Importance of Business Intelligence in Revenue Management – Strategies & Industry use cases
Revenue management answers business critical questions like what to sell, when to sell, whom to sell, at what price to sell with data-driven tactics, strategies, and predicts customer’s behavior at the micro-market level.
Revenue Management leverages mission-critical, real-time insights generated by Business Intelligence that collects data, interprets it and presents findings on key performance indicators as identified by business stakeholders.
Application of BI and Revenue Management in key strategies
Pricing
Businesses define pricing policies based on a product’s demand and consumer’s price sensitivity. Business Intelligence gives in-depth insights on pricing position, competitive data, shopping cart abandonment rate, historical pricing, and revenue. Decision making based on such valuable insights allows businesses to reposition their pricing policies, boost conversions, recover lost sales and generate high profits.
Inventory
Effective inventory management is key to implement cutting-edge revenue management. BI helps to understand sales influencers with data from past transactions, product demand, and supply chain. When the entire supply chain is accurately tracked from order through distribution centers to delivery, BI instrumentally suggests optimal procurement policies for stocking high-performing, profitable products and avoids stockpiling of low-value products. BI also suggests assorted products (mix of merchandise that suits customers), alerts on replenishment status (to avoid out-of-stock conditions) and helps in tackling cancellation looms (which product often gets cancelled).
Promotion
With BI, businesses identify potential customers by applying strategies such as marketing mix, bundling (offering two or more complementary goods as a package deal) and effective customer segmentation. In-depth insights from the share of wallet analysis (amount of business a company gets from specific customers), customers’ internet shopping patterns, frequency of online and offline visits, recent purchase history and value of purchase also provide valuable promotion ideas. With that, businesses offer personalized promotions, suggest seasonal demand offers and cross-sell value additions in real-time for targeted customers. Promotions need to achieve a fair trade-off between volumes of sales and profit percentages.
Product Launch
For successful product launches, it is essential for businesses to understand market segments and the right target audience. BI offers a 360-degree analysis of market research data including the size of the market, the scope of the product across different segments, accessibility of customers, homogenized target groups (in terms of their preferences & buying behavior), quantified results of previous product launches. These in-depth research findings from a market based, a competitor based, channel-based, audience-based analysis enable informed decision making to launch newer products into the market with absolute confidence.
Use Cases
Revenue management and BI for Hotel Industry
Hotels generate long-term repeatable customers by holistically analyzing their accommodation data, shopping patterns, entertainment preferences, booking seasons, social media conversations and offline feedback from guest books.
Revenue Management Experts use business intelligence to determine optimal room rates, forecast reservation, manpower need, inventory levels, and other resources to avoid ad-hoc procurement and over-staffing during off-seasons and under-staffing during peak seasons. With the help of Business intelligence-driven revenue management, hotels are able to sustain targeted revenue and profitability.
Revenue management and BI for Airlines Industry
Being one of the early adopters of revenue management, Airlines Industry maximizes revenue by optimizing seat sales, ticket pricing, route profitability and inventory monitoring.
BI empowers Airlines to offer dynamic pricing strategies based on seat availability, price sensitivity, seasonality, geo-location and many other contextual factors for passengers who fall under the economy, business and holiday segments. This requires a highly cleansed, integrated data environment that synchronizes all relevant in-house online and offline data and data from other third-party sources. BI systems allow users to custom create control checkpoints based on business rules and accordingly provide real-time alerts to take instant decisions.
Most of the airline companies that began to practice yield management saw a direct increase of 3% – 7% in revenue. American Airlines had accredited yield management policies for a revenue increase of $500 million per year (in 2015). Delta Airlines also had used a similar technique to increase its revenue by almost $300 million per year (in 2015).
Revenue management and BI for Tourism Industry
The tourism industry adapts revenue management to have a steady business even during the off-season. Mark-down pricing strategy offers discounted pricing for tourists to increase the number of bookings and mark-up pricing strategy increases pricing before offering discount thereby making their customers feel that they are getting better value.
During peak seasons, travel agents tend to set premium pricing for travel packages, because consumers would anyway grab it due to demand. BI helps the tourism industry with its drill-down capabilities to measure customer’s responses to offers, customer loyalty, patterns from other segments and geographies, etc. This is how the tourism industry balances bottom-line and profit between seasonal and non-seasonal times.
With deep industry-specific revenue management expertise and hands-on experience in applying advanced analytics, business intelligence capabilities, any business can influence it’s ability to maximize revenue and optimize products & services.
