Revenue Management - Developing Industries

Developing Industries

The ability for Revenue Management to optimize price based on forecasted demand, price elasticity and competitive rates has incredible benefits, and many companies are rushing to develop their own Revenue Management capabilities. Many industries are beginning to embrace Revenue Management and apply its principles to their business processes:

• Financial Services – offer a wide range of products to a wide range of customers. Banks have applied segmented pricing tactics to loan holders, often utilizing heavy amounts of data and modeling to project interest rates based on how much a customer is willing to pay.

• Media/Telecom – a promotion-driven industry often focused on attracting customers with discounted plans and then retaining them at higher price points. Businesses in this industry often face regulatory constraints, demand volatility, and sales through multiple channels to both business and consumer segments. Revenue Management can help these companies understand micro-markets and forecast demand in order to optimize advertising sales and long-term contracts.

• Distributors – face a complex environment that often includes thousands of individual SKUs with several different product lifecycles. Each distributor must account for factors such as channel conflict, cross-product cannibalization, and competitive actions. Revenue Management has proved useful to distributors in promotion analysis and negotiated contracts.

• Medical Products and Services – deal with large fluctuations in demand depending on time of day and day of week. Hospital surgeries are often overflowing on weekday mornings but sit empty and underutilized on the weekend. Hospitals may experiment with optimizing their inventory of services and products based on different demand points. Additionally, Revenue Management techniques allow hospitals to mitigate claim underpayments and denials, thus preventing significant revenue leakage.

• Hotel and Hospitality services – daily revenue or yield management strategies are a popular practice within the hotel sector, particularly prominent in mature and large hotel markets such as in Western Europe and the North America. Key operating indicators Occupancy Rate (OR), Average Daily Rate (ADR) and Revenue per Available Room (RevPAR) are tracked using third party sources to follow direct competitor set averages in demand and price, thereby indicating penetration rate and performance index. Wider or macro market averages are also monitored. Since the hotel industry is cyclic, revenue managers can confidently maneuver supply and demand statistics to reach optimal results.