Executive Summary
The Head of Ticketing must deliver a sales and marketing framework which achieves the vision of London 2012 Olympics as Everybody’s Games. It is incongruent to suppose maximum revenue and maximum attendance can both be achieved and therefore the critical problem is developing a strategy that affords the appropriate balance of emphasis to revenue or attendance. Previous host countries have had varying levels of success with their strategy and due to the unique context of the London 2012 games past approaches do not provide a definitive solution. This report utilises (model) to assess the strengths and weaknesses of the two propositions, evaluate the options for each and provide a recommended sales and marketing approach. Ultimately, the analysis identifies an attendance focused strategy will more likely achieve the vision and have longer term social benefits and revenue potential.
Introduction
This report focuses on the responsibility of the Head of Ticketing, London Organizing Committee of the Olympic Games (LOCOG), to establish a sales and marketing strategy for the 7.9 million tickets available at the London 2012 Olympics. With the support of 70% of people in the UK, London’s Olympic bid was founded on three key aspects; firstly, the opportunity to socially and economically revitalise the disadvantaged area of East London; secondly, creating the first 100% public transport facilitated games, and ultimately, recognition of the London 2012 games as inclusive, fair and equitable – Everybody’s Games. Historically, delivering a marketing strategy that achieves on revenue, sales, attendance and public perception is complex.
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The previous two games, Beijing and Athens, have faced public criticism regarding empty stadiums and poor atmosphere despite employing different strategies; low revenue 100% sales and high revenue 72% sales respectively (adjusted for ticket quantity).
Comparison of recent host countries with similar ticket volume to London show unsold tickets of 11.8% (Sydney 2000, 7.6M tickets) and 24% (Atlanta 1996, 11M tickets), however both these games received largely public accolades. Tiering of tickets is inevitable and learning from past host committees is important, however the context of London is unique. Considerations for a sales and marketing strategy must include the recent global financial crisis, global broadcasting, needs of different stakeholders and the expectations and behaviours of people in London, UK and neighbouring European Union countries in relation to sporting preferences. Analysis of these factors is necessary to ensure the approach adopted supports, and where possible enhances, the London 2012 Olympics as Everybody’s Games.
Analysis
Significant study through the substantial utilization of historic data, both numeric and generic, has aided in dissecting the issue with further detailed analysis in order to capture all the underlying possible problems so as to make the London Olympics 2012 a grand success specifically by configuring a problem statement that would overcome all the glitches that existed in the past Olympic games and which would also avoid any potential anomalies. For London Olympics 2012, it has been identified that the ticket pricing mechanism must have a substantial balance between good revenue and meaningful attendance. This implies that the sold out tickets at the Box Office is just not the aim of the event but having the stadiums mostly occupied with spectators who love and understand the game (knowledgeable fans), is of prime importance instead of the mere presence of people without the love or comprehension of the game or, in the worst scenario, absence of adequate audience at the games or even scarcity of an “average Londoner”.
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In addition, past experiences from Beijing Olympics is evident of the fact that the cheap price strategy is not an effective approach for the resolution as it does not necessarily imply or reassure good attendance. Furthermore, existence of financial crisis during the period greatly impacts the spending capacity of all the stakeholders of the London Olympics 2012 games. Besides these factors, it is also worthwhile to note that online ticketing system is being introduced at this Olympics games.
Problem Definition
The above mentioned factors exert major pressure on having an effective and intelligent marketing and sales strategy that would ultimately support the revenue and attendance balanced approach for the best possible outcome. Hence the following problem statement was developed to capture the essence of all these underlying issues and its implications. To achieve a balance between revenue and attendance for all Olympics events by employing an effective sales and marketing strategy aligned with “The People’s Games”.
Identifying Alternatives
The problem statement provided a strong basis for the identification of alternatives. The ideas obtained from a brainstorming approach were grouped, using problem statement as an anchor. Ideas were considered with an objective of achieving the maximum ticket revenue targets and maximum attendance for most of the events. The critical factors identified for LOCOG include price tiering for tickets, promotional offers, managing perception of ‘Everbody’s Games’, prevention of black marketing and reselling of tickets and promoting online selling of tickets. The following two strategic alternatives were identified to be considered to achieve the desired objectives:
•Revenue focussed strategy
•Attendance focussed strategy
Revenue focussed strategy, as the name suggests would target on achieving maximum revenues. The emphasis is on earning significant revenues by charging high prices for the tickets, auctioning domestic sponsorships and licensing rights. The strategy will enable to achieve the specified revenue target but doesn’t guarantee full occupancy in stadiums. Attendance focussed strategy would focus on maximising the attendance for all major and minor Olympic events. This can be achieved by low and subsidized ticket pricing, promotional offers for sport literates, members of sports club and organisations, local communities and less popular events.
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This will ensure maximum attendance but revenues would be affected to a great extent. The above alternatives were analysed using S.W.O.T (Strengths, Weaknesses, Opportunities and Threats) table. The SWOT was seen as a superior analysis tool for this problem as it allows consideration of both internal and external effects for each strategic alternative. It also provided a clear understanding of the strength of an alternative in terms of achieving the desired results.
SWOT Analysis
To consider negative and positive influences of the business alternatives, a detailed SWOT analysis was performed. The details for SWOT are given in the table below:
Strengths (Internal)Weakness (Internal)Opportunity (External)Threat (External) Strategy Alternatives
Revenue Strategy (price mechanism)
Generate revenue
Balance demand and supply
Attract right crowd
Sporting culture
50% of revenue from big four events
Image impact on less popular sports/athletes
No applicable precedent to adopt
Angry spectators
Angry advertisers / sponsors [something about merchandise]
Doesn’t guarantee attendance
Revenue will help develop East London tourism
Revenue will help develop UK tourism
Online Ticketing (for efficiency)
“Big four” and football events has the potential to “subsidise” cost of less popular sports to maximise attendance
Economic instability in the Eurozone Black market and reselling of tickets
Unchartered territory – post-GFC
Demand may exceed supply for popular events
Supply may exceed Demand for less popular events
Potential to violate Europe laws regarding price discounts
Attendance Strategy (ensures attendance)
Image/ credibility can be controlled
We possess knowledge of popular events for planning
Accessibility – public transportation (the “Olympic Javellin”)
Excellent locations that will encourage tourism
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Atmosphere can be controlled and maintained (retaining spectators for the entirety of events)
Easier selling of licensing rights
Potentially smaller profit margins
If not coordinated adequately, may result in unintentional congestion
Capitalise on numbers – advertising revenue (television, trams, billboards), merchandise, food and drinks, exploiting passion for the Premier League football events
Increase in tourism
Strengthen the local community pursuant to the “People’s Games” vision
Focus on education and sports
Maintain impression management for sports people
Insufficient infrastructure (public transport)
May damage image
May cause public blowback from “knowledgeable fans”
Potentially inefficient ticket pricing scheme (no market equilibrium)
Table 1: SWOT analysis of the business alternatives
SWOT analysis indicates, if LOCOG pursue revenue strategy, it can maximise revenues from ticket sales of various Olympic events and would also promote sporting culture of London. It would also provide an opportunity to promote East London tourism and generate continued revenues in the longer term. Although, as mentioned above, revenue strategy may bring financial benefits, it doesn’t guarantee attendance of knowledgeable fans and enthusiastic crowd for the events. It is a high possibility that stadiums for popular events get fully occupied and for less popular events may suffer from shortfall of attendance which eventually will upset their advertisers and sponsors. Moreover, it is difficult to lower down the prices for average londoners, as the strategy aims to achieve 40% of its revenue from big four events.
If LOCOG chooses to pursue attendance strategy in an attempt to maximise appropriate attendance for maximum events, it has to compromise on revenue generation due to subsidized tickets pricing and other promotional offers. Also, it may not provide an opportunity to promote tourism to a great extent but it will promote local community crowd in alignment with the ‘People Games’ vision. However, focus on maximum attendance may attract more sponsors and advertisers and facilitate easier selling of licensing rights. SWOT analysis showed both the strategy alternatives have their pros and cons in terms of its alignment with LOCOG vision and financial targets. However it is necessary to assess the chosen alternative from the aspect of its effectiveness and probability of achieving the desired objectives. Before selecting an alternative as a recommended solution further evaluation is performed to analyse its practical implications and financial achievability.
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Evaluation of Options
After the careful evaluation and exploration of both the options, the following analysis was derived. Revenue focused strategy would be an ideal if profit and increased revenue is the preferred sole consequence of the Olympic event. With the enormous pressure of having to achieve positive return on investment through significant revenue figure, this strategy would be able to accomplish this objective. And this could be certainly achieved with aggressive marketing campaigns and sales promotions through various channels like ticketing, domestic sponsorship and licensing rights. However, this strategy would not confirm the presence of adequate fun and cheerful fans at the stadiums, energetic and ecstatic athletes on the fields, delighted and contented broadcast viewers and sponsors on their seats. This is because when revenue is the key focus, most of the decisions and choices will be based entirely on the cost factor, which could surpass the other important aspects of this event.
Conversely with the passage of time and with the strong guiding principles of IOC, it can be noticed that the Olympic games have become not only the most preferred platform to showcase immense sporting talents but it has also become an opportunity for the respective OCOG to create, promote and leave a positive legacy behind in the form of good memories for all the stakeholders of the mega event. Therefore attendance strategy with effective sales and specific marketing schemes for explicit segments of customers e.g. old, young, disabled, local, domestic, international, VIPs, sponsors and participants with precise schemes on areas of discounts, event tie ups, ticket recycle, ticket resale etc. which would by far, seize the requirements and presence of various segments of customers. Therefore, this strategy will not only address the revenue issue, but it will also fulfil the attendance objective of this prestigious event. Analysis & Evaluation – Attendance Strategy.
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Abstract:
Our ticket sales target is 85% of available tickets sold.
We must strategically sell/offer 557,270 tickets to achieve this target.
We will have additional revenue to the sum of $21,762,000-$56,088,500 from which to strategically sell/offer the 557,270 tickets. Our Attendance Strategy is contingent on the following observation based on the information presented to us: “Big Four” events + football (50% of ticketing revenue) = Supply < Demand Less popular sports = Supply > Demand
Broadcast Revenues for the Olympic Games and our projection for London 2012.
Seeing as though we possess the broadcast revenues of the Olympic Games from 1984-2008, and the increase in revenue each year appreciates by a percentage change that seems fairly distributed, we’re able to calculate a moving average to project the broadcast revenues for London 2012. In the first instance, we need to calculate the percentage change from the previous year to the following year. These percentage changes are, in their respective order: 71%, 63%, 71%, 67%, 89%, and 86%. The next step then is to calculate the average percentage change over these years, which is 74%. If we then add the percentage difference to Beijing’s broadcast revenue, we add another $440 million to that figure, which provides us with an estimate projected revenue of $2,177 million. The International Organising Committee (IOC) is entitled to 35-50% of that revenue pursuant to the revenue structures instituted by the IOC, so this means that LOCOG may receive anywhere between $762,000-1,088,500 additional revenue. International Sponsors Revenue for the Olympic Games (1988-2008) and our projection for London 2012.
Studying the figures above, it’s apparent that the number of sponsors doesn’t correlate with the revenue generated as the figures are inconsistent in terms of a ratio. However, the last three Olympic Games do demonstrate some consistency (Sydney 2008, Athens 2004, and Beijing 2008), and so we sought to calculate an average for revenue to number of sponsors. Thus, the average for 11-12 international sponsors is $491.6 million. Rationalising that Beijing 2008 was conducted in the thick of the global financial crisis (GFC), it is reasonable to assume that we are able to attract above average revenues and sponsors. Therefore, we can expect:
If 13 sponsors, then >$550 million expected revenue as a minimum;
If 14 sponsors, then >$600 million expected revenue as a minimum.
This means that an additional $60-$110 million additional revenue (as a conservative estimate) can be expected as a result of one or two additional international sponsors. The International Organising Committee (IOC) is entitled to 35-50% of that revenue pursuant to the revenue structures instituted by the IOC, so this means that LOCOG may receive anywhere between $21-55 million additional revenue. Ticket Sales for the Olympic Games (1984-2008) and our projection for London 2012.
The figures we shall concern ourselves with for the purpose of our projection of ticket sales is the “Tickets Sold (in millions)” column, and we will exclude Beijing 2008 from our data-set as prices were artificially low and attendance was inorganic – we deem the Beijing data to be an outlier. Percentage figures are also rounded to the nearest whole unit.
Possessing the data for seven consecutive Olympic Games, we are able to generate an average for tickets sales. They are, in their order of their respective years: 82%, 75%, 77%, 75%, 88%, and 72% (excluding Beijing 2008).
The average of all of these Olympic Games is 78%. The case study makes it clear that if 85% of tickets are sold, then the LOCOG would have achieved a great result. It is this 85% figure that will form the basis of our target. With some arithmetic, and the information presented to us, we are able to deduce that of the 7,961,000 tickets available, the projected average to be sold (78%) will be 6,209,580 tickets sold. Our target of 85% of tickets sold translates into 6,766,850 tickets that must be sold. The difference, therefore (557,270 tickets), is what we must base our marketing and ticketing strategy on. 5Recommended Solution
Our recommendations to the LOCOG board is for the marketing strategy to emphasis attendance at the Games to overcome previous Olympic shortcomings and to maintain focus on “Everybody’s Games”. Nonetheless achieving financial equilibrium cannot be overlooked and will also be addressed. Recommendation One – Embody “Everybody’s Games”: Customers have been identified as the key stakeholder of the Games and this aligns with the games vision. For the marketing strategy to be truly for the people, an inclusive, participative approach must be adopted to walk alongside customers to develop and implement marketing solutions. Therefore the first recommendation is to engage a diverse range of the UK community who enjoy a variety of sports (both popular and less popular).
The aim is to co-create a plan that promotes the best possible Games experience and the attendance of a variety of likeminded people who love sports. It is anticipated this approach will promote a powerful ‘vested interest’ in the community. It is proposed these volunteers will also be utilised as “Games Champions” both in the development stage of the marketing plan but also in its implementation and evaluation. A broad range of medium must be employed to reach different segments of the market including social media, and other community consultations, engagement and participatory avenues. This recommendation must be planned for and implemented immediately.
Recommendation Two – Appropriately Price Tickets to Promote Attendance: Based on pattern and history the second recommendation is to develop a pricing strategy that is not too costly or inexpensive. See Appendix One for the proposed pricing strategy. The strategy aims to keep prices low but not artificially low in order to promote attendance. If tickets are not sold, it is recommended to utilise the pre-existing online lottery system to request nominations and allocate free or low cost tickets to local students or clients of community oriented organisations in line with the vision of “Everybody’s Games”.
Recommendation Three – Broaden the Lens on Revenue: Ticket revenue is undoubtedly important, however the goal of selling tickets alone does not guarantee attendance as per previous history at the Games. Ticket revenue accounts for $650 million of anticipated revenue and $1 billion is forecasted from national sponsorship. No data is available on national sponsorship patterns. However it may be extrapolated that national sponsorship may follow a similar upward trajectory to that of international sponsorship at previous Olympics Games (1988-2008).
This leads to the third recommendation; to conduct research on how viable it is to further capitalise on sponsorship revenue, with particular emphasis on the impact economic downturn may have on businesses willingness to invest. If this analysis is favourable, it is recommended to allocate additional resources to campaign for additional sponsorship deals with the highest possible return.
Furthermore given the UK’s proximity to the European market there is likely to be a broader sponsorship base than what would be expected in Australia (with $492 mil sponsorship) and therefore there is a larger segment of prospective sponsors. Unconventional sponsorship avenues may also be pursued. For example, in line with the “Everyone’s Games” vision, it is recommended that UK companies exporting internationally be targeted to promote their brand which may ultimately benefit the UK people. It is anticipated that sponsorship revenue will offset potential shortcomings in ticket revenue.
Recommendation Four – Multi-Pronged Approach to Promote Attendance: A multi-faceted approach is recommended to promote attendance at the Games. Please note the scope of the below recommendations may change depending on the outcome of Recommendation One. 4.1 As 45% of sales are anticipated to be sold either by people in Europe (20%) or in other parts of the world (25%), it is recommended to research the particular countries expected to purchase tickets and their corresponding sporting preferences. If there are instances of less popular sports in the UK which are more popular in these other countries target this segment to increase participation and attendance. For example, handball is not as popular in UK as in other European countries. Advertising campaign to be customised in particular International regions with imagery and/or messaging related to these sports to promote attendance by sports fans.
All official Games tickets to be collected on site (rather than mailed) to promote attendance at the event instead of customers purchasing tickets online or at outlets for souvenir purposes only. This may also reduce the likelihood of scalping. When tickets are picked up implement an incentive scheme whereby participants who attend the games are provided with a Games coin as a souvenir or memento of their attendance. Utilise Games volunteers (and nominated sportspeople in official Games-wear) to set up interactive educational booths or demonstrations to market less popular events at the Games and at Festivals to increase interest and participation. Add field on online forms to seek permission to contact customers about other offers and promotions when requesting tickets or making enquiries. Furthermore, capitalise on existing information technology infrastructure by including additional fields on online forms to collect information about customers sporting interests and their demographic details to further refine and target advertising. Data mined information from ticket requests and enquiries can be used to directly market other similar events or events related to sporting interests via email or social media.
