revenue management Powerpoint Presentation

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revenue management

by: aquibdmax

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REVENUE MANAGEMENT

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Demand is influenced by marketing decisions. These decisions are made first and then supply chain manages its operations to meet the demand at lowest cost. Revenue management addresses the benefit of coordinated decision making. DEFINITION Revenue management is defined as the use of differential pricing based on customers segment time of use and product or capacity availability to increase supply chain surplus. Targeted differential pricing is at the heart of successful revenue management.

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Revenue management has an impact on supply chain profitability if any of the following four condition exist:

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TECHNIQUES USED IN REVENUE MANAGEMENT

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1. Revenue Management For Multiple Customer Segments: Most of the situations involve multiple segments of customers, each segment having a different price elasticity with a different market curve. Differential pricing increase total profit of a firm. Two issues must be handled: How can the firm differentiate between the two segments and structure its pricing to make one segment pay more than the other, How can the firm control demand such that the lower paying segments does not utilize the entire availability of the assets.

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Pricing under capacity constraint for multiple segments: Revenue management is also known as yield management. The aim of revenue maximization problem is to maximize yield per unit of capacity. Due to limited capacity , the firm will have to alter prices. Demand? = a?-b? p?

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2. Revenue Management Under Uncertain Demand And Limited Capacity Situations: Demand from the segment paying the lower price arises earlier in time than demand from the segment paying higher price. A provider may charge lower price to a buyer willing to commit in advance and higher price to buyers who place order at the last minute. Since demand is uncertain therefore it is impossible to predict exact capacity to save for the higher price segment. R ?(C ?) = Prob (demand from higher – price segment > C ?) P ? R ?(C ?) is expected marginal revenue, (C ?) is the capacity reserved for higher price segment, P ? is the price charged to the higher price segment.

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3. Revenue Management For Seasonal Demand:

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4. Revenue Management For Inventory:

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