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Article · January 18, 2023
Selling at the right price, to the right customer, at the right time
Revenue management is a set of levers that lift sales through better pricing. Businesses that use it see revenue rise by 8% on average - while keeping prices low.
Selling at the right price, to the right customer, at the right time. Revenue management is a set of levers that allows certain businesses to increase sales by optimising pricing: by modulating fares according to demand, they improve revenue through better pricing - segmentation and price levels - and better management of inventory and oversupply.
These techniques were born in the United States in the 1980s, after airspace deregulation opened the market to competition and allowed airlines to operate any type of connection in any country. Deregulation triggered a price war that pushed airlines to optimise sales by setting fares intelligently, while making the most of their demand and their inventory.
Pricing - the art of setting the right price - and yield management - the art of steering those prices - are therefore the two pillars of revenue management. By navigating a pre-defined fare grid, airlines managed to optimise both sales and revenue. The practice then spread across Europe, to every sector selling non-storable goods and services.
Hotels, restaurants, tourism, rail transport, culture and live entertainment all use it. The results are compelling: revenue up by 8% on average. Just as importantly, revenue management makes it possible to keep prices low - or even to lower them - by improving occupancy rates.
To keep prices low, the goal is to sell at the right moment, to the right customer and at the right price, by structuring offers, anticipating demand and segmenting customers as precisely as possible. The idea is real-time pricing that adapts to fluctuating demand.
“The revenue manager is able to manage and optimise their entire inventory. The digital tool identifies critical situations for them and suggests a series of levers to pull - raising prices, changing minimum stay lengths. It is then up to them to make the right trade-offs,” explains Pascal Niffoi, co-founder and managing director of N&C, a revenue management consultancy and IMPACT CONSULTANTS partner.
In an inflationary context, with a deteriorated economic situation in France and abroad, revenue management is a genuine asset for the companies that adopt it. “Current conditions, competition, changing regulations - all of these push towards adopting revenue management,” concludes Pascal Niffoi. A growth solution for now, and for a long time to come.
An article by Rodolphe Lenoir and Pascal Niffoi.
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