Customer-Centric Revenue Management Strategies

Subject: Strategic Management
Pages: 2
Words: 310
Reading time:
2 min

After the formulation of the different categories of customers according to the framework by Reinartz & Kumar, Noone et al. identified four different strategies of customer-centric revenue management (CCRM) to serve the four categories of customers through revenue management (RM), including traditional revenue management, lifetime value-based price modelling, availability warranting and ad-hoc promotions, and short-term promotions.

Traditional revenue management is explained as the manipulation of room prices and the duration of stay at hotels towards realizing effective inventory management and balancing forecasted demand and its capacity, based on historical data and the present booking pick up. According to Schuessler, revenue management is the continuous, integrated and systematic approach to the maximization of room revenues, through the varying of room prices, with regard to projected demand patterns. Its focus is placed on the maximization of yield and not revenue.

Lifetime value-based price modelling offers prices to the clients while placing focus on the lifetime value they draw from purchasing the product or service, towards maximizing the business’ long-term yield, from the continued long-term satisfaction of the customer. Also, clients with an anticipated high lifetime worth may take complete advantage of availability warranties during times of high demand for the given service or product. Availability guarantees are the moves to warrant the supply of the services or the products of the company to the target consumers, especially those among high profitability groups. In this case, these target groups are warranted continued supply and access to the services, despite the changes in demand, which may lead to the over-demand of the services.

Profitability levelCategoryStrategies
High profitability
  • Butterflies
  • True friends
  • Traditional RM and short-term promotions
  • Lifetime value-based pricing and room availability guarantee
Low profitability
  • Strangers
  • Barnacles
  • Traditional revenue management
  • Small wallet share, traditional RM, ad-hoc promotions
  • Traditional RM: Small size of wallet
The most relevant strategies for the different categories of customers