revenue management

Quick Reference

The use of sophisticated computer systems to analyse consumer behaviour, forecast demand, and adjust pricing in order to maximize revenues. Revenue management is mainly applicable to industries in which resources are fixed and perishable, such as the travel and hospitality industries. A seat on an aeroplane, for example, must be filled by the time of take off or contribute nil revenue; companies therefore need to know the optimum moment at which to maximize the yield from a flight by offering unfilled seats at a discount. At the same time, the company will want to encourage early rather than late booking as the general rule and may devise price incentives accordingly. Revenue management attempts to optimize overall yield through a complex process of market segmentation, price discrimination (e.g. charging a different price for an airline ticket depending on when, where, and by whom it is bought), and differentiating the product (e.g. charging more or less for a ticket depending on what travel restrictions apply).

Subjects: Accounting.

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