6 Yield Mgmt

8/3/2019 6 Yield Mgmt

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Neha Kakkar (FC10147) [ SLIDES NO. 1-12: Introduction,

eseential conditions, objectives, benefits and process ]

Shivala Vyas (FA10050) [ SLIDES NO. 13-22: Airlines,

Telecom and other applications of Yield Management ]

Ankit Arora (FA10010) [ SLIDES NO. 23-38: Hotels]


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INTRODUCTION


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It is the process of understanding, anticipatingand influencing consumer behaviour in order tomaximize yield or profits from a fixed, perishable

resource.

Setting prices according to predicted demandlevels among different market segments.

An approach to manage supply and demandunder varying degree of constant.

INTRODUCTION


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To the right person

At the right price

Sell the right thing

Concept evolvement


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That there is a fixed amount of resources

available for sale.

That the resources sold are perishable (there is

a time limit to selling the resources, after

which they cease to be of value).

That different customers are willing to pay a

different price for using the same amount of

ESSENTIAL CONDITIONS


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A well-designed Yield Managementsystem can predict with

reasonable accuracy how manycustomers will use a given serviceat a specific time at each of several

different price levels and thenblock the relevant amount of

capacity at each level.

PRICE BUCKET


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Integrated control of CAPACITY and PRICE

Objective: Maximize revenue(minimize lost revenue / opportunity

costs)

Science of squeezing every possible

dollar from customers

objective


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YM requires two or more segments that attachdifferent value to the service and havedifferent price elasticities.

It need to determine how sensitive demand isto price

And what revenue will be generated atdifferent prices for each target segment.

Price Elasticity= % Demand

% Price

PRICE ELASTICITY


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Maximize Revenue by Yield

Management

Maximize RevenueMaximize Revenue

Pricing Strategy

How do we price ourproduct?

InventoryManagement

How much is availableat each price point?

Selling Strategy

How do we sell ourproduct?

Maximize Revenue can be broken down into three main activities:


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Improved forecasting

Improved seasonal pricing and inventory

decisions

Identification of new market segments

Identification of market segment demands

Enhanced coordination between the front

office

and sales divisions

BENEFITS OF YIELD

MANAGEMENT


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Improved development of short-term and

long-term business plansEstablishment of a value-based rate structure

Increased business and profits

Savings in labor costs and other operatingexpenses

Initiation of consistent guest-contact scripting

BENEFITS OF YIELD

MANAGEMENT


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PROCESS


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APPLICATION OF YIELD MANAGEMENT IN

DIFFERENT SECTORS


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AIRLINES

CAPACITY : FIXED

(Unsold seats not generatingany Revenue)

MARKET

SEGMENTATION


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Yield management in airlines

Create artificial hurdles:

y Advance purchase: 21 days, 14 days, 7daysy Use limitations: Saturday night stay, non-

refundable tickets

Restrict the number of seats sold at thelow price:

This requires a forecast of future booking by


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AVAILING THE OPPORTUNITY AT

THE RIGHT TIME

Airline seats -once the aircraft

departs with anempty seat, thereis no longer arevenue

opportunityassociated withthat seat.

Travel Industry

Car Rental Agency

Media Advertising Hobbies - Golf, Horse

Riding etc.

PRODUCE


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MAKING A CALL TO YIELD MANAGEMENT

Large sunk cost combined with lowLarge sunk cost combined with lowmarginal costmarginal cost

Perishable inventoryPerishable inventory

CompetitionCompetitionCHALLENGESCHALLENGES

Low-value transactions

Network com lexit

TELECOM


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Market Segmentation and

Pricing

Monetizing Unused

Bandwidth

Increasing Profits at Peak

y.m. helping TELECOM


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Rental cars

Adjust prices frequently according to

demand; serve high valued fleetutilization with priority; accept orreject booking requests based onlength-of-rent controls.

Railways

Divide customers into standard classand first class; provide different

prices based on the day of travel and

y.m. otherapplications


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Retailing:-Use early discount pricing to maximizethe revenue from sales of a seasonal product.

Manufacturing:-Determine the right price for

every product to every customer segment throughevery channel in response to changing market

conditions.

Natural gas, petroleum storage and

transmission:-Make the right price for thetransportation services so that the pipelines stay full.

Project management:-Use capacity planning andscheduling to reserve specific capacity for customers

willing to pay higher prices to have critical activities.

A artment rentin :-Establish o timal rates for


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Hotels


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PRICING

STRATEGIES

COSTS CUSTOMERSCOMPETITORS

3 Cs


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cost


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competitORS


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customers

CUSTOMERS/

GUESTS

SEGMENTATION VALUE/BENEFITS


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Rack Rate

Group/Tour/C.T./Lay over

Package/Member

Rates categorization


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Occupancy

No. of rooms sold

x

100No. of rooms available for

sale yield

Revenue Realized

x

100


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REVENUE

MANAGEMENT INHOTELS

DEMAND FOR

ROOMSSUPPLY

DIFFERENTIATION

to achieve

BALANCE

OCCUPANCYYIELD


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OVERBOOKING

NO SHOWS CANCELLATIONSFORECASTING BASED ON

HISTORIC PATTERNS

OVERBOOKING

Tie up with

other

hotels/chains

Sending back


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DIFFERENTIAL PRICING PARAMETERS


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MEASURING PERFORMANCE OFREVENUE MANAGEMENT ISDIFFICULT.

HUMANNATURE: LONG TERMCONSUMER LOYALITY V/SSHORTTERM PROFITS

Revenue Management plays a vital role in generating

short term gains provided it does not create a difference in

the experiences being provided to our regular guests- Mr.Anil Malhotra, GM, Hotel Taj Chandigarh.

challenges


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Designing fairness into revenuemanagement

Design price schedules and fences that areclear, logical and fair.

Communicate consumer benefits of revenuemanagement.

Use bundling/packages to hide discounts.

Take care of loyal customers.

Use service recovery to compensate foroverbookings.


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Interview with Frank Croston-Hamilton Partners

Hotel premier inn using dynamic

pricing strategy Push volume during low season

Push price during peak season

Balance between demand and supply

His views- yield management is easy,not complex

Dynamic pricing is a better tool thanbanded pricing

VIDEO

Documents

6 Yield Mgmt