What is Yield Management?

Yield management is variable price management. It is a tactic used to optimize the turnover of fixed perishable inventory.

Basically, yield management ensures that the right price is available for the right customer at the right time. In other words; There are different prices for the same product depending on customer needs and moment in time. Prices also depend on external factors that influence demand.

In industries with a fixed and perishable stock, customers are increasingly accustomed and therefore willing to pay more if the supply meets specific wishes and circumstances (e.g. availability of specific locations, weather conditions, seasons, etc.)

The relevance of segmentation:

An important starting point is customer segmentation. Segmented customer groups have specific needs that are important to them. These specific needs can be translated into criteria.

Based on the criteria, price and product rules can be established that create scarcity in the supply, even if it actually does not exist. Price and product rules form the basis for variable prices in yield management. For example, a traveler who books his flight ‘last minute’ rarely gets the cheapest rates, because there is a great desire or even necessity to travel.

When does Yield Management take place?

Yield management is an activity that takes place continuously during the period that the stock in question is for sale. This is because the supply and demand curves are constantly influenced by a variety of external factors.

There is a plethora of external factors. Depending on the industry in question, these include:

  • Weather conditions
  • Competition
  • Seasonal influences
  • Economic situation
  • Events

It is important to keep track of the most important factors for business operations. Then yield management can be better practiced.

Would you like to learn more?

If you want to know more about revenue management, readthis blog. If you want to learn more about dynamic price optimization, you can find it here. Let us know if you would like to have personal contact