An integrated approach towards revenue management

Abstract

This paper argues that advanced demand exhibit three characteristics — that of being probabilistic, stochastic and deterministic. Deterministic demand results in revenue management practices being cross-functional. The paper proposes a new revenue management system that integrates four decision sets of the firm: the value set, the segmentation set, the sensitivity set and the forecasting set. An integrated revenue management system also links the concept of capacity to the attributes promised by the firm to the customer. The paper then proposes that service firms that do not sell 'unitised' services such as seats or rooms have to define and capture its amorphous capacity and through capacity limitation, create advanced demand and practice strategic revenue management.