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The phenomena of revenue management gained importance in recent years due to variable and discriminatory pricing
schemes offered by various companies to their customers. Revenue management applies the orderly analytics that predict the
behavior of the consumer at micro level and augment the prices and availability of products to the customers thus enhancing
the overall revenue for the company. The aim of devising revenue management techniques is to deliver the fine product or
service to the appropriate customer at the precise price. Revenue management system is based on analyzing the customer’s
perception of the value that the product would provide and make straight the availability, placement and price according to
that perception.
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7/10/22, 2:07 PM Revenue Management - Meaning, Benefits, Scope and Future - MBA Knowledge Base
This discipline became the need of every business rapidly. There could be many reasons for this. Even a kid whose is out for
selling orange juice will have to analyze and predict the appropriate weather and time for selling his product. When we talk
about giant businesses, the need for assessing customer demand and subsequently managing that demand is enormous and
critical. A revenue management system is answer to the question of such demand.
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1. Pricing strategy: Pricing strategy is related to envisaging the customer’s perceptions about the value of the product and
then setting prices to catch that value. Pricing strategy which a company adopts dictates its objectives i.e. what it wants to
accomplish. Company then chooses pricing tactics that can respond to the customer’s expectations. Customer price
sensitivity analysis, price ratios and price optimizations are example of such tactics. Carefully selected pricing strategy can
increase the total revenue and ultimately profitability of the firm. Therefore, revenue management can redefine pricing
strategy and can build enhanced pricing tactics.
2. Distribution channels: A company can deliver its products with various channels like online or in shops. Different type of
cost and revenue are linked with these channels. Customer of particular nature selects the specific channel for buying the
product for example customers who opt for purchasing online are more price sensitive. Revenue management tools can
help analyzing the channels and deciding appropriate discount offers to distributing and retailing channels then to
consumers without losing the customers’ perception about the value of the product.
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7/10/22, 2:07 PM Revenue Management - Meaning, Benefits, Scope and Future - MBA Knowledge Base
3. Marketing: Revenue management tools can help determine the response rate of customers to a particular level of
promotional activities. By efficiently promoting the products, a firm can increase its revenues and subsequently the
profitability.
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7/10/22, 2:07 PM Revenue Management - Meaning, Benefits, Scope and Future - MBA Knowledge Base
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