Launching the Revenue Rocket

Abstract

Revenue management (RM) is the application of disciplined tactics that predict consumer behavior at the micromarket level and optimize product availability and price to maximize revenue growth. While the application of RM principles depends on each company's competitive situation, the process is similar for all firms. Each firm should examine the applicability of RM to its situation, and specifically if its market is characterized by vagaries of demand, a perishable product (e.g., hotel rooms, restaurant meals), and strong competition. The firm's management should use data-analysis techniques to estimate untapped revenue potential. This estimate involves analyzing all available data to uncover hidden revenue potential through the computerized emulation of actual business environments and control processes. Finally, the firm should quantify the benefits of revenue management. Those responsible for managing revenue should be given express control over all revenue-generating functions, and top management should allow those revenue managers the leeway to make constant and rapid changes in the price and product mix. In the final analysis, revenue management allows a firm to create new time-based products on the spot, as customer demand for those products becomes apparent.