This article The London 2010 Olympic Games deals with the issue revenue management with special emphasis on the ticket pricing and management of the attendance at the London 2012 Olympics Games. The idea is to keep the previous hosting cities such as Australia, Athens and China as benchmarks and to learn from the strategic failure points experienced by the aforementioned host cities. Furthermore, the article discusses the different kinds of costs involved in the management of Olympics which are categorized as Hardware Cost and Software Cost, with hardware cost representing the cost associated with the infrastructure development whereas the software cost is the cost associated with the audiences and the people who will be attending the event. The case also highlights the constraints which are to be critically analyzed and scrutinized in order to be able to come up with a relatively more sound strategic solution specific to the pricing strategy that should be followed in order for Williamson, the head of ticketing, to resolve the dilemma of selling more tickets or concentrating on keeping higher attendance.
Revenue management and pricing strategy cannot be developed in isolation. The integration from all other departments of the event organization is highly crucial. The key selling point should also be the focus while coming up with a stable pricing strategy. The key point here to understand is that the article keeps on mentioning the previous Olympic Games host such as Australia, Athens and China and explains what their competitive edges were that made them a success in terms of higher revenues. Alongside, the article also mentions the competitive edge of London as a host city. The expectancy of a greater level of international audiences is there as London’s geographical position open doors for the entire Europe to be a part of the event. The second most important thing that gives London an edge is its sport loving audience with special interests in sports like football which is considered as the most popular game in the entire world. As a revenue manager Williamson’s focus should be gaining as much as he can from the areas where there is more and more demand and neutralizing the areas that have a threat to fall behind.
The modern Olympic Games that were first held in Athens, Greece in 1986 have become a ritual that is hosted by a country and performed every four years. London won the rights to host the much anticipated event of Olympics 2012 with Paris, New York, Moscow and Madrid in the competing league. It is the third time now that The Great Britain has been bestowed with the honor to hold the London Games. This should be taken as a great opportunity as it can help retrieve and fasten the development process in the east London as well as event such as Olympics can bring massive economic contributions to the country. Therefore, high levels of planning and efficient implementation from the management should be made.
The ticket price of any event depends on its perceived hype of the event on the spectator. It all comes down to the expected worth of an event to decide for its popularity and the number of sponsors it gains. In the regard of hype and popularity no sports event can beat the Olympic Games, they dish up as the greatest sports fiesta till date, where Millions of people gather to encourage and support the athletes from all over the world. So it is quite apparent that advertising and promotion isn’t the biggest of the problems here, although the dilemma faced by Paul William and His team LOCOG (London Organizing Committee of Olympic Games) is so much more than just the availability of tickets for its audiences and the price that the people are willing to pay.
The path followed by LOCOG is somewhat new and experimental, as the stakeholders are 60 million people residing in the United Kingdom. Calling it “Everybody’s Games” is not just a label but it implies a great deal on the plans and policies implemented by keeping the middle class audiences as their target customers. The major drawback the Beijing Olympics faced was non availability of tickets to the general public, they were successful in promoting and advertising all over the world to attract foreigners and bureaucrats, but what they lacked was a solid plan of selling tickets to the natives. Consequently a vast number of rows were left unattended, and the native Chinese were left out on the show in their own hometown. This served as a major turn off of The Beijing Olympics. Therefore a thoroughly thought out plan requires full participation of the native English majority and targeting all the different classes of target market with a special emphasize on the middle class population is essentially the right choice here for the management of London 2012 Olympics.
From the case study we come to know that London Olympics 2012 anticipate around 500,000 spectators per day and 800,000 on the peak events like the opening and the closing ceremony. There are 7.9 million tickets are up for sale, the goal is to sell the maximum tickets with the perfect pricing strategy. It is estimated that roughly 30% of all the tickets will be purchased by the Londoners, 25% by the residents of the United Kingdom, 20% by people from the rest of the Europe and 25% by the people of the rest of the world. Although just selling the tickets is not the only issue on the agenda of LOCOG. Ticketing for the Olympic Games and meeting the anticipated expectations on collective revenue basis is far more chaotic than it looks. As we can see from the above mentioned figures that locals comprise the biggest chunk that could be the possible target audience, penetrating pricing strategy should be followed in order to sell more and more tickets to the locals who will be more likely to participate in the events if they didn’t have to pay a lot for the tickets since they already reside where the events are taking place. People coming from other areas are most likely to pay more since they are specially coming to attend the event and will be less sensitive to the ticket pricing.
Objectives of the Company
The pricing strategy we need to look into majorly bases on the objectives of the organization; the clearer the objectives are the easier to set the prices. The core objective of this case is to settle for a best combination for maximum profitability and maximum attendance target; and that too not just on the peak events like opening and closing ceremony, the target is to fill maximum number of seats on an average day by the right audiences who can bring the needed enthusiasm to the whole event. So we know one thing now, just selling the tickets is not the only issue at hand; we are looking at myriad of things all to be achieved at the same time.
As briefly mentioned above the much fitting approach that Williamson can follow is the Revenue Management Technique; it includes the fundamentals of price discrimination and segmentation. With the help of marketing analysis we can incorporate segmentation, for example by entrancing the mind of the watcher that the front seats have better view compared to the middle ones. This is a common tactic used for determining the demand patterns. Since every spectator is at a constant struggle to get the best possible seat that their pocket can finance so that they can have the best view of the welcome dances and the concluding fireworks. Similarly the segmentation of the most anticipated games of the whole event in contrast to the less awaiting are put with premium priced tickets for maximum leverage to generate revenue. For example if the tickets for football and table tennis are being sold out at the same price, Most of the spectators would want to go for football as there they are left with no incentive to go watch the less famous sports(table tennis in the case of London 2012 Olympics), since the prices are the same. Therefore segmentation is one important step towards finest strategizing policies.
The segmentation follows as approx $90, $60 and $30 a seat for general public with the difference in the location of the seat. This little strategy can result in expected revenue collection for example even a tenant who is saving money to go to the Olympics for the first and the probably the last time ever would want to spend $60 instead of $30 to get a better view. Psychological pricing in this accord can help gain advantage from the emotional and irrational aspect of a consumer. If the ticket costs $200, the sellers will charge $199, this seeming looks like a practical joke but in reality it leaves a great impact as the buy can claim that he bought the ticket under hundred dollars.
The way to bring forth the excitement level of the right audiences at the right time requires a fool proof pricing strategy by keeping in view the strong points and the weak links of the whole event. For this purpose forecasting the spectators demand plays a hub to initiate the pricing strategy. Our strategy is based on the demand and allocating the tickets in the right way depends basically on three factors; age, gender and interest. At this point, a marketer analysis the different levels of demand for different prices. Regarding our case, the demand and price are inversely related, but the trend is not constant throughout it tends to go towards the inelastic and elastic considering different aspect of what we are dealing with.
Apart from the opening and the closing ceremony there are a few sports like the swimming, gymnastic and cycling that attract more audiences than the other so the demand is more or less inelastic in this area, means that the demand of the consumers does not vary rapidly with respect to the price change so high profits can be attained if premium pricing approach is followed in this regard. It is common observation that most of the people want to attend the famous events like the opening and closing ceremony as well as the hyped games like the synchronized swimming, diving, Soccer (football) and tennis.
Amidst all of this the events of bottom line games like handball, sailing, triathlon etc do not come under the presumed cloud of excitement of the audiences. Hence the demand for the bottom line events is fairly low and considered to be elastic, means the demand is dependent on the price are inversely related, if the price goes down the demand goes up and vice versa. In this case if minimum price is attained, this will increase the demand for the bottom lined sports, and a filled auditorium will be seen. This fulfils the attendance target which in fact is one of the ambitions of LOCOG, so in case of less famous sports the opportunity cost of high revenue is a packed auditorium with audiences. The lost revenue in this case can be restored by an extra gain through high priced tickets of famous and much awaited events. Price penetration entails low prices at first but when the tickets are left scare the prices bid up and this scarcity gives rise to a demand hike.
So the advanced predictive analysis of demand enable us to specify a given number of tickets for a given sport, for example according to the case study 185,000 tickets are secured for swimming, around 120,000 tickets for fencing and 1,975,000 for football, it all depends on the popularity of sports among the spectators and the hope that the reserved ratio of the tickets will meet up the accuracy of demand forecast.
Sometimes all it takes for the frenzied sales of tickets is a rumor about the scarcity of tickets. But what if the prices are so high that even with the scarcity no one wants to go the event? The scarcity tinged with the right recipe for pricing is what we have to deal with in this case. The price shouldn’t be out the reach of a regular Englishmen, that’s the rule we’re following according to the tagline ‘Everybody’s Games”
Perceived value pricing is calculated on basis of a customer’s perceptions about a product or service, regarding the bottom line games, if the spectator thinks it isn’t worth spending so many dollars on watching a game he has no interest in. But if the same offer is flashed upon his eyes with the most attractive prices, he will at least think once to consider the opportunity, as not every day is a day when his home country hosts an event that this.
Moreover the whole atmosphere factor adds up to the attractiveness of an event as well. So many spectators with no interest in sports whatsoever are there just for the sake of recreational purposes. The ambience that the Beijing Olympics failed to create that feel no wonder people called it “No fun Games”. Sydney has not been able to live up to the expectations earning the title of “the Laid-back Games”. While keeping all these prospects in mind, what should be done to maintain the atmosphere alive and pleasant? The answer again lays in the tagline “Everybody’s games”, by targeting the ordinary public and not just the sober elite class, who think twice to yell in their heads. To ensure the promise of Everybody Games the organization should arrange for open-air festivals in the city can help encourage a community atmosphere.
A teenager who was equally passionate about music and sports was asked, if given the choice would he go the U2 concert or attend the great Olympic Games 2012, without a miss of a heartbeat he replied “U2!, all the way”, it doesn’t mean that that Olympics has lost its charm on its lovers, it’s just that the same charm is seeming less on the teenager of today. It is becoming something which a father will drag a son to go to and not the other way round. The LOCOG should lure young students into pursuing the Olympics fever, and should allot student discounts on tickets to uphold the appeal among the young fellows. This is one of the finest ways to attract the right audiences to prop up the Olympics charm.
Not only the success of the event itself should be looked forward, but a broader look of opportunities should be kept in mind which will serve London in the long run. Beijing Olympics served as the milestone resulting in more than ever strong bounds of China with the rest of the world. London should take after China in that accord and should boost up maximum powerful business opportunities in the country with the alliance of the Olympic Games.
Moreover in Beijing Olympics China portrayed its true traditions and capitalized on the Chinese Culture whereas in the Sydney Olympics, Australia capitalized on their infrastructure. The history of The Great Britain goes way back and if London promotes its cultural and historic side a lot of tourists will be attracted in the future.
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