100 so that you can keep betting on events of your choice and retain their customers. It is recommended to reduce the frequency of this event because it encourages customers to re-gamble all the time and even deposit more money afterwards something that does not allow them to reduce their betting frequency.

    I.       Future challenges

A serious challenge to the capacity of any government around the world to is to prevent it’s citizens from gambling with offshore providers and also prevent cross-border leakage of gambling profits. Despite the UK’s Government structure, in October 2001, that was based on margins instead of revenue in order to allow traditional onshore bookmakers to compete more effectively with offshore competitors, the constant improvements on technology and the increased social demand of online betting might reshape the Governments structure not only in the UK but also worldwide.

In effect, one of the biggest challenges for a future research would be the transformation of products into service platforms. Thus, companies need to stay up to date with new technologies and opportunities in order to meet successfully the needs of the market. A great example of that kind of transformation is from the telecommunication industry with smartphones that moved beyond a simple product into something bigger. Network and service providers along with internet access made possible the online communication into a service hub.

Gambling presents a serious social and medical problem that needs to be dealt with. The rapid increase of online platforms and betting exchanges are pushing people into betting more money and thus more debts. Gambling can result to a mental health issue that individuals have with signs of that issue being the absence from work, being angry, lying and finding illegal ways to support their habit. An efficient strategy needs to be in place in order to “cure” the gambling addiction and doctors need to evaluate their techniques of diagnose and treatment in order to help their clients.

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