Revenue management's primary objective is to sell the right product to the right customer at the right time, at the right price, and in the right package.
FREMONT, CA: Revenue management, alternatively referred to as yield management, is defined as the process of analyzing and anticipating customer behavior to increase revenue and maximize company profits. While this is something that most businesses strive for, revenue management is primarily concerned with industries that rely on specific types of resources, such as the hotel or airline industries. Revenue management benefits include a more accurate forecasting of customer wants and needs, a more effective pricing strategy, market expansion, and a stronger relationship between company divisions.
Expectations of the Customer: Revenue management enables businesses to understand better what customers expect from their products. Revenue management research enables businesses better to understand their customers' specific wants and needs, allowing them to shape the product and its presentation more effectively. For example, a hotel chain focusing on revenue management may discover that most of its customers are business travelers who require easy access to the Internet. As a result, the hotel chain may implement a policy that includes complimentary wireless internet access in all hotel rooms.
Competitive pricing: Revenue management enables a business to develop a competitive pricing strategy that attracts customers and gives the business a competitive edge over competitors. Indeed, revenue management is so pervasive in specific industries that businesses that do not implement revenue management strategies will find themselves unable to compete effectively in the marketplace. For instance, an airline may conduct research demonstrating that customers who would otherwise fly are struggling due to high fares and additional fees. As a result, the airline can strengthen its competitive position by reducing the cost of certain flights or even eliminating baggage fees.
Segments of the Market: Revenue management aims to demonstrate to the company the full extent of its market segment and introduce it to newly available market segments. Businesses that typically concentrate their efforts on a single market segment may need to broaden their scope to continue growing in the industry. For example, a hotel chain that caters primarily to business travelers may discover that many of its locations are popular family vacation destinations. The hotels can begin advertising to family travelers and making necessary changes to their locations, such as expanding the breakfast menu or adding children's play areas, encouraging business from this segment.
Divisions of the Corporation: Revenue management fosters a strong connection between the activities of various company divisions, most notably those responsible for sales and marketing and those responsible for customer service. While sales and marketing representatives must develop programs to reach out to customers, many of these programs are carried out by frontline service representatives. Revenue management enables businesses to coordinate their divisions better and thus develop the most effective programs possible.
Check This Out: Business Management Review