Revenue Management Flashcards
What is the primary goal of revenue management?
To optimize revenue and profit by allocating the right product to the right customer at the right price.
When is revenue management most applicable?
For services with no stock or perishable goods, short-term capacity, and low marginal costs.
What is yield management in revenue management?
It involves allocating the right product to the right customer at the right price to maximize revenue.
What are the main modules of revenue management?
Linear demand curve, customer segmentation, product bundling, and nonlinear pricing.
How does price optimization work?
By estimating the demand curve, applying it to price scenarios, and calculating revenue to find the optimal price.
What is the significance of customer segmentation in revenue management?
It helps create different prices for different customer groups to maximize revenue from diverse segments.
What is product bundling, and why is it common?
Selling multiple products as a bundle at one price; it simplifies purchasing, encourages cross-selling, and captures full willingness to pay.
What is nonlinear pricing in revenue management?
A pricing model where the relationship between price and quantity is not linear, often involving a flat fee plus a variable component.
How does scenario analysis aid in revenue management?
It evaluates multiple pricing scenarios to identify the optimal pricing strategy.
What are the benefits and challenges of price discrimination?
Benefits: Maximizes revenue by targeting different price sensitivities. Challenges: Can be perceived as unfair if not applied ethically.
What is the two-part tariff pricing mechanism?
A nonlinear pricing strategy involving a flat fee plus a variable price component.
What is the purpose of using Excel Solver in revenue management?
To define and optimize target values such as revenue by adjusting price-related variables.
What is the core idea behind separate pricing versus bundling?
Separate pricing involves pricing each product individually, while bundling offers multiple products at a single price.
How does competition influence airline pricing in revenue management?
Routes with less competition often have higher prices due to fewer pricing pressures.
What is fare code in the airline industry?
A single-letter code indicating conditions and rules associated with a specific airline ticket.
