The phenomena of revenue management gained importance in recent years due to varying and discriminatory rates schemes offered by various companies to their customers. Revenue management can be applied the orderly analytics that anticipate the patterns of the consumer at micro level and augment the costs and availability of products to the customers thus enhancing the entire revenue for the company. The purpose of devising income management techniques is to provide the fine service or product to the correct customer at the complete price. This system is dependant on examining the customer's belief of the value that the merchandise would provide and make straight the availability, positioning and price corresponding to that notion.
This discipline became the necessity of each business rapidly. There may be many reasons for this. Even a child whose is out for advertising orange juice must analyze and predict the appropriate weather and time for retailing his product. When we talk about massive businesses, the need for examining customer demand and eventually controlling that demand is extensive and critical. A revenue management system is response to the question of such demand.
Information technology has gained immediate importance and advanced itself in all aspects from the invention of first computer ENIAC till present. The cost of installing and conversing through IT established equipment has been reduced incredibly. This remarkable lowering managed to get possible to work with information technology equipment in commercial businesses in addition to government and armed forces. (Forester, 1985). As like other field, it has enjoyed a great role in increasing the procedures of income management. In such a paper, we will study the effects that it has on the revenue management.
This article can be involved with defining revenue management systems and their program. It will also make clear that how well it can meet the consumer demand, how well it can be included with overall distribution channels and what role information technology is playing to enhance the overall improvement of the revenue management systems. We will at the end, try to make some conclusions and suggestions about the development of decision support system of earnings management and how can it be helpful in increasing the future profits of the business.
Brief record of income management
The concept of income management is not not used to the business enterprise world. Every business that is retailing some fragile product must flex the price tag on that commodity due for some uncertain environmental change or response for some competitor's action or customer's demand. Car seats in airplanes, clothes (i. e. for summertime and winter), rooms in hotels etc. , all require income management ways of be sold in a manner that maximize the overall wealth of the company. This field properly originated in US air travel industry in start of 1970s. Bob Crandall of North american Air travel (AA) who put restrictions on marked down fairs. From then on yield management came into practice which is the foundation of revenue management. American Air travel, with the aid of other airlines further prolonged the yield management system by offering low fares to the cost sensitive travellers and expensive fares to enough time sensitive passengers, giving maximum value to both type of travelers. The impact of practicing yield management was come into knowledge by calendar year 1985. American Flight reported about 48 percent profit development. This huge success captivated other industries to build up into the field of yield management (Haley and Inge, 2004).
Purpose and great things about implementing income management
We discussed above that yield management evolved in to the revenue management. As it became the standardized practice for the firms, its definition advanced. Revenue management is thought as the field which is concerned with answering the demand questions related to consumer patterns and system and group of methodologies required to make them. Earnings can be compared with supply string management because it aims at reducing the cost of producing and delivering the products hence increasing the earnings, so as the goal of revenue management. There have to be certain business conditions that are crucial to successfully put into action a revenue management system. These conditions include customer heterogeneity, creation inflexibility, adjustable and uncertain demand, management culture, infrastructure of data and information an so on. (Ryzin, 2005) employing a earnings management system benefits the business by unleashing the hidden demand which can result in great income opportunity, helps understanding the customer's options between price and product characteristics, rises revenue, suggests discount rates on the product when necessary to build up the market show and helps in creating a sales driven business whose sole concentration is earnings maximization. (Mix, 1997)
Jurisdictions of revenue management system
There is large range of options available to increase earnings through a earnings management system.
Pricing strategy: pricing strategy relates to envisaging the customer's perceptions about the value of the product and then setting up prices to catch that value. Prices strategy which a company adopts dictates its targets i. e. what it desires to perform. Company then decides pricing strategies that can respond to the customer's prospects. Customer price sensitivity examination, price ratios and price optimizations are exemplory case of such tactics. Carefully selected charges strategy can boost the total earnings and ultimately profitability of the firm. Therefore, earnings management can redefine charges strategy and can build improved pricing techniques (Nagle and Hogan, 2006)
Distribution channels: a corporation can deliver its products with various channels like online or in shops. Different kind of cost and revenue are associated with these programs. Customer of particular characteristics selects the specific channel for purchasing the product for example customers who decide for purchasing online will be more price sensitive. Revenue management tools can help studying the stations and deciding appropriate discount offers to distributing and retailing stations then to consumers without shedding the customers' understanding about the worthiness of the product (Phillips, 2005).
Marketing: earnings management tools can help determine the response rate of customers to a specific degree of promotional activities. By successfully promoting the merchandise, a company can increase its income and subsequently the profitability (Phillips, 2005).
Process of Managing Revenues
The revenue management process starts with collecting data on inventory, consumer perceptions and manners, product prices etc. The system employed collects and then store the information discussed earlier and uses it to maximize prices and route selection and amount of price promotional activities required. After collection of data, segmentation is done by the machine to categorize consumers in to various teams (Cross, 1997). After segmentation, system forecasts the demand by execution of quantitative evaluation of data like time-series model and cross price elasticity (McGill and Ryzin, 1999). When the forecast stage is completed, revenue management system comes into the position of giving different options to the business about in just how many different ways did it sell its product to what type of customers (Combination, 1997). Optimization provides response to two questions. To begin with it provide guidance to the business about which factor should be optimized like price or sales. Second of all it tells that what optimization technique is pertinent and really should be opted. For instance, regression research for learning relationships between factors, discreet choice models for envisage customer action and linear development techniques for preparing optimum prices to increase the total revenue (Phillips, 2005).
Information technology improvements and Income management
Famous presenter and visitor lecturer of Harvard Business Institution Don Burr regrets that reality he didn't predict real role of technology it can play in successfully implementing a income management system. He confesses that "PeopleExpress" collapsed because it hadn't installed the repository management system for the purpose of collecting and holding information necessary for carrying revenue management operations. He says that my number one preference will be to be sure that my folks have the perfect tools of information technology if I would have to begin an flight. He says that in his view it is the sole factor which pulls the maximum revenues for air travel industry when compared with another factor Combination, 1997).
The tools used to get, store, process and successively talk about information are included in it. As revenue management processes mentioned previously require all these tools to manage information relevant to produce management, it is quite clear that using it can help increasing the RM system a lot (Reynolds, 2010)
From learning the techniques of revenue management we can conclude that revenue management uses Customer Relationship Management (CRM) data, source string management data, marketing and charges data and consumer action data to forecast the future demand and customer replies. Information technology helps to make the info collection procedure faster and effective. It provides easy data access tools with the help of graphical interfaces, provides communication, collaboration and networking technology to acquire data from different systems easily. By using showing feature of marketing information among various systems like CRM, source chain and marketing can be exchanged. RM system can gain access to that information for forecasting goal. Databases management tools like normalization of data, storage space of data, data modeling and categorization objective can be achieved effectively and within virtually no time. Oracle DBMS systems are the best example of databases management software. A firm can develop its own customize DBMS for this function (Lucas, 2001). Software applications have been developed to quantitative forecasting from the info. SPSS and Microsoft Office Excel will be the examples but a firm can develop the application according to its needs. These applications are able to review million of statistical data with in few minutes (Hail, 2011). Information technolgy can even be used for the search engine optimization funtion of earnings management. For example, if the system decides to enhance through linear encoding, Excel solver, Model Frontier, Maple, FortMP, Inverse, CPLEX, FortSP, Mathmetica, NMATH, OptimJ, SNOPT and OpenOpt will be the examples of search engine optimization software (Wikipedia, 2011). Large fims like American Airline uses custom-made and speciall puprose applications. Optimization software can help sovling the second problem of marketing function and they're reilable as well as successful.
Fisrt issue of Search engine optimization fucntion is to choose that which factor should be optimized to get the maximum profitability. Information technolgy helps this fucntion through its productive decision support systems (DSS). For instance, P&G uses its information system for restructuring of the resource chain by firmly taking help from IS how to restructure the chain. Through this it significantly reduded the price and increased respond to customer and market place (Laudon and Laudon, 2007).
Decision support systems provide managers with analytical tools to model a large quantity of the in semi organized decision making environment. Decision support system data source and software is deveopoped to sponsor the data and a sensitivity model is developed to repeatedly analyzy data on "what-If" question. Get spread around sheet pivot furniture are also used sometimes to improve the decision making process (Laudon and Laudon, 2007). Performance of decision support system depends on the amount of information. To conclude, we can say that, it boosts the revenue management procedures by reducing enough time of collecting and analyzing the info, reduces the processing cost by moderating the need for physical elements like complexes and kiosks e. g. in flight online ticket advertising, increases level of business by causing the business enterprise more reachable to customers e. g. online booking on airline industry, enhances service and product quality through providing trustworthy service and reduces risk of loss by suggesting appropriate promotional and prices strategies e. g. flight industry will offer low fares in down season and high fares when business going and tourism rate is high (Kimes, 2008).
Future and obstacles in Revenue management
Implementing revenue management in an corporation is not a fairly easy task. There can be a lot of hurdles like ethnical, organizational and reliabilty issues in information systems already developed like supply chain, customer marriage and intelligence. More recently, revenue management is moving towards more ASP ( Program service provider) plateforms. In future, revenue managemet will be centered on subscription and renting through ASPs alternatively than developing program systems inside the organization. Future problems of RM can be its location inside the organization i. e. whether in marketing or funding department or the organization or may be it will be needing a complete new department to handle its activities.
We cannot deny the importance of technology in establishing a earnings management system. Technological innovation makes a firm near to success in obtaining higher profitability. But a competent earnings management system requires more than just technological innovation, it needs collaboration between the processes and folks of the organization (Greenwalt, 2004). Price concentration is dominant in traditional RM applications but we expect enlargement of non traditional applications (Economist, 2000). Further evidence of expansion can be viewed in acquisation of Talus by Manugistics (a resource chain solution supplier), (Manugistics, 2000).
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