Yield management

Its utility

The principles of the yield management are applicable only if the company answers certain criteria like:

a rigid apparatus of Production (difficult adaptation of the capacities in volume and quality),
an impossibility of Storage (the not sold products are thus lost),
capacity to be able to envisage its activity (for example thanks to the reservations, with the statistics of the last sales…)

These criteria do not depend on the company, it undergoes them. In order to optimize its turnover, the yield pleasing management to adapt its supply in preparation for.

According to the period the company will be found with a too important capacity, the sales are not enough to make profitable the day because of high the fixed loads. Contrary the capacity perhaps too low and being under a great request. One cannot satisfy all the requests and thus one loses a prospective customer for lack of product.

The yield management is useful for these companies. For one in order to attract more customers, to modulate the prices according to the request. For the other in order to sell the products with the most interesting prices.

The main aim of the yield management, and this for very undertaken, is to maximize its Turnover for its capacity. The yield management particularly finds its utility in the companies whose loads are mainly fixed, because the yield management intervenes exclusively on the turnover (CA) and which the result depends primarily on this one: more CA will be optimized, better will be CA Contrary to the companies having many variable loads, where the result will depend as well on CA as their variable loads.

Scopes of application: First of all, at present, Returned Management relates to the services companies exclusively. Several studies nevertheless were carried out on certain products (yoghurts in particular, by decreasing the price gradually, according to the expiry date). The airline companies developed tools surpuissants but they are not the only ones has to call upon Returned Management. Other fields call upon this technique, like the hirers out of car, the hotels, cruisings and crossings in ferry, the trains, the coaches and recently, certain sectors start timidly with Returned Management, like: hairdressing salons (the price varies from one day to another, in this case it is not a question strictly speaking of RM but of pricing) restaurants (to manage the waiting list, ex: a couple is presented to which one requires to have patience, and a few minutes later enter a couple and two children who obtain a table immediately. In fact the restorer did not have any more but one table for four people)

Operation of the yield management

Segmentation of the customers

When one starts to use the yield management, one of the first things to be made is to segment the customers. The criteria of segmentation will differ according to the companies and the objectives aimed. For example a company aiming at selling more product will segment its customers so as to see those which will consume the most its products and most regularly. Contrary a company aiming at selling with the best price for it its products, will segment its customers according to those which will be ready to pay more.

The segmentation must be most precise possible, it often arrives that segmentations have under-segmentations. Let us take the example of a Airline company, a person buys a ticket on Internet, it will be segmentation A. But if it buys it on Internet via the site of an tour operator it will be segmented AB. The utility of this kind of segmentation, is of knowing precisely which buys and how. Thanks to these segmentations there are the answers to the " questions; who? " and " how? ". The segmentation does not answer the " question; Why? " , on the other hand it why the tariff policy will influence according to each segmentation.

Study of the market

The second essential thing to apply the principles of the yield management is the knowledge of the Marché in which the company officiates. According to its products it will enter in competition with certain companies but could be complementary with others.

The knowledge of the market passes by several points. The first is the fluctuation of the request. According to the events, the periods and the localization the request will change one moment with another, it is essential to be able to plan the periods of strong activity and that where it will be weak, for that there are various tools to set up such as for example:

a planning of the demonstrations.
Of the management reports of the previous years.
advantages and disadvantages of the company and its products.

Let us keep as example an airline company which will aim to increase its number of product sales in period of weak activity and to increase its sales turnover in period of strong activity. During an event over two days which will bring many passengers it will be able to practice low prices upstream a few days and downstream from the event in order to incite travellers to leave over periods when its activities would have been weak, and to practice high price over the period of the event, knowing that the request will be such as it will sell its product all the same. Here the planning of the demonstrations will have enabled him to optimize its turnover, but also the management reports which taught him that for the same period without events it had sold few of its products.

The market is also composed of its competitor, it is essential to be gravitational than the concurrent company, it is thus necessary to know what this one proposes in order to better do for a segmentation of the customers given.

Use

The yield management will be based on figures, but the management of these figures and its impact require an important human intervation. The figures can be used by any person but so that they are well used it is necessary to have a person trained to the Gestion and sensitive to the market evolutions.

Constraints

Once set up, one can quickly pass to an active and practical phase. The person in load will have to set up varied tariffs, promotional offers and services in the idea to lose less customers. But in order to have an effective use of the yield management it is necessary to provide to the services sales (that those are human or computerized) of information on the policy for one exact moment of the company. More and more the sales of services are done remotely via Internet or of the companies (as the travel agencies) which cannot have flexibility that an employee of the company dedicated to the sale will have, it is thus necessary to offer possibilities of choice.

The difficulty which arises then is to see a promotional offer selected by the majority of the customers what will involve a fall of the Turnover and thus an not-optimization of the turnover thus to any promotional offer are dependant " contraintes". These constraints are there for various reasons. First of all, when an promotional offer is installation, in order not to make fall CA, it is often set up a maximum quota of availabilities in order to control the influence of this promotion on the activity. Physical constraints, for example an impossibility of cancelling the service and this same before its consumption, of the temporal constraints, for example the service is sold with the promotional tariff only if the customer takes a plane ticket return ticket and that the outward journey and the return are separated from two or three days. There can also be commercial constraints. For example the plane ticket will be with half price if the customer places in such or such Hôtel. This resulting from agreements between the profit companies.

The objective of these constraints is to limit the negative impact on CA

Development of consumer loyalty

In order to optimize CA it is very beneficial of fidéliser the customers, for that one offers to the faithful customers advantages. In order to recognize the faithful customers it to them is often sold discount cards involving on presentation of the Réduction S, of the additional service S or the office pluralities of points bringing of the Cadeau X. This idea was taken up by the marks of large distribution which, in order to fidéliser their customers, set up charts of free fidelities allowing an office plurality of points or even easy terms.

The development of consumer loyalty also passes by a criterion more abstract and indirectly related to the yield management: the quality of the service. It is said that “a satisfied customer tells his stay with three people, dissatisfied to ten”. The person in load of the yield management must take account of the quality of the service and the problems which the customers can meet and to improve them. For that it is necessary to set up an easy possibility and " formelle" with the customers to complain, for example via questionnaires of satisfactions. A return on behalf of the team in load of the sales of the services is also essential to make evolve/move the product. The installation of its Rapport S makes it possible to be able to regulate the existing problems and to better manage the problems to come. When a customer is prone of a complaint, if it is found vis-a-vis a procedure simple and formal (in writing often) it has the feeling that its opinion counts and consequently it will not have had a problem but will have allowed that Ci is regulated; so for the company the result is the same one, for the customer it is diametrically different.

Promotional offer by segmentation

It is the most complex part to set up and to control during the use of the yield management. These offers are generally created in order to attract a segmentation of the customers which normally do not buy, or little, the services of the company. Thus for that it is necessary to found restrictive conditions of identification for each segmentation prone to a promotion in order to ensure that it has a sealing between each segmentation there and to prevent a customer from profiting from lower promotion. That can be done by the presentation of document in proof. These " barrières" are called fence .

The control of the sales

This point there is applicable in the majority of the service companies but with an exception, the Hôtel lery.

In the service companies, in order to optimize CA, one seeks to sell the services as well as possible. It is necessary for that to avoid selling a service a long time in advance less expensive than than it the very same day would be sold but it is also necessary to succeed in selling the maximum of service for the D-day. It is there one of the largest offices of the yield management.

The totality of the tools installed make it possible to envisage a little the activity that there will be for one D-day, starting from these tools it will be defined tariffs. Often the companies define minimum sales quota. These quota are generally allocated with the tour operators (Travel agency, Internet sites, etc…) and are at very advantageous prices. Then for the remainder of time one will define for a segmentation a bottom price below which the sales will not be authorized. This floor will fluctuate according to the made sales, and the made sales the last years at the same period. Thus one will optimize the sale of the services to the greatest number of customer.

Particular case: hotels

The Hôtel S are a very particular case, and thus uses the yield management in a slightly different way.

In France, the hotel services are regulated only after consumption of those, and often a few days after their consumption. In fact the made reservations do not correspond to the Vente S which will be really made, it are only one indicator. " is thus needed; sécuriser" the turnover and sales. For that " responsabiliser" the customer, by asking for a guarantee of its arrival. That is not always enough and it is regular that customers do not come, their room remaining empty. An open stope represents loss in hotel trade because this one always generates loads. In order to avoid that, the hotels practice, in illegal manner, what is called the overbooking or overbooking .

The overbooking is something of dangerous for the hotel one in commercial term. That consists in making it possible to hold more rooms than it does not have which it in order to avoid finding itself with an open stope. This practice requires a perfect control of multiple parameters. First of all the number of No-Show (customers which does not come) of the previous days and of the previous years in order to be able to estimate the number of people who will perhaps not come. Then the local market, because if all the customers come it is necessary to be able to place the overbooking elsewhere. Thus in order to optimize CA services sold surplus the number of services available.

Needs

The yield management is a method which has needs and costs and all the service companies do not have financial means the or human ones to set up the yield management in an optimal way. One needs adapted software, software which makes it possible to segment the sales, to define tariff beaches, etc…

One needs a support of reflection, generally Statistiques based on the daily figures, these statistics require a daily and detailed follow-up.

It is also necessary to envisage simple means and rapids to communicate the tariff evolutions. Nowadays certain sectors are particularly well equipped, in particular the Tourisme where the software of the various speakers is created to function the ones with the others. There is also a human need, the installation of the yield management requires the creation of a Yield manager , his place in the flow chart of the company is important because it would intervene with his collaborators but also with the partners. The personnel of sales must be formed, if Yield manager fixes the prices, the personnel must be capable of his own initiative to pass from a tariff offer to another.

He can nevertheless be set up to differing degree and was applied successfully for example in strategies of dynamic positioning for undertaken edition.

References

Yield management , Sylvain Daudel, Georges Vialle, Presses Institute of air transport, 1994
marketing according to Mac Kenna, Inter-Editions, 1989 & 1991

External bonds

Small file on the yield management

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