Introduction to Revenue Management

1.5 units

The term quantitative pricing and revenue analytics collectively refers to the set of practices and tools that firms in various industries use to quantitatively model consumer preferences, segment their market, and tactically optimize (often in a microtargeted or personalized manner) their product assortment, pricing, and promotion strategies. The origins of this field, which is often referred to as revenue management, were in the airline industry during the late 1980s. The prototypical question is how a firm should set and update pricing and make product availability decisions across its various selling channels in order to maximize its profitability. In the airline industry, tickets for the same flight may be sold at many different fares, and availability may change as a function of purchase restrictions, forecasted future demand, and the number of unsold seats. The adoption of such systems has transformed the transportation and hospitality industries, and it is increasingly important in retail, telecommunications, entertainment, financial services, health care, and manufacturing as well as online advertising, online retailing, and online markets. In parallel, pricing and revenue optimization has become a rapidly expanding practice in consulting services and a growing area of software and IT development. The ultimate goal of this course is for students to learn to identify and exploit opportunities for revenue optimization in different business contexts. The topics covered in this course are either directly or indirectly related to customer segmentation, demand modeling, and tactical price optimization.