Name your price: The power of analytics
A new generation of pricing and revenue management practices can lead to meaningful results quickly.
In the travel industry, pricing has always been a tough job. Overprice an airline seat, hotel room, cruise cabin, or rental car today, and you won’t get a second chance to move that unsold unit tomorrow. Set the price too low, and you destroy value by selling out limited inventory too soon. No wonder, then, that the industry boasts some of the most sophisticated pricing capabilities anywhere. But in the era of analytics, those capabilities are looking increasingly outdated and inadequate. To meet the demands of large data sets and respond rapidly to fluctuations, targeted automation is a must have. Blame the Internet. An explosion of new sales channels, with price-comparison sites such as Expedia and Kayak, has ratcheted up competition and ever more frequent price changes. Digital technology and social media have also greatly raised the scope for one-to-one marketing — and made it possible to track the behaviors of millions of individual customers. As a result, pricing managers are faced with an overwhelming amount of information stored in a variety of places. For example, one travel company we know has three terabytes of pricing data in eight systems — including inventory data, current booking levels, historic demand patterns, and competitor information across thousands of categories. How can companies make sense of all this data — and use it to drive value? The answer lies in a new generation of pricing and revenue management practices that can yield meaningful results quickly. These have helped travel companies improve revenue per unit by 3-8 percent, and market share by 1-2 percentage points. But it is not just a matter of a software tool or a single new analysis. It requires a sharp prioritization, iterative building of tools, and hands-on engagement of many functions across the organization. (more…)