The Theory of Revenue Management

Revenue management is a strategic approach used by businesses to maximize income by adjusting prices based on demand and customer behavior. It involves analyzing data to predict how much customers are willing to pay at different times and for various segments, then setting prices accordingly. For example, airlines charge higher prices during peak travel seasons and lower prices during off-peak times. The goal is to sell the right product to the right customer at the right time and for the right price, optimizing revenue without losing potential sales. This balance helps businesses make the most profit from their available capacity.