Outcome management is a variable pricing strategy, based on understanding, anticipation and influencing consumer behavior to maximize revenues or profits from fixed, time-limited resources (such as airline seats or hotel reservation or inventory ads). As a revenue management branch that specifically focuses on inventory, results management involves the control of strategic inventory to sell the right product to the right customer at the right time for the right price. This process can lead to price discrimination, where customers who consume the same goods or services are subject to different prices. Result management is a large revenue generator for some major industries; Robert Crandall, former Chairman and CEO of American Airlines, named the results management and called it "the most important technical development in transportation management since we entered deregulation."
Video Yield management
Definisi
Outcome management has been part of major business theories and practices for the past fifteen to twenty years. Whether an emerging discipline or new management science (called both), results management is a set of strategies and tactics to maximize results to improve the profitability of a particular business. This is complicated because it involves several aspects of management control, including level management, revenue stream management, and distribution channel management. The results management is multidisciplinary because it combines elements of marketing, operations, and financial management into a highly successful new approach. The results management strategy specialist must often work with one or more other departments when designing and implementing the results management strategy.
Maps Yield management
History
Deregulation is generally regarded as a catalyst for results management in the aviation industry, but this tends to ignore the role of Global Distribution Systems (GDSs). It is arguable that the pricing paradigm still occurs as a result of decentralized consumption. With mass production, pricing becomes a centralized management activity and customer contact staff focusing exclusively on customer service. Electronic commerce, where GDS is the first wave, creates an environment where large volumes of sales can be managed without a large number of customer service staff. They also provide management staff with direct access to pricing at the time of consumption and rich data retrieval for future decision making.
On January 17, 1985, American Airlines launched the Ultimate Super Saver tariff in an effort to compete with the low-cost airline People Express Airlines. Donald Burr, CEO of People Express, was quoted as saying "We are a vibrant and profitable company from 1981 to 1985, and then we earn $ 50 million a month... We have benefited from the day we started until America came to us with Ultimate Super Savers. "In the book Income Management by Robert G. Cross, Chairman and CEO of Revenue Analytics. The results management system developed on American Airlines was recognized by the INFORMS Edelman Prize committee to contribute $ 1.4 billion in a three-year period in the airline.
Management of crops spread to travel and other transport companies in the early 1990s. Notable is the implementation of results management at National Car Rental. In 1993, General Motors was forced to take a $ 744 million fee against profits associated with its ownership of the National Car Rental. In response, the National program expanded the definition of results management to include capacity management, pricing and order control. As a result of this program, General Motors is able to sell National Car Rental with approximately $ 1.2 billion. Results management gives way to more common revenue management practices. While revenue management involves predicting consumer behavior by segmenting the market, forecasting demand, and optimizing prices for different types of products, yield management refers specifically to maximizing revenue through inventory control. Some well-known revenue management implementations include NBC, which credited its system with $ 200 million in increasing ad sales from 1996 to 2000, target pricing initiatives at UPS, and revenue management at Texas Children's Hospital. Since 2000, many dynamic pricing, promotional management, and dynamic packaging that underlie e-commerce sites utilize revenue management techniques. In 2002 GMAC launched an initial implementation of web-based revenue management in the financial services industry.
There are also high profile failures and carelessness. Amazon.com was criticized for irrational price changes caused by the bug of revenue management software. The Coca-Cola Company plan for dynamic price vending machines is suspended as a result of negative consumer reactions. Revenue management is also blamed for most financial difficulties that are currently experienced by legacy operators. The high dependence of high-cost operators in the captive markets can virtually create conditions for low-cost carriers to flourish.
Used by industry
There are three important conditions for results management that will apply:
- That there are a number of resources available for sale.
- That the resources sold are not durable (there is a time limit for selling resources, after which they stop being valuable).
- The different customer is willing to pay a different price because it uses the same amount of resources.
If the available resources are not fixed or not durable, the problem is limited to logistics, ie inventory or production management. If all customers will pay the same price for using the same amount of resources, the challenge may be limited to sales as quickly as possible, e.g. if there is a charge for storing inventory.
Outcome management is particularly relevant especially in cases where the constant cost is relatively high compared to variable costs. The less variable costs, the more additional revenue earned will contribute to the overall profit. This is because the focus is to maximize the expected marginal revenue for certain horizon operations and planning. It optimizes the utilization of resources by ensuring the availability of inventories to customers with the highest estimated net income contribution and extracting the largest level of 'willingness to pay' from across the customer base. The results management practitioner usually claims 3% to 7% increase in additional revenue. In many industries, this can equalize more than 100% in earnings.
The management of the crop has significantly changed the travel and hospitality industry since it was founded in the mid-1980s. It takes analysts with detailed market knowledge and advanced computing systems that employ advanced math techniques to analyze market behavior and capture revenue opportunities. It has evolved from airline systems created in response to deregulation and quickly spread to hotels, car rental companies, shipping lines, media, telecommunications and energy to name a few. Its effectiveness in generating additional revenue from existing operations and customer base has made it very attractive for business leaders who prefer to make a profit from revenue growth and increase capabilities rather than streamlining and cutting costs.
Airlines
In the case of a passenger airline, capacity is considered fixed because changing what aircraft fly with a particular service on request is an exception rather than a rule. When the plane leaves, the unsold seats can not generate income and thus can be said to have died, or been damaged. Airlines use special software to monitor how seats are reserved and react accordingly. There are various inventory controls such as a multilevel inventory system. For example, airlines may offer discounts for flights with low demand, where aviation is unlikely to be sold out. When there is excess demand, seats can be sold at a higher price.
Another way to capture the various willingness to pay is market segmentation. An enterprise can repackage its base inventory into different products for this purpose. In the case of a passenger carrier, this means applying the purchase limit, the length of stay and the cost to change or cancel the ticket.
The airline must retain the number of reserved seats in reserves to meet the possible demand for seats with high tariffs. This process can be managed by inventory controls or by managing tariff rules such as AP (Advanced Purchase) restrictions. (Purchases 30 days in advance, purchase 21 days in advance, purchase 14 days in advance, purchase 7 days in advance, day of departure/travel expenses) The price of each seat varies directly with the number of seats booked, ie, the fewer seats reserved for the category certain, the lower the price of each seat. This will continue until the price of seats in the premium class is equal to the price in the concession class. Depending on this, the lowest price (lower price) for the next seat to be sold is set.
Hotel
The hotel uses this system in a similar way, to calculate rates, rooms and sales restrictions to maximize its return. This system measures unlimited and unlimited requests and speeds to measure which limits should be applied, e.g. length of stay, non refundable rate, or near arrival. The results management team in the hotel industry has grown tremendously over the last 10 years and in this global economy targeting the right distribution channels, controlling costs, and having the right market mix plays a key role in yield management. The result management at the hotel sells rooms and services at the right price, at the right time, to the right people.
Rental
In the rental car industry, yield management deals with the sale of optional insurance, lightening damage and increased vehicle. This accounts for most of the profitability of rental companies, and is monitored on a daily basis. In the equipment rental industry, yield management is a method for managing rental rates against capacity (available fleets) and demand.
Intercity bus
The result management has moved to the bus industry with companies like Megabus (Megabus), Megabus (North America), BoltBus, and easyBus, which run low-cost networks in the United Kingdom and parts of the United States, and more recently, nakedbus.com and Intercape , which has networks in New Zealand and South Africa. It is now operated and developed in Chile by SARCAN, a Chilean company that provides revenue-management and revenue-focused systems, with the Turbus company as a key customer. Finland's cheap intercity bus service, OnniBus, and Polish Polish, based their revenue stream on yield management.
Housing multifamily
In the multi-family housing industry, the optimization of the results is focused on the production of supply estimates and demand to determine rental recommendations for optimization of earnings. However, the use of yield optimization systems was quite new to the industry in the late 1990s, with Archstone Smith pioneering its use. The multifamily industry currently has two outcome management system providers, RRO Rental Income Management Systems (Rent Rent) from Rainmaker, and YieldStar Asset Optimization Systems from RealPage. There are new providers who have entered the market and provide additional capabilities in a much simpler workflow. The chief among the new vendors is the International Property Solutions with PricingPortal products.
Insurance
Insurance companies use price optimization (premium) to increase profitability on policy sales. This method is widely used by properties & amp; accident insurance and brokers in the UK, Spain and, to a lesser extent, in the US. Some vendors, such as Earnix, EMB, ODG, provide industry-specific price optimization software.
Telecommunications
On average, Communications service providers use an average of only 35 to 40 percent of available network capacity. Recently, telecom software vendors such as Telcordia and Ericsson have promoted results management as a strategy for communication service providers to generate additional revenue and reduce capital spending by maximizing customer use of available network bandwidth. The approach includes basing strategies on innovative services that are explicitly designed to use only the reserve capacity and borrow a proven method from the aviation industry. This approach can be more difficult to implement in the telecommunications industry than the aviation sector because it is difficult to control and sometimes deny network access to customers. The similarities between airlines and the telecommunications industry include large scorch costs combined with low marginal costs, perishable inventory, ordering, price flexibility and an opportunity to increase sales. Differences that present challenges for communication service providers include low value transactions and overall network complexity. Suggested approaches to implementing successful results management strategies include accurate network information collection, bandwidth capacity allocation that does not affect service quality, deployment of service management software such as real-time policy and real-time filling, and using new marketing channels to target consumers with service innovative.
Online advertising
The management of results in online advertising sales is essentially the same as in other industries mentioned above; manage publisher inventory/inventory (banner impressions) with market demand, at the best price (CPM/RPM) while ensuring the highest fill rate.
Train
While trains traditionally sell fully flexible tickets that apply across all trains on certain days or even rail for a few days, deregulation and (partial) privatization introduce results management in the UK as well as for high-speed services in Germany or France. Tickets for the same route can be as cheap as 19EUR but also go into three digits depending on the time of departure, request, and time of ticket booked.
Ski
Results management has shown an increasing popularity in the ski industry, especially in the North American market. These range from non-physical level fences, including age and differentiation of validity to fully dynamic pricing. The determinants of the variable pricing include specific demand factors by date (official and public holidays, weekends, weather, resort size and accessibility, etc.)
Pet Boarding
With predictable demand far exceeding the number of fixed supplies in the professional pet boarding industry, Yield Management has become a popular practice for this business segment. Just like the Hotel Industry, this system helps measure which limits to apply, e.g. length of stay, non-refundable rate, or approaching arrival, while also ensuring they sell rooms and services at the right price, to the right people, at the right time.
Econometrics
Result management and econometric centers for detailed forecasting and mathematical optimization of marginal revenue opportunities. Opportunities arise from the segmentation of the consumer's willingness to pay. If the market for a particular item follows a simple straight line The price/demand relationship described below, a single fixed price of $ 50 there is sufficient demand to sell 50 units of inventory. This generates $ 2500 in revenue. However the same Price/Demand relationship earns $ 4000 if the consumer is presented with multiple prices.
In practice, the segmentation approach relies on a sufficient fence between consumers so that everyone does not buy the lowest price offered. The airline uses the time of purchase to make this segmentation, with the customer booking then paying a higher rate. The fashion industry uses time in the opposite direction, discounting later in the sales season once the item is out of fashion or incorrect for the whole year. Another approach to fencing involves attributes that create substantial value for consumers with little or no cost to the seller. A backstage pass at the concert is a great example for this. Initially result management avoids the complexity caused by absolute price interaction and price position by using price replacements such as order class. In the mid-1990s, most implementations included some measure of price elasticity. The airlines are exceptional in this regard, preferring to focus on more detailed segmentation by implementing an O & amp; D (Origin & Destination).
At the heart of the results management decision-making process is a trade-off of marginal outcomes from competing segments for the same inventory. In the case of limited capacity, there is a bird-in-the-hand decision that forces sellers to refuse customers to generate lower revenues in the hope that inventory can be sold in higher-value segments. Tradeoffs are sometimes mistakenly identified as occurring at the crossroads of marginal revenue curves for competing segments. While this is accurate when it supports marketing decisions where access to both segments is equivalent, it is wrong for inventory control decisions. In this case, the intersection of the marginal revenue curve of the higher value segment with the actual value of the lower segment is the point of interest.
In the case illustrated here, the car rental company should set the protection level for the higher-value segment. By estimating where the marginal revenue curve of the luxury segment across the real lease value of the midsize car segment the company can decide how many luxury cars are available for the midsize car tenants. Where the vertical line from this intersection point cuts the demand (horizontal) axis determines how many luxury cars should be protected for the original luxury car tenant. The need to calculate the degree of protection has led to a number of the most prominent EMSRa and EMSRb solutions, which stands for Expected Marginal Seat Revenue versions a and b respectively. The flower balance point was found using the Littlewood rule which states that the request for should be accepted for
2 1 1
di mana
adalah nilai segmen bernilai lebih rendah
adalah nilai dari segmen bernilai lebih tinggi
adalah permintaan untuk segmen bernilai lebih tinggi dan
adalah kapasitas yang tersisa
This equation is reset to calculate the level of protection as follows:
1 -1 2 1
Dalam kata-kata, Anda ingin melindungi 1 unit inventaris untuk segmen bernilai lebih tinggi di mana 1 sama dengan probabilitas kebalikan dari permintaan rasio pendapatan dari segmen bernilai lebih rendah ke segmen bernilai lebih tinggi. Persamaan ini mendefinisikan algoritma EMSRa yang menangani kasus dua segmen. EMSRb lebih pintar dan menangani beberapa segmen dengan membandingkan pendapatan segmen bawah dengan rata-rata tertimbang permintaan dari pendapatan segmen yang lebih tinggi. Tak satu pun dari heuristik ini menghasilkan jawaban yang tepat dan semakin banyak penerapan memanfaatkan simulasi Monte Carlo untuk menemukan tingkat perlindungan yang optimal.
Since the mid-1990s an increasingly sophisticated mathematical model has been developed such as the formulation of dynamic programs pioneered by Talluri and Van Ryzin that have led to more accurate estimates of offer prices. The offer price represents the minimum price the seller should receive for a single inventory and is a popular control mechanism for the Car Hire and Hotel company. Models derived from developments in financial engineering are very interesting but unstable and difficult to place parameters in practice. Results management tends to focus on a less rational environment than financial markets.
Results management system
Companies involved in yield management typically use computer-generated management systems to do so. The Internet has greatly facilitated this process.
Companies that use results management regularly review transactions for goods or services already provided and for goods or services to be provided in the future. They can also review information (including statistics) about events (known future events such as vacations, or unexpected past events such as terrorist attacks), competitive information (including prices), seasonal patterns, and other related factors affecting sales. The model seeks to estimate total demand for all products/services they provide, based on market segments and price points. Since the total demand usually exceeds what a particular company can produce in that period, the model tries to optimize the company's output to maximize revenue.
Optimization seeks to answer the question: "Given our operational constraints, what is the best mix of products and/or services for us to produce and sell in that period, and at what price, to generate the highest expected revenue?"
Optimization can help companies adjust prices and allocate capacity among market segments to maximize expected revenue. This can be done at various levels of detail:
- based on the goods (such as a seat in a flight or seating in an opera production)
- by a bunch of stuff (like the entire opera house or all seats in flight)
- by market (such as sales from Seattle and Minneapolis for flights to Seattle-Minneapolis-Boston)
- as a whole (across all airline routes, or all seats during the opera production season)
Outcome management is perfect when selling perishable products, ie items that can not be sold at any point of time (for example a plane ticket just after the flight takes off). Industries that use result management include airlines, hotels, stadiums and other places with fixed seats, and advertising. With previous estimates of demand and price flexibility, buyers will sort themselves out based on their price sensitivity (use more power outside peak hours or go to the mid-week theater), their demand sensitivity (should have higher costs in the morning of flight or need to go to Saturday night opera) or their purchase time (usually paying a premium for late booking).
In this way, the overall goal of yield management is to provide the optimal mix of goods at different price points at different time points or for different features. The system will try to maintain a balanced distribution of purchases over time as well as high.
Good yield management maximizes (or at least significantly increases) revenue production for the same number of units, taking advantage of high demand forecasts/low demand periods, effectively shifting demand from high demand periods to low demand periods and by charging premiums for bookings late. While yield management systems tend to generate higher revenues, revenue streams tend to arrive later on the order horizon because more capacity is held for final sales at a premium price.
Companies faced with a lack of price strength sometimes change to produce management as a last resort. After a year or two using results management, many of them were surprised to learn that they had actually lowered prices for most opera seats or hotel rooms or other products. That is, they offer much higher discounts more often for off-peak hours, while raising prices just a little for busy times, resulting in higher overall revenue.
By doing this, they have actually increased the quantity demanded by selectively incorporating more price points, as they learn about and react to the diversity of interests and buy their customer drivers.
Ethical issues and questions about efficacy
Some consumers are concerned that yield management can punish them for conditions that can not be helped and unethical to punish. For example, formulas, algorithms, and neural networks that determine the price of a plane ticket can consider frequent flyer information, which includes a wealth of socio-economic information such as age and home address. Airlines can then charge higher prices to consumers who are between a certain age or who live in an environment with a higher average wealth, even if the neighborhood is also poor. Very few (if any) airlines that use yield management can use this price discrimination level because prices are not set based on buyer characteristics, which in any case is often unknown at the time of purchase.
Some consumers may object that it is impossible for them to boycott the results management when buying some goods, such as airfare.
Results Management also includes many uncontroversial and more general practices, such as various prices over time to reflect demand. This level of results management forms the majority of results management in the aviation industry. For example, airlines can set ticket prices on Sundays after Thanksgiving at a higher rate than Sunday a week later. Or, they can make tickets more expensive when purchased at the last minute than when buying six months in advance. The objective of the results management level is basically to try to force demand to equal or exceed supply.
When results management was introduced in the early 1990s, particularly in the aviation industry, many suggested that despite a clear, direct increase in revenues, it may undermine customer satisfaction and loyalty, disrupt relationship marketing, and encourage customers from companies that use yield management for no. The frequent flier program was developed in response to regain customer loyalty and reward frequent and high-return passengers. Currently, yield management is almost universal in many industries, including airlines.
Although optimizing revenue in theory, the introduction of results management does not necessarily achieve this in practice because of corporate image problems. In 2002, Deutsche Bahn, the German national railway company, experimented with yield management for frequent loyalty card passengers. The existing fixed pricing models for decades have been replaced by more demand-responsive pricing models, but these reforms have proved very unpopular with passengers, leading to widespread protests and decreased passenger numbers.
Experimental study of yield management results
Recently, people working in the field of behavioral research studies have begun to study the management decision of the results of the actual human decision makers. One question discussed in this study is how much revenue can increase if managers rely on a results management system rather than their own judgment when making pricing decisions. Using methods from experimental economics, this work has revealed that the results management system tends to increase revenue significantly. Furthermore, this study reveals that "errors" in yield management decisions tend to be quite systematic. For example, Bearden, Murphy, and Rapoport indicate that with regard to the policy of maximizing expected revenues, people tend to overestimate prices when they have high inventory levels and are too low when their inventory levels are low.
See also
- Geo (marketing)
- Variable price
- Price discrimination
- algorithm pricing
- Last minute ads
- Institute of Operations Research and Management Science
- Behavioral Operations Research
- Lack of revenue
- Revenue management
References
- Mauri, Aurelio G. (2007), "Outcome management and fairness perception in hotel business", International Economic Review , ISSN 1865-1704, Vol. 54, N. 2, p. 284-293.
- Mauri, Aurelio G., Hotel Income Management: Principles and Practice , Pearson, Milan, 2012. ISBNÃ, 978-88-6518-146-1
- ^ Khakifirooz, Marzieh; Chien, Chen Fu; Chen, Ying Jen (2017). "Bayesian inference for large semiconductor data mining manufacturing for improved yields and smart production to empower industry 4.0". Applied Soft Computing .
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