1. Introduction
In 2004 London won the rights to host the 2012 Summer Olympics and it became the London Organizing Committee of the Olympic Games’ ( LOCOG’s ) contractual duty to program and pull off the 17 yearss of Olympic events in the metropolis. 12. 500 jocks from 205 states are expected to take part in the London Olympics. viing in 26 athleticss and 300 events. With a jutting 7. 9 million tickets to be sold the 2012 Olympics will be the biggest of all time. It is the LOCOG’s duty to pull off the pricing. sale and distribution of the tickets. This study describes and justifies the LOCOG’s proposed pricing scheme for the approaching 2012 Olympic Games 2. Proposed Pricing Plan

Proposed Monetary values
Table 1 – Proposed monetary values for London 2012 Olympic Games Tickets Events Seat Prices ( $ ) Available Tickets Total Revenue ( $ ) Tier 1 Tier 2 Tier 3
Non Sporting Events
Ceremonies 1500 1000 100 120. 000 103. 896. 000
Other Events 60 40 20 365. 000 12. 397. 590

Sports
Class 1
Preliminary 80 50 30 944. 000 42. 751. 872
Finals 300 200 80 944. 000 154. 975. 536

Class 2
Preliminary 70 45 25 2. 301. 000 91. 181. 727 Finals 175 100 50 2. 301. 000 211. 671. 866

Class 3
Preliminary 45 30 20 498. 000 13. 391. 096
Finals 80 50 25 498. 000 21. 848. 630

Entire 7. 971. 000 652. 114. 316
Table 1 shows the proposed ticket monetary values. Th

Each featuring event is besides divided by sensed value into one of 3 classs ( 1 holding the highest and 3 holding the lowest sensed value ) . Popularity and classification of each athletics is summarized in Appendix 1. For the intent of this exercising. each category’s ticket monetary values are calculated by agencies of leaden mean monetary value block embracing pricing for all athleticss falling within a grade.

2. Pricing Scheme
Although ticket gross revenues will non needfully organize a big portion of the Olympic grosss. it is critical that the LOCOG acquire the ticket pricing policy and distribution right. To make so we will utilize a 6-step monetary value puting process described in Kotler et Al ( 2012 ) . The process can be seen below in figure 1. each of the stairss will be considered in the remainder of this subdivision. Figure 1 – 6 Step Pricing Setting Procedure

Figure [ 1 ] – 6 Step Pricing Setting Procedure

2. 1. Pricing Aims
The LOCOG has 4 chief aims that we will see when puting ticket monetary values. The first aim is to maximize grosss. much media attending has been given to the intensifying cost of these Olympics which provides increased motive to hit or even exceed the ?650 million grade that has been predicted by the budget. The 2nd aim is to maximize attending. Previous forming commissions have come under some examination for the less than optimal attending. Maximizing attending will give something back to the UK. better the ambiance. better the presentation for the broadcasters. create memorable images and supply an audience for the patrons. However. most significantly maximizing attending will hike the focal point on the athleticss and athletes themselves. Equally good as holding make fulling seats or 3rd aim is to make full these seats with the right people. informed sport- lovers who will assist make the right kind of ambiance at the events. The concluding pricing aim is to do the Games accessible to the mean individual ; this means doing the distribution channels simple and maintaining monetary values low-cost to guarantee these Games that have been branded “the people’s Games” is perceived to be merely that. The LOCOG recognises that some of these aims appear to be conflicting: it would be easy to maximize attending but grosss may endure and frailty versa. The difficultly exists in striking a balance to guarantee that we meet all four aims described.

2. 2. Determining Customer Demand
The London Olympic Games has a sum of 7. 961. 000 tickets which consists of 7. 476. 000 athletic event tickets. 120. 000 gap and shutting ceremonial tickets and 365. 000 tickets to other non-sporting events. To be able to accomplish the jutting gross marks set by LOCOG and to develop our pricing schemes. it is imperative that we are able to find the monetary value sensitiveness of demand. Price Sensitivity of Demand:

Price sensitiveness reflects the alteration in measure demanded for each $ 1 alteration of monetary value and plays an of import portion in finding the alterations in overall gross at each monetary value degree. Broadly talking. the Olympic Games when seen as a individual entity have low monetary value sensitiveness as it: a ) Presents a really rare chance

B ) Offers a distinguishable merchandise with no direct competition
degree Celsius ) Is perceived to be of quality. prestigiousness and clannishness

However it would be excessively wide a generalisation to look at the Olympic Games as one complete entity with individual changeless monetary value sensitiveness and remarkable perceived value. Rather it is a apogee of many groups of events and clients each holding their ain degrees of demand and monetary value sensitiveness. We have pinpointed two other critical sub-factors which play a large portion in finding the overall monetary value sensitiveness and hence pricing. 1. Difference in income groups

2. Difference in sensed value of events

Income groups:
With the overall higher perceived value of the Olympics. they are by and large attractive to all income groups. However as observed from informations from old games. different income groups have different income disbursement precedences and hence different monetary value sensitiveness. * Tier 1 seats targeted to higher income groups by and large have low monetary value sensitiveness and therefore is charged a much higher monetary value and a broad scope of monetary values * Lowest grade seats targeted to take down income groups by and large have higher monetary value sensitiveness therefore pricing has been restricted *

* Based on this. the following ticket monetary values were adopted: * Tier 1 – premium monetary value – aiming high income groups * Tier 2 – center
monetary value – aiming in-between income groups * Tier 3 – low monetary value – aiming low income groups *

Perceived value of events:
The LOCOG acknowledge that non all events and event phases have the same sensed value. * The Olympic ceremonials have the highest sensed value due to the prestigiousness it offers and attending are expected to be affected much by big monetary value alterations. which is why it is much higher than any other event. * Sports popular all over the universe such as sports and water sports by and large tend to hold a higher sensed value and hence charged a higher ticket monetary value than athleticss such as tabular array tennis which tend to hold lower perceived value and hence have been priced lower * Popularity of the athletics besides depends on the state in which the Olympics are being held. Sports popular in the UK either inherently ( such as football ) or due to its recent successes ( such as cycling ) contributes to an addition in sensed value of the athletics and hence a higher monetary value * Ticket monetary values of peculiar athleticss besides depend upon the phase of the athletics. with the preliminary phases holding an overall lower perceived value and therefore a lower ticket monetary value than the finals.

* Each featuring event is hence divided into one of 3 classs ( 1 holding the highest and 3 holding the lowest sensed value ) . Popularity and classification of each athletics is summarized in Appendix 1. For the intent of this exercising. each category’s ticket monetary values are calculated by agencies of leaden mean monetary value block embracing pricing for all athleticss falling within a grade.

2. 3. Estimating Cost
The LOCOG’s budget for the 2012 Olympics is estimated to be $ 3 billion. This includes the cost to present the clean events and the gap and shutting ceremonials ; lodging and feeding the jocks ; transit to and from the Olympic locales ; media ; and security. Since LOCOG and IOC are non-profit organisations. our primary aim will be to bring forth adequate gross to cover the $ 3 billion costs. Both LOCOG and IOC are responsible for bring forthing the gross to run into these costs. The IOC is expected to supply LOCOG about $ 1. 2 billion dollars from broadcast grosss and international sponsorships. For the balance. the LOCOG plans to bring forth $ 1. 8 billion. This is from about 60 domestic patrons. $ 150 million in licensing fees and eventually $ 650 million which has to be raised from ticket gross revenues. 2. 4. Analysis of competitor’s costs/prices/offers

LOCOG considered the OCOGs of the old Olympic Games as rivals and the pricing scheme from both old Olympics and other major athleticss events. In the past. each Olympic Games host OCOG have used different pricing schemes and monetary values to run into their ain aims. The consequences are shown in Table 1. The Sydney Olympics had the highest gross revenues rate ( selling 88 % of available tickets ) and later obtained the highest grosss of the last 20 old ages. Interestingly the mean ticket monetary value was besides highest among old Olympics in 20 old ages. Olympic Games Available Tickets

for sale
[ in 1000000s ] Tickets sold [ in 1000000s ] Gross saless Rate Total Revenue [ in 1000000s ] Average monetary value per ticket [ US dollar ]
1984 Los Angels 6. 9 5. 7 83 % 156. 0 27. 4
1988 Seoul 4. 4 3. 3 75 % 36. 0 10. 9
1992 Barcelona 3. 9 3 77 % 79. 0 26. 3
1996 Atlanta 11 8. 3 75 % 425. 0 51. 2
2000 Sydney 7. 6 6. 7 88 % 551. 0 82. 2
2004 Athens 5. 3 3. 8 72 % 228. 0 60. 0
2008 Beijing 6. 8 6. 8 100 % 200. 0 29. 4
Table 2 – Ticket information from old Olympic Games

LOCOG aims to achieve $ 650 million gross revenues for 2012 Olympics. The unit monetary value is to accomplish the grosss. The mark unit monetary value was hence decided to be as follows: The mark unit ticket monetary value = $ 650 million ? 7. 9 million tickets = $ 82. 30 /ticket This figure is similar to the mean monetary value per ticket of the 2000 Sydney Olympics. An analysis of the last 3 Olympic Games can be seen below. The 2000 Sydney Olympic Games pricing scheme was the best in footings of run intoing the LOCOG’s current aims. the Sydney Games monetary values could hence be used as a benchmark for the LOCOG to establish its ain monetary values on. The other 2 Olypmic Games ( Athens and Beijing ) would non needfully be suited benchmarks due to the fact that Athens had little locales and Beijing’s OCOG created unnaturally low monetary values. The Sydney Games are most representative to those that will take topographic point in the UK. Australia. similar to the UK is home to a figure of athleticss fans and big featuring locales. so demand and handiness for tickets is expected to be similar. Table 3 – Comparison of Olympic Games harmonizing to LOCOG’s 4 aims Olympic Games Sydney 2000 Athens 2004 Beijing 2008

Gross High $ 551M Low $ 228M Low $ 200M
Attendance Good ( unknown ) Low
Right people Good ( unknown ) Not good
Accessibility & A ; Affordability Good ( unknown ) Good

2. 5. Choosing a pricing method
Table 1 below examines the 6 chief. widely-used price-setting methods: cost plus pricing. aim return pricing. going-rate pricing. auction type pricing. perceived-value pricing and value pricing. Table 4 – The strengths. failings and suitableness of the chief pricing methods Pricing Method Description Strengths Weaknesses Suitability for London 2012 Cost-plus pricing Price is set at the production cost plus a given net income border. ? Sellers earn a return on investment? Simple to apply? Transparent for consumers ? Ignores demand? Does non see competitors’ pricing? Ignores perceived value ? Includes sunk costs – driving up price? Does non give the chance to maximize net incomes This pricing method would non be suited for the Games.

The ticket grosss can non be expected to cover the cost of the full Olympic Games. or even the LOCOG budget. This scheme ignores the concluding 3 aims and hence would non be appropriate Target-return pricing Determine the monetary value based on what would accomplish the mark return on investing ? Helps Sellerss meet fiscal objectives? Particularly utile for houses with high capital investing ? Does non see competitors’ pricing? Better for market leaders or monopolists merely ? Sellers have to alter monetary value harmonizing to demand in order to accomplish the coveted return Again. this method is merely utile in accomplishing our first nonsubjective – to maximize net incomes. It could be used loosely but to maximize attending and engagement for each different athletics other pricing methods could besides be used.

Going-rate pricing Price is based mostly on rivals pricing ? Useful for houses seeking to keep market portion ? Costss have to be similar to your rivals in order to do net income. ? Could originate price-wars which drives down net incomes This could be suited for London 2012. if LOCOG considered old Olympics Games as rivals. The LOCOG could analyze and measure the pricing of the other Games. being careful non to do the same mistakes in opinion made by old commissions. Auction-type pricing In an English auction: many purchasers bid for one point. the point goes to the highest bidder ? Manufacturers can sell points at a minimum cost as physical shops are non required?For high demand merchandises Sellerss are able to maximize their net incomes ? This pricing manner merely works for certain products/services and is more suited for one-offs? Sellers may non be able to do big net incomes or even cover cost if the sensed value is lower than the existent cost to fabricate the merchandise. This would non be a suited method.

If used we could run the hazard of run intoing none of our aims. For more popular events tickets monetary values would be driven excessively high doing handiness to endure. Perceived-value pricing Pricing based on value for client and non on the cost of the merchandise ? Generally monetary values are likely to be higher than when cost-based pricing is used which can maximize net income for the seller? Forces marketer to see valley to clients which is utile in developing the merchandise ? Different values are held by different clients ? Costss of merchandise may non be recovered? Difficult to implement This method could besides be suited in pricing the Games tickets. the first aim to maximize net incomes may non be met. nevertheless Value pricing Giving comparatively low monetary values for high-quality offering ? This method can assist win clients and increase market portion ? Low monetary values may be mistaken for lower quality offerings? Require houses to take down production costs in order to do profit? Customers gained may non be loyal? May promote monetary value wars with rivals which in bend can drive down net income borders This method could besides be suited for the Games. The latter 3 aims could be met with this scheme. However maximization of grosss is non likely to be achieved.

As can be seen in the tabular array above the most suited schemes for ticket pricing sing our pricing aims are going-rate pricing. target-return pricing and value pricing. 2. 6. Choosing a concluding monetary value

Internal and External Factors Influencing the Final Ticket Prices ( clients. and likely reactions )

Stakeholders
The Scheme

Justification
The tickets were priced in the undermentioned manner. utilizing Sydney
Drumhead

4. Analysis

4. 1. Restrictions
( likely jobs – programs to get the better of. countries of possible dissension 4. 2. Swot
5. Summary/Conclusion

6. Bibliography
7. Appendixs

8. Rebuttal Scheme
Our rebuttal scheme is to presume the individualities of the different stakeholders with the regulative reappraisal group. Each of the stakeholders has a distinguishable position of the aims of the pricing scheme. The stakeholders. their position points and their preferable ticket pricing scheme are listed in the tabular array below. Stakeholder Objectives Preference Worst Case Scenario Politicians Manage public perceptual experiences. Host a successful Games – full attending. Adequate tickets to Londoners Lower monetary values for the UK community to guarantee maximal engagement Lower monetary values for tickets for the international community. Tickets that are less accessible for the UK IOC Maximise revenueMaximise attendanceGet the right kind of attendanceAccessibility to locals Sporting organic structures Full attendanceSupport for jocks London community Attendance for Londoners

General UK community Attendance for UK population LOCOG Maximise revenueMaximise attendanceGet the right kind of attendanceAccessibility to locals Sponsors Full attending – larger audiences Cheaper tickets to guarantee maximal attending and a diverse audince International community Accessible ticket gross revenues for everyone Boris Johnson Manage public perceptual experiences

The 2nd aspect of our rebuttal is to utilize the rating of the general pricing methods that can be seen in table 1. The tabular array is an rating of the chief pricing schemes some of which may be suggested by the other squad.

Third. there are some Olympic specific schemes that have non been considered in our study at all. These schemes are listed below every bit good as the grounds for their skip from our study. Strategy Reason for skip

A per centum of free tickets
Concessions for the elderly/students/young people
Tickets of different monetary values for different states
Bundled tickets
No tickets or fewer tickets for the IOC/sponsors
Tickets to schools
All high monetary value tickets
All low monetary value tickets Brit taxpayers in general will be picking up a larger portion of the check for the Olympics. a consequence which flies in the face of user-pay public finance policie All free tickets Brit taxpayers in general will be picking up a larger portion of the check for the Olympics. a consequence which flies in the face of user-pay public finance policie Allowing ticket resales

( exhibit A ) .

Exhibit A The Breakdown of the income
Estimated Costss ( excepting cost of substructure ) $ 3 billion * Staging the Opening Ceremony. Closing Ceremony. and featuring events * Housing and feeding the jocks and functionaries
* Anticipating and work outing possible transit jobs * Meeting the demands of the media
* Providing security to guarantee a safe and peaceable Olympics Estimated Revenues ( Entire $ 3 billion )
* IOC ( $ 1. 2 billion )
* $ 1. 2 billion – portion of broadcast grosss and international sponsorships * LOCOG ( $ 1. 8 billion )
* $ 1 billion – domestic patrons
* $ 150 million – licensing fees
* $ 650 million – ticket gross revenues
We studied about the pricing scheme for the undermentioned football and tennis events. Football
English Premier League Football: British professional football conference. England Football Friendly: an exhibition lucifer between the English national and another country’s national squad. England Under-21 Football: a game between English national squad who are under 21 old ages old and another country’s national squad. 2008 European Cup Football: one-year event to find the best squad in Europe. Tennis

Wimbledon Tennis: an one-year tourney held in UK.

Pricing factor
As for football. the monetary value depends on the phase of event and age. On the other manus. the monetary value of table tennis ticket depends on place. Table 5. Pricing policy for assorted athleticss events in Europe
Price puting depending on phase Price puting depending on Age Price
puting depending on seats’ place Price puting depending on squad English Premier League Football No No Yes Yes

England Football Friendly No Yes Yes? Yes?
England Under-21 Football No Yes No No
2008 European Cup Football No No Yes? Yes?
Wimbledon Tennis No No Yes No

1. 1 Price Range
The undermentioned figure shows the monetary value scope for football events in Europe. The monetary value is different depending on events. but most of monetary values are from $ 40 to $ 100.