Revenue Management

Revenue Management

Revenue Management Jonathan Poland

Revenue management is the practice of using data analytics to optimize sales and maximize revenue for a business. This can be achieved through the use of dynamic pricing, which takes into account various factors such as inventory levels, customer behavior, and competition in order to set the most appropriate price for a product or service.

In addition to pricing, revenue management can also be used to optimize other aspects of marketing, such as promotion, customer relationship management, and the use of different sales channels. By using data-driven techniques to analyze the market and make informed decisions, businesses can effectively manage their revenue and achieve their financial goals. The following are illustrative examples.

Forecasting

Forecasting demand to set prices. For example, a hotel chain that forecasts demand by property and room type based on historical patterns to set initial prices for an upcoming season. Forecasting may also be used to plan promotional activities such as advertising.

Price Sensitivity

Detecting customer price sensitivity to implement price discrimination such as an airline that attempts to detect business travelers by route and dates in order to charge them more. For example, a flight that doesn’t include a weekend stay is a common method for detecting business travel.

Inventory

Adjusting promotional activity and prices to avoid ending up with unsold inventory. This is particularly important for industries that have inventory that occurs at a point in time such as a seat on a flight.

Channels

Effective use of sales channels to clear inventory and obtain the best price. For example, a hotel may sell through a discount travel agency to clear inventory that isn’t likely to sell through higher price channels.

Segmentation

Identifying segments of customers who have different price sensitivity or who respond to different types of promotion. For example, a bicycle helmet manufacturer may find that customers who are more price sensitive are likely to purchase bright color products whereas customers who willing to pay more tend to prefer conservative colors.

Optimization

Firms use revenue management to optimize for different types of goal. A firm with limited inventory may optimize for average selling price to improve margins. A company that can scale up production may optimize for total sales with a minimum acceptable margin. In some cases, firms may optimize for customer lifetime value. For example, prices that are always jumping up and down due to dynamic pricing can result in loss of loyal customers if a competitor is offering flat prices that customers prefer.

Learn More
Brand Management Jonathan Poland

Brand Management

Brand management is the process of creating, developing, and managing a brand in order to build brand equity and drive…

The Lobbying Process 150 150 Jonathan Poland

The Lobbying Process

Lobbying the government involves a series of steps to effectively communicate your message, build relationships with decision-makers, and influence public…

Organization 101 Jonathan Poland

Organization 101

A business organization is a group of individuals or entities that come together to pursue a common business goal or…

Key Strengths Jonathan Poland

Key Strengths

Key strengths are talents, character traits, and knowledge that are particularly relevant to a given role. These are often listed…

Contract Awards Calendar 150 150 Jonathan Poland

Contract Awards Calendar

Governments around the world typically follow a structured and organized process for awarding contracts to suppliers, contractors, and service providers.…

Sticky Information Jonathan Poland

Sticky Information

Sticky information is information that is difficult to transfer. This is an analogy that information that knowledge “sticks” to people,…

Generic Brand Jonathan Poland

Generic Brand

A generic brand is a type of brand that does not have a distinct or unique image. Instead, it is…

Revenue Risk Jonathan Poland

Revenue Risk

Revenue risk refers to any event or circumstance that could potentially negatively affect your future revenue. This could include external…

Product Benefits Jonathan Poland

Product Benefits

A product benefit is the value that a customer derives from a product or service. It is what makes the…

Content Database

Search over 1,000 posts on topics across
business, finance, and capital markets.

Business Ethics Jonathan Poland

Business Ethics

Business ethics refer to the principles and values that guide the behavior of individuals and organizations in the business world.…

The Lobbying Process 150 150 Jonathan Poland

The Lobbying Process

Lobbying the government involves a series of steps to effectively communicate your message, build relationships with decision-makers, and influence public…

Value of Offerings Jonathan Poland

Value of Offerings

Value is a concept that refers to the usefulness, worth, and importance that customers assign to products and services. This…

Pricing Power Jonathan Poland

Pricing Power

Pricing power refers to a company’s ability to increase prices without significantly impacting demand for their products or services. This…

Data Infrastructure Jonathan Poland

Data Infrastructure

Data infrastructure refers to the hardware, software, and network resources that support the collection, storage, processing, and analysis of data.…

Risk Management Jonathan Poland

Risk Management

Risk management is the process of identifying, assessing, and prioritizing risks in order to minimize their potential impact on an…

Lobbying Jonathan Poland

Lobbying

Vertical integration is when a single company owns multiple levels or all of its supply chain.

Customer Experience 101 Jonathan Poland

Customer Experience 101

Customer experience (CX) refers to the overall experience that a customer has with a company or brand, from their initial…

Bias for Action Jonathan Poland

Bias for Action

Bias for action is a mindset or approach that emphasizes the importance of taking action quickly, without extensive thought or…