Yield management is gaining increasing popularity not only among hotels, and airlines, but also among advertisers, and publishers. What makes it so noteworthy? Keep reading to discover the top advantages and disadvantages of yield management.
Yield management – what is it?
Yield management is a system used by numerous businesses such as airlines, hotels, or ad publishers to price their inventory in a way that maximizes revenues.
The goal is to sell the right product, to the right customer, at the right time, for the right price.
Yield management is a dynamic pricing strategy that uses historical data and analytics to set prices that reflect the demand for a particular good.
Pros and cons
There are both advantages and disadvantages to using yield management.
On the plus side, yield management can:
- increase profits for businesses,
- segment customers based on various factors,
- eliminate pricing errors,
- help businesses better understand customer demand and optimize their inventory to match that demand.
On the downside, yield management can:
- be complex and time-consuming to implement,
- treat all buyers equally, which may be a disadvantage for returning customers,
- result in creating forecasts that aren’t accurate,
- create confusion and frustration for customers who may see fluctuating prices for the same product or service, and may choose another provider.
Ultimately, the decision whether yield management is a good fit for a business depends on the characteristics, goals, and needs of a specific organization.
Companies that are looking to increase profits and better understand the customer journey may find yield management helpful. Nevertheless, it’s worth mentioning that it can be a risky strategy that may have a negative impact on the bounce rate, and shopping cart abandonment rate. Therefore, before making the final decision, it’s worth considering both pros and cons.