Misnaming Yield means compromising optimization

Et si la définition la plus répandue du Revenue Management, bien que simpliste, était à l’origine de mauvaises pratiques, constituant ainsi l’un des freins majeurs à la mise en place de stratégies RM efficaces ?

En effet, le Revenue Management ne se résume pas à sa définition la plus répandue « vendre au bon client, au bon moment et au bon prix », et on vous dit pourquoi !

What if the most common definition of Revenue Management, though simplistic, was actually at the root of poor practices, thus becoming one of the major obstacles to implementing effective RM strategies?

Indeed, Revenue Management is not limited to the widely used definition of “selling to the right customer, at the right time, and at the right price” and here’s why!

Barriers to effective adoption of revenue management

We observe daily that organizations eligible for revenue management (hotels, campsites, parks, stadiums, cruise lines, etc.) struggling to embark on the virtuous path of revenue management fall into two categories:

The first group consists of organizations that don’t want to upset their long-standing customers and feel uneasy about this “definition” of yield management: “No, my customers are above all human beings, we know them, I don’t want to discriminate against them—they wouldn’t understand my new strategy.”

This mindset directly stems from legitimate concerns caused by the definition of yield management, which is accurate but overly simplistic.

We reassure them: the customer is never the target. What yield management targets is their purchasing behavior. A “good customer” is not just a repeat customer; above all, it’s the customer who provides you with visibility, a buffer, or volume during the low season.

It is therefore their behavior that should be protected; if their behavior changes, they may no longer be a “good customer.”

The second group consists of organizations that have taken the plunge but have not approached the subject correctly and will not achieve the expected results.

Generally, due to a lack of methodology, they mix CRM, RM, distribution (and now AI and Big Data) in strategies and tactics that are ineffective in RM, CRM, and distribution alike.

Redefining Revenue Management for greater effectiveness

No, revenue management is not about choosing the customer as a customer.

The action of RM is not a customer choice, but a choice of restrictions, i.e., steering actions (pricing, duration, origin, sales conditions, etc.), stemming from strategic then tactical decisions that constrain or free the offer.

These actions ultimately lead the same customer to a more or less constrained and directed purchasing decision.

And if such a customer does not come, it means their purchasing behavior is not profitable from a micro or macro perspective for the hotel, campsite, or cruise line.

Profitability is what the Revenue Manager must estimate using good segmentation, with appropriate forecasting methods or benchmarks.

At Revbell, we therefore prefer a definition that is less ambiguous, less theoretical, but more operational: Revenue Management means implementing a set of practices aimed at forecasting (demand) and optimizing (using actionable levers).