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Pricing and Revenue management in SCM
Pricing and Revenue management in SCM
Pricing and Revenue management in SCM
Pricing and Revenue management in SCM
Pricing and Revenue management in SCM
Pricing and Revenue management in SCM
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Pricing and Revenue management in SCM

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  • 1. Pricing and Revenue Management in the Supply Chain© 2007 Pearson Education 15-1
  • 2. The Role of Revenue Management in the Supply Chain x Revenue management is the use of pricing to increase the profit generated from a limited supply of supply chain assets x Revenue management may also be defined as the use of differential pricing based on customer segment, time of use, and product or capacity availability to increase supply chain profits x Most common example is probably in airline pricing© 2007 Pearson Education 15-2
  • 3. Conditions Under Which Revenue Management Has the Greatest Effect x The value of the product varies in different market segments (Example: airline seats) x The product is highly perishable or product waste occurs (Example: fashion and seasonal apparel) x Demand has seasonal and other peaks (Example: Function halls)© 2007 Pearson Education 15-3
  • 4. Revenue Management for Multiple Customer Segments x If a supplier serves multiple customer segments with a fixed asset, the supplier can improve revenues by setting different prices for each segment x Prices must be set with barriers such that the segment willing to pay more is not able to pay the lower price x The amount of the asset reserved for the higher price segment is such that the expected marginal revenue from the higher priced segment equals the price of the lower price segment© 2007 Pearson Education 15-4
  • 5. Revenue Management for Perishable Assets x Any asset that loses value over time is perishable x Examples: high-tech products such as computers and cell phones, high fashion apparel, fruits and vegetables x Basic approach: – Vary price to maximize expected revenue© 2007 Pearson Education 15-5
  • 6. Revenue Management for Seasonal Demand x Seasonal peaks of demand are common in many supply chains x Examples: Most retailers achieve a large portion of total annual demand in December (Amazon.com) x Off-peak discounting can shift demand from peak to non-peak periods x Charge higher price during peak periods and a lower price during off-peak periods© 2007 Pearson Education 15-6

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