Revenue Management: Price Optimisation Essay

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Concept of revenue management

The concept of revenue management is essential in balancing the dynamics marketing management in a service industry (Lovelock & Wirtz 2011). This paper discusses the concept of revenue management by price optimisation at the Midland Mainline, which is an intercity train company located in Sheffield, London. As the Marketing planning manager, I implemented several revenue management strategies which are discussed in the paper. Besides, the paper will present a comparative analysis of the revenue management strategies that the Midland Mainline and the InterContinental Hotels Group apply in their service businesses.

Revenue management application

The article, Retail Price Optimisation at InterContinental Hotels Group, by Dev Kouskik, Jon Higbie and Craig Eister discusses price optimisation part of successful revenue management within the hotel service industry. Among the main concepts applied include strategic pricing, price elasticity, and monitoring competitor rates. The article is very relevant in understanding the marketing dynamics within the competitive hotel service industry.

For instance, in order to optimise prices, the InterContinental Hotels Group opted to manage their revenue through the IT system that tracks hotel reservation, capacity utilization, categories of customers, price elasticity, and cheque size expansion. As indicated in the article, this strategy increased the performance of the hotel by 26%. This translated in revenue growth by $145 million in a year (Kouskik, Higbie, & Eister 2012).

In relation to the Midland Mainline service business environment, price optimisation strategy adopted more or less similar approach. For instance, the 4-Sight small group fare was effective in maximizing capacity utilization. Through the 4-Sight strategy, the train company was able to be more competitive than the option of using a private car to travel. In fact, within just four weeks of implementation, the train company was able to sell 70% of the tickets (East Midland, 2014). Many new customers were convinced by this strategy to try the privatised railway travel. This translated to an incremental in revenues (Lovelock & Wirtz 2011).

As indicated in the article, the InterContinental Hotels Group has been proactive in improving its supplementary services. For instance, the company offers free laundry, pick and drop to group customers, free guide, and free information on various services that a customer staying in the hotel may be interested in. As a result of the improved supplementary services, the InterContinental Hotels Group has been able to expand its operations and build a brand of meeting customer expectations.

The concept of improvement of the supplementary services was also applied at the Midland Mainline Train Company as part of price optimisation in revenue management. For instance, the train company introduced free onboard services such as tea and coffee, Kids Activity Packs, and money-off vouchers for London attractions (East Midland 2014). These supplementary services were important in improving the competitiveness of the company in the London train services business environment.

The price optimisation strategy adopted by the InterContinental Hotels Group is based on a customised model which rates the elasticity of prices, occupancy, and annual calendar. Basically, the festive period attract higher fees that the non festive season. The same concept is applied at the Midland Mainline where charges are based on the number of customers, frequency of travel, and the period of travel. The strategy has been effective in optimising capacity and annual revenues (Lovelock & Wirtz 2011).

Underlying benefits

From the above comparative analysis, the benefits of price optimisation include increment in revenues, competitive advantage, and capacity to deliver reliable and affordable services (Frow, Ngo, & Payne 2014). Basically, revenue management balances the supply-demand variables of management in a service business environment.

Reference List

East Midland 2014, Information, Web.

Frow, F, Ngo, V, & Payne, A, 2014, “Diagnosing the supplementary services model: Empirical validation, advancement and implementation.” Journal of Marketing Management, vol. 30, no. 2, pp. 138-171.

Kouskik, D, Higbie, J, & Eister, C 2012, “Retail Price Optimisation at InterContinental Hotels Group.” Interfaces, vol. 42, no. 1, pp. 45-57.

Lovelock, H, & Wirtz, J, 2011, Services marketing: People, technology, strategy, Upper Saddle River, NJ: Pearson Prentice-Hill.

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IvyPanda. (2020, June 28). Revenue Management: Price Optimisation. https://ivypanda.com/essays/revenue-management-price-optimisation/

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