The intention of this essay is to critically evaluate yield management in application to the commercial aviation sector. Thorough studies and countless definitions of the term yield management will be included in order to deliver on how major airlines utilises this concept as management tool to maximise sales and gain competitive advantage from their competitors.
An introduction of the concept first took place in 1985 when the American airlines commenced facing competition from the low cost airline Peopleexpress,which led the airline to “develop a revenue management program…a key element of this program was yield management” (Hayes and Miller, 2011). This was to help American airlines gain competitive advantage from the low cost carrier.
There are various definitions of yield management applied in academic research for countless different service industries, several studies and reports on business and economics illustrates that yield management is a constituent part of the Revenue management programme.
Huefner (2011) suggest that revenue management encompasses differential pricing and other techniques to influence customer demand for an organisation’s products and services.
The purpose of yield management is as described by Wang and Bowie (2007) “to maximize revenue through the effective management of three main areas: pricing strategy, inventory control and control of availability. Where as (Wall and Griffiths, 2005) Describes more in detail that yield management is “the bringing together of information systems technology market analysis, organisational design, business experience and sector knowledge into an integrated revenue generating strategy”. With countless of definitions of yield management, it is worth noting that the definitions vary with the industry it is used in.
Clearly justified yield management concept is utilised in order to amplify sales, by utilising information on customer purchasing behaviour on product, services or sales patterns in order to produce pricing recommendations and inventory controls that may generate grander revenues and relatively deliver products that appeals to distinctive customer requirements.
There are advantages that are allied to the implications of yield management within a firm, the application of yield management facilitates a firm to better understand its consumers need and expectations, which enables the company to produce services or products that are suitable to its consumers. Which in the case of American airlines was a successful concept to follow in order to beat its competition.
Several airline firms utilises yield management as a way to maximise revenue and stay on top of business, nevertheless there are requirements for the implementation of yield management to be effective. One needs to take into consideration according to Arthur Andersen (1997) Market segmentation, Price management, Demand forecast, Availability and / or capacity management and reservations. Whereas Kimes...