Yield Management as a Pricing Mechanism

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Yield Management as a Pricing Mechanism
Yield management can be identified as that process of inquiring understanding, factoring in and anticipating consumer behavior with the aim of maximizing profits or yields realized from perishable goods and resources for instance reservations of hotel rooms and airline tickets. In addition, the process of consumer behaviour examination is carried to meet the standard price level in order to entice the product and service to the consumer. Consequently, Valls (2009) provides that yield management is simply seen as a criterion that aids in the sale of the correct product or service to the most appropriate client at the most suitable period of time and at the most recommendable price. This means that yield management, a branch of revenue management, comprises of inventory strategic-control so as to conduct sales to clients at the right time and at the right price.
In many service industries, yield management has been opted as the main pricing technique. Having resulted to massive success in the airline sector, other firms such as hotels, rental cars and cruises among others have tried to adapt the same with high expectations of success. Techniques involved in yield management suggest the price allocation segments where different clients and consumers are allocated different prices at with the aim of profit maximization. Such consumers are prone to penalties if they would opt to altering any changes with respect to the purchases, as well as accepting restrictions if they needed benefit from discounts offered on prices. Contrary, clients for instance the airline consumers may buy an airline ticket at the rush hour, or rather the last moments; such a client is prone to less sensitivity with respect to prices. This means such clients are always prepared to buy services and products at extreme prices during such emergent situations, or rather considered emergency products. It is therefore worthy argument that yield management engages completion of a firm`s capacity, hence enhancing contribution to the sole target, which is profit maximization (Coulter, 1999). In such argument, it is worthy providence that numerous firms have opted to use of computer-derived strategies of pricing in line with the achievement of the above asserted goal. These strategies and mechanisms are known as Yield Management Systems (YMS) and engage strategies like overbooking, common in airline sector in particular as well as hotel sector where...