Crash Course on Everything About Pricing Revenue Management

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Crash Course on Everything Pricing Revenue Management

Trading in a fast-paced digital world, it’s basically a given that you’d come across some terms you’re not 100% familiar with, which can, in turn, have a negative impact on your business. Luckily, we’re here to give you a crash course on one of the more convoluted aspects of selling products and services online – pricing and revenue management.

Buckle up, and let’s dive in!

What is pricing and revenue management?

In so many words, setting prices and implementing revenue management involves using data to forecast demand for your product and maximize your profits. Originating from the airline industry, the concept of pricing and revenue management has since evolved to cover a wide range of organizations from various spheres, all of whom are adopting a qualitative strategy to increase their sales.

With the help of web analytics, revenue management looks at consumer behavior trends and historic conversions, transforming the information into a reliable forecast for upcoming spikes in demand. Backed by this data, businesses can tailor their prices and customer experience accordingly to optimize profit.

At the core of successful pricing and revenue management lies an in-depth understanding of your target audience. Using historic data, companies can analyze how their customers think and what their drivers are for purchasing a specific product or service.

Once you have this knowledge, it’s all about matching consumer demand to your capacity, as well as adjusting prices based on time and audiences. Do this right, and you’ll be well on your way to increasing your overall profits.

Who needs pricing and revenue management?

Revenue management is most effective for companies whose products or services are suitable for price fluctuations. Consider, for instance, businesses whose offering is tailored to specific times of the year. These companies would benefit the most from setting prices and implementing revenue management.

Wholesalers, drop-ship management, and food distributors, for instance, will often adjust their rates around big holidays such as Christmas and Easter, in anticipation of a spike in demand from independent retailers and venues.

Setting prices and implementing revenue management is also a popular approach amongst big tech retailers which deal in goods that can quickly go out of fashion if left unsold. The purchasing habits of different audience groups can also influence pricing and revenue management. Tech buffs, for instance, will be willing to part with more cash for a state-of-the-art gadget than casual users, so the demand for your product will vary depending on the segment you’re targeting.

The other type of industries which heavily benefit from revenue management are the businesses whose offering doesn’t roll over to the following day. Think waste management, for example, where time not used today cannot be sold tomorrow. The offering of such companies, quite simply, has an expiration date.

How to optimize pricing and revenue management

As we demonstrated above, what approach you choose for your pricing and revenue management depends largely on the products you sell and your overall business strategy. Ideally, you’d aim to increase sales by striking a balance between bumped-up prices when demand is high, and discounts during quiet months.

You can achieve that through static or dynamic pricing and revenue management approach. In other words, you can choose whether the price points for your products are adjusted based on performance (static) or historic data (dynamic).


Learn more about the benefits of pricing and revenue management by downloading our pricing strategies checklist. Then, chat with us to develop your revenue management strategy.

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