Help with questions 1-5 please! 1. What are the key risks that an RM (revenue ma

Question

Help with questions 1-5 please!

1. What are the key risks that an RM (revenue management) approach attempts to manage, and which ones it does not?

2. Under what type of demand conditions is RM most effective? How do you expect demand variability to affect RM practice and results?

3. How does the difference in prices affect RM effectiveness? Consider implications on (1) segmentation strategies, and (2) industries that would most benefit from RM.

4. Think of other applications of thsi simple RM framework. Describe why it is applicable and how you would segment the market. How can you estimate the impact on profits?

5. Suggest several directions for improving this simple model to better account for the complex reality for the business (airline or other). What new information/data would be necessary?

Explanation / Answer

1.Key risk that the revenue management attempts to manage are:

Risk that revenue management cannot manage are:

2. Demand conditions in which RM is most effective are

Demand variability can affect the RM practice and results as revenue management entirely depends on demand assumption before devising the strategy of Optimisation. Hence any change in demand will require a modified strategy for revenue management.

3. Difference in prices effects RM effectiveness because of various perception of the prices. For example higher price reflects quality and the target market shift to category with better lifestyle where is lower prices would attract the customers who are willing to save a penny and compromise with quality of service. Industries that would most benefit from revenue management strategy are hospitality industry and airlines. Service provided for different class of people is different and prices are decided accordingly in both the industry.

4. Other applications of revenue management could be in education industry where additional material and better quality of notes could be provided for additional cost which would help in generating more revenue from the existing customer base. Impact on Profit can be estimated by the forecast of demand for the product. Market can be segmented based on high income group and low income group. Higher income group would tend to invest more in education as compared to lower income group who may not be able to afford better quality education.

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