« Ah, it’s because of you that we’re paying too much », « I don’t understand prices, it’s getting on my nerves », « It’s IP tracking », « You have to buy your ticket between 2 and 4 in the morning »…
When I talk to people about my job, these are the phrases I hear most often. The Revenue Manager is at best unknown, at worst despised and often misunderstood. That being the case, if you were to ask me where Revenue Management fits into all this? I’d tell you: nowhere!
Revenue Management is based on classic and well-known economic laws
Revenue management techniques are based on demand forecasts and on the fact that the stock of the product sold is perishable and in limited quantities. Prices then reflect the classic law of supply and demand: when demand exceeds supply, prices go up; when they fall, they go down. There’s no manipulation here. When you buy peaches at the height of the season, when supply is abundant, they are not expensive. If you buy them out of season when supply is low, they are more expensive, sometimes 3 or 4 times more per kilo!
IP tracking is just a manipulation technique
Yet I’m constantly reading articles associating Revenue Management with more or less dubious commercial practices, such as IP tracking. What is the link between IP tracking and demand forecasting? Nothing at all. At most, it’s a sales technique designed to encourage buyers to make up their minds quickly. This is a case of psychology and manipulation.
Similarly, charging a booking fee of 15€ on the Internet on the pretext that it’s 10.44 on a Monday morning has nothing to do with the law of supply and demand! This reservation is neither limited in quantity nor perishable. It’s the seat on the plane or the hotel room that is!
And when my colleague buys a plane ticket on a website that I won’t name, and the price she has to pay is ultimately a lie, then I’m writing an article!
84,98€ ? If you read the fine print, you’ll realise that if you want to pay this price, you’ll need a Visa Entropay… You don’t know what that means? Neither have I!
Let’s take a look at this mysterious Visa Entropay. It allows you to: open an account for free, get a credit card for free, and pay with it for free too. So far so good. Except that you have to put money into the account, and there’s a 4.95% fee for transferring money into the account. So it’s impossible to pay just 84.98€ for a plane ticket! It’s only a short step from being illegal…
Decree of 3 December 1987 Article 1: « All information on the prices of products or services must show, regardless of the medium used, the total sum including all taxes that must actually be paid by the consumer, expressed in euros ».
Finally, despite being a member of the Internet generation Y, I think it’s better to go to a good old-fashioned travel agency and pay 30€ in booking fees, with the agent’s smile as a bonus, rather than getting worked up all alone in front of your computer to go on a family trip with your partner and 2 children and pay booking fees, per person and per journey. So for a return ticket with stopover: 13.98€ x 4 people x 4 flights = 111.84€ !
By definition, a price « too expensive » won't sell
So it’s true that plane tickets and hotel rooms can be « expensive ». But « too expensive »? It’s the market that defines the price. A price that’s « too expensive » won’t sell, by definition, and I doubt that this is the objective of Revenue Managers. Especially as every medal has its « other side » : thanks to Revenue Management, there is still availability for the day after tomorrow and prices have never been so low in the off-season. It’s also true that pricing strategies are no longer as easy to understand as they once were. But if the company has a coherent line of action, and applies it correctly, there’s no reason why the customer shouldn’t understand it… Isn’t it said that « what is well conceived is clearly expressed » ?
The various price manipulation techniques
Today, I’d like to draw up a list of all the manipulative techniques and dishonest, borderline-legal practices that annoy us and are not Revenue Management: IP Tracking, hidden costs, booking fees that vary according to the time of purchase, abusive phrases such as « there’s only one seat left at this price » and other pirate techniques… Help us to draw up a list of these practices!
Keywords: Revenue Management, Revenue Managers, forecasting, IP tracking, manipulation
