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London Olympics 2012 Ticket Pricing Strategy

By Jsinclair7 Mar 03, 2013 706 Words
To: Dr. Judson

From: Jessica Feldman

Date: March 3, 2013

Re: London 2012 Olympics

Background

In 2005, to the delight of millions of English citizens, London won the rights to the 2012 Summer Olympics. London had previously hosted the Olympic games in 1908 and 1948, while bidding on the 1992,1996, and 100 games. In 2012 London had decided to stage the games in East London, a disadvantaged area that never fully recovered after being heavily bombed during World War II. Upon receiving this news, the people responsible for executing the games new they had a long road ahead of them. Building six new large venues, and upgrading and expanding East London’s transportation links to include a 12-car subway shuttle was the responsibility of the Olympic Delivery Authority while the London Organizing Committee of the Olympic Games (LOCOG) was responsible for staging the games. Paul Williamson was hired by the LOCOG as the Head of Ticketing, and he soon realized that pricing tickets was a large endeavor in itself, with many challenges.

The Trade-Offs

Chris Townsend, Williamson’s boss and the Commercial Director of the LOCOG, made sure Williamson never lost sight of their ultimate goal, maximizing ticket revenues and attendance. Williamson also had to adhere to the pressures from the Head of Public Relations and Media, Joanna Manning-Cooper who stated, “We are billing these as ‘Everybody’s Games,’ which means the majority of tickets have to be at prices the public can afford.” Conforming these conflicting goals was a virtually impossible task.

Williamson knew there was no way to please both sides seamlessly, but he knew that he must price tickets in a way that negatively impacts either side the least. In order to maximize revenues, ticket prices should be as high as demand will allow. At the same time, Williamson has to consider what the public deems as reasonable, in order to remain consistent in making these games “everybody’s games.” As if that was not difficult enough, Williamson also had to price tickets in such a way that would ensure attendance. From past games experience, particularly in Beijing, tickets sold but attendance was mysteriously low. Although the Beijing Olympics was the first sold-out Games in history, the vast array of empty seats told a story of low-ticket prices ensuing low attendance. There were differing speculations for the Beijing mystery, from large numbers of tickets set aside for sponsors, IOC VIPs, media, etcetera that went unused, to many Chinese citizens purchasing tickets as merely souvenirs, never intending to actually attend. Whatever the reason actually was, Williamson took this experience as a lesson to price tickets high enough to entice purchasers to attend. Over all, a decision had to be made on what was more important to the games, exceeding revenue but falling short on attendance, or coming short on revenue but maximizing attendance.

Pricing By Sport

Although Williamson had aided in setting ticketing guidelines and acted as a ticketing advisor to sporting events in the past, the Games proposed a new set of challenges, unique to the Games, by selling 7.9 million tickets to 26 different sports over a 17 day period. Pricing tickets needed to be considered differently for every sport. Football is Europe’s favorite sport and is estimated to contribute 10% of the of ticket revenue. Even though Football will be an easy sell, people will compare the ticket price to what they are used to paying for various Football games. While along with Europe’s most beloved sport Football, the big four sports (swimming, artistic gymnastics, athletics, and the ceremonies) are expected to account for 40% of ticket revenues and are easy sells, where historically demand far exceeded supply, there are all other sports where historically supply far exceeded demand. Demand is also higher for sports that the host city has success in. For example, from the three preceding Games, London has won its most medals in Indoor Track Cycling, Sailing, Athletics, Rowing, and Swimming. In turn, these sports will have a higher demand and should be priced accordingly. While Williamson prices tickets based on sport attributes, he must also make sure he does not disrespect any sport or athlete by pricing a particular sport’s tickets too low.

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