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Price changes in Washington, DC
ParkDC initiative to regulate parking assets. (District Department of Transportation - Washington, DC )

A collection of Revenue Management practices

Many services combine the three elements described in the previous step: a service has to be consumed at a particular moment, there are often capacity limits and the provider of the service may be identified as unique.

Many people are loyal to their hairdresser, for example, and do not want to try just any hairdresser. This may be because their hairdresser knows what suits their customers, or the customers may be afraid that a new hairdresser will cut their hair in the wrong way.
Some customers may be ready to pay more to have their hair cut at a time when demand is high rather than to switch to a different hairdresser or to a different time. In other words, if hairdressers identify periods of peak demand, they might be able to do revenue management.

The typical sectors where you will traditionally find revenue management are the transport sectors and the hospitality sectors (e.g. airlines, trains, buses, car rentals, hotels, campings, apartment rental).

There are other sectors of the ‘traditional economy where revenue management could be applied but that are not quite as advanced in these practices, for example, restaurants or the entertainment industry (cinemas/theatres/amusement parks/theme parks/animal parks).
A cinema, for example, shares exactly the same features as an airline: limited space for different shows that are more or less in demand at any given time, by different categories of customers. Add to this the limited competition on the market, and you wonder: why haven’t they done it yet?

A collection of examples all over the world

Newer sectors, including the so-called “digital economy”, are also using clever pricing schemes directly inspired by revenue management methods. Here are some examples of what is already being done:

  • AirBnB has a guideline for pricing that uses the seasonality of demand, but could also use the remaining stock of housing in a city to adjust prices for a specific date.

  • Uber has been heavily criticised for its demand-based pricing model, where periods of high demand are subject to increased ‘surge pricing’. But Uber also proposes low prices in periods of low demand .

  • Universal Studios raised ticket prices just before opening a new Harry Potter attraction.

  • Mobile app developers facing the problem of pricing their products, change the price of some features of their apps or games (e.g. items, super-powers, hints, extended versions) according to the willingness-to-pay, or willingness-to-‘play’ of their customers.

  • The concert industry is also keen to use ‘dynamic ticketing’ for some events in very high demand .

You will also find some other interesting, although more anecdotal, examples all over the world:

  • A golf club adjusting its prices according to the temperature (e.g. more expensive in the morning, cheaper in the afternoon).

  • Demand-based parking has also been implemented in some cities. The goal in this case is to use the pricing strategy to keep cars away from very busy areas.

  • A restaurant designs the deals it wishes to offer, including the minimum and maximum prices and the times at which the offer is valid.

  • The Chicago Cubs baseball team uses demand-based pricing.

  • Some casinos in Las Vegas use revenue management to adjust their betting levels at the tables to maximise their profit.

  • The Boston Ballet turned to dynamic pricing to encourage ticket-buying behavior that is beneficial to the arts organisation and to its customers.

  • An Indian petrol retailer launched dynamic fuel pricing in a deregulated market.

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This article is from the free online course:

Manage Your Prices: an Introduction to Pricing Strategy and Revenue Management

École Nationale de l'Aviation Civile

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