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Impact of information technology on Revenue management - Research Paper Example

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The phenomena of revenue management gained importance in recent years due to the variable and discriminatory pricing schemes offered by various companies to their customers. …
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Impact of information technology on Revenue management
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Download file to see previous pages The aim of devising revenue management techniques is to deliver the fine product or service to the appropriate customer at the precise price. This 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. 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 the answer to the question of such demand. Information technology has gained rapid importance and improved itself in all aspects from the invention of first computer ENIAC till present. The cost of installing and communicating through IT based equipment has been reduced incredibly. This remarkable reduction made it possible to use information technology equipment in commercial businesses in addition to government and military (Forester, 1985). As like other field, information technology has played a great role in improving the processes of revenue management. In this paper, we shall study the impacts that information technology has on the revenue management. This article is concerned with defining revenue management systems and their application. It will also explain that how well it can meet the consumer demand, how well it can be integrated with overall distribution channels and what role information technology is playing to enhance the overall progress of the revenue management systems. We will at the end, try to make some conclusions and recommendations about the development of decision support system of revenue management and how can it be helpful in maximizing the future profits of the company. Brief history of revenue management The concept of revenue management is not new to the business world. Every business that is selling some fragile product needs to flex the price of that commodity due to some uncertain environmental change or response to some competitor’s action or customer’s demand. Seats in airplanes, clothes (i.e. for summer and winter), rooms in hotels etc., all require revenue management strategies to be sold in a manner that maximize the overall wealth of the company. This field properly originated in US airline industry in start of 1970s. Bob Crandall of American Airline (AA) who put restrictions on discounted fares. After that yield management came into practice which is the foundation of revenue management. American Airline, with the help of other airlines further extended the yield management system by offering low fares to the cost sensitive passengers and high priced fares to the time sensitive passengers, giving maximum value to both type of travelers. The impact of practicing yield management was come into knowledge by year 1985. American Airline reported about 48 percent profit growth. This huge success attracted other industries to develop into the field of yield management (Haley and Inge, 2004). Purpose and benefits of implementing revenue management We discussed above that yield management evolved into the revenue management. As it became the standardized practice for the companies, its definition progressed. Revenue management is defined as the field which is concerned with answering the demand questions related to consumer behavior and system and set of methodologies required to make ...Download file to see next pagesRead More
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