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What the London Olympics Really Mean: Victory over Austerity

After seven long years of preparation, the London 2012 Olympic Games are finally underway, and even the notoriously critical British press is falling into line. Everyone seems to be settling in for a good time. But as much as we want to see our British Olympic team win medals, the Games have much deeper meaning for Britain — nothing less than victory over austerity. As the financial crisis began in 2008-9, spending $15bn on hosting the Olympic Games looked like a commitment Britain simply could not afford to make. But with the benefit of hindsight, the more Britain has struggled economically, the more important London 2012 is in its potential revival.

A year ago, we reported on London's preparation for the games, noting the almost unimaginable achievement of being ahead of schedule and under budget — in an inhospitable economic environment. But since then, the economy has steadily been getting even worse. The latest economic figures confirm Britain's "double dip" recession. Levels of net public debt are now running at around $1600bn. Earlier this month, the British government announced plans to inject a further $80bn into the economy via an ongoing quantitative easing program which has now injected a cool $375bn in order to drive growth.

Holding the only truly ring-fenced public budget in Britain, London 2012 has felt a responsibility to spend its funds wisely. Their challenge is not just to deliver an excellent event on one sixth of the budget of the Beijing 2008 Olympics, but to do so in a way that boosts a flagging economy. The strategy has three components: targeted in terms of investment, customer-focused in terms of revenue, and remorselessly focused on sports which can deliver gold medals.

Investment has been targeted in several ways. For example, 75% of supply contracts have been awarded to companies outside of London itself. This has provided funds and secured jobs for the ailing construction sector nationwide. Elsewhere, what little funds that have been available for marketing have been focused on digital activity — which offers not only an economic option but also a deeply personalised customer experience. The "Twitter Olympics" is in full swing — with travel news in a creaking London transport infrastructure delivered immediately to those who need it. The only remaining question is whether Twitter can cope with the demand — the network has already gone down under the pressure, struggling to cope.

London 2012 has done an excellent job of putting the customer at the heart of sales strategy. For example, in the ticketing space they needed to yield an average sales price of $80. Customer insight in a culture of austerity suggested trying a novel approach. The best seats for the Opening Ceremony cost $3,200 (or £2,012) for those whom the recession has passed by unscathed; whereas for some events, children under 16 have "paid their age" — £5 for a 5-year-old, for example. One size fits nobody in a schizophrenic market.

But customer marketing has yet to confront its biggest challenge. London 2012 sold the $15bn Games to the British public less on a premise of commercial investment than of increased sporting participation. Delivering this is particularly challenging — $5 spent on a swimming pool is $5 less spent on an impoverished British public health service. Olympic leaders continue to reiterate that these two are linked — if London 2012 inspired British adults to become 10% more active, that same health service is saved $800m per annum through lower illness levels and therefore less strain on the healthcare system.

As enticing as this challenge may be, the biggest limitation is the marketing savvy of British sport. Children are the key to creating a healthier nation, and yet the guardians of British sport have been slow to realize that the kids of 2012 need more engagement than offering them a playing field and a ball. British sport has more to learn from corporate youth marketing than from best practice in the sporting arena. Shortly after London 2012 each British Olympic Sport will be handed hundreds of thousands, in some cases millions, of data records from British sports fans who wanted to buy tickets for their sport. Big data needs to gets sporty, and quickly...for the sake of the public healthcare budget.

The final piece of the strategy: remorseless focus on gold medals. Investment has been targeted on those sports which will return them — because gold medals will drive ongoing commercial investment and inspire those same kids. This has implications. The British handball team will walk out to compete in the handball competition in a $130m brand new arena. However, they received hardly any funding because a medal will elude them. The focus is on the handball arena becoming a multi-purpose leisure centre for a newly created, economically viable London community built out of the Olympic Village. In contrast, the British Cycling team has been funded to the hilt — because their 8 gold medals in Beijing inspired another 200,000 people to start cycling regularly. This takes pressure from the public purse (traffic congestion and healthcare provision) while creating a cycling economy worth $5bn a year.

At its heart, London 2012 is not really a sport event. In the context of $1600bn public debt, it could never have been. Targeted investment, customer focus and elite performance have been at the heart of its viability. Whatever the British weather throws at us over the next few weeks, the Games are a commercial success story in a struggling nation.

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