Yield management pricing refers to an inventory control and pricing strategy used by revenue-oriented businesses to maximize returns on a perishable asset (i.e. hotel rooms, rental cars, airline seats, etc.).
The key aspects of yield management pricing include:
- Setting variable prices for the same product/service based on demand, time limits, availability and customer profiles.
- Using predictive analytics and booking/reservation data to forecast demand by segment.
- Adjusting prices upwards for high demand periods and downwards as time until use approaches.
- Encouraging early bookings from price-sensitive customers at relatively low prices.
- protecting availability for more lucrative customer segments willing to pay premium prices.
- Clearing unsold inventory close to use through discounted prices before it expires worthless.
- Balancing maximizing revenue per unit with optimizing total revenue across all sales.
The goal is to allocate fixed/perishable capacity to customers that create highest yields through dynamic revenue management practices. It aims to capture more consumer surplus compared to uniform pricing models.