UNIT 4.

LESSON 4

YIELD
MANAGEMENT
 INTRODUCTION

The focus of this lesson will be on the various concepts and analytical methods that fall
under the heading of yield management. In numerous service industries, the phrase is used
to describe ways for allocating scarce resources, such as airplane seats or hotel rooms,
among a diverse group of consumers, such as business or pleasure visitors. A company's
overall revenue or "yield" on capacity investment can be optimized by altering this
allocation. These concepts and methods are commonly referred to as perishable asset
revenue management because they are utilized by businesses with extremely perishable
items or services that cannot be stored at all.
 LESSON PROPER

YIELD MANAGEMENT

Allocating the right amount of capacity to

the right client at the right price in order
to maximize capacity.

Yield management is a pricing approach used by

organizations in the hotel, air travel, and other
tourism-related industries in order to maximize
revenue from perishable inventory.
 Revenue management is another name for yield management. This strategy is used by
businesses to determine the best pricing, client, and capacity combination. The goal of yield
management is to get the most out of a limited amount of available capacity. It seeks to
match a firm's fixed capacity to future demand in various market sectors in order to
maximize revenue or yield

YIELD =ACTUAL REVENUE

_______________
POTENTIAL REVENUE

WHERE:

ACTUAL REVENUE = ACTUAL CAPACITY USED X AVERAGE

ACTUAL PRICE POTENTIAL REVENUE = TOTAL CAPACITY X MAXIMUM PRICE

Although yield appears to be the ideal instrument for matching demand and supply, it
comes with its own set of dangers, which include the following:

a. Competitive focus loss

b. Alienation of customers
c. Overbooking
d. Incentive and reward systems that are incompatible
e. The yield management function is not organized properly
 Queuing Systems and Waiting Lines

A queuing system, also known as a waiting line system, does exactly what the name implies. It happens when a
person or object waits in line for an activity or transaction to be completed. A customer may be in line to
purchase a movie ticket or deposit a check, or a shipment may be waiting to be shipped at a warehouse.

In order to address queue management issues, it is critical to understand queue characteristics. Regular queue
situations include waiting in line for services at a supermarket or a bank, waiting for computer results, and
waiting in line for a bus or commuter rail. The fundamental idea behind queue theory is that there are
multiple queues.

Waiting line models assist management in evaluating the cost of waiting vs the cost of providing service.
Queuing or waiting line models can thus be used in circumstances when it is necessary to make judgments in
order to reduce the amount of time spent waiting while spending as little money as possible.

Queues are the result of a demand surplus beyond the ability to handle it. Queuing is frequently caused by a
mismatch between capacity management and demand, although it is not always possible to exactly match
capacity to demand, or vice versa. There are times when maintaining an exact match between capacity and
demand is too expensive for a company. Ships and planes cannot transport passengers to certain locations at
any one moment. To enhance productivity, a timetable must be created.
 To deal with queue difficulties, businesses should consider the following
strategies :

1. Examine the operational procedure. The organization should investigate the operational process in
order to determine the root reasons of queuing

2. Create a reservation procedure. Setting up a reservation system is one way for service businesses
to avoid long queues in their facilities.

3. Customers who are waiting should be distinguished. Customers are frequently prioritized based on
their needs or characteristics in service organizations with long lines.

The following are some other ways to distinguish customers:

a. The significance of the client

b. The job's urgency

c. The service transaction's duration

d. Payment of the Premium Fee

4. Making waiting a delightful experience.

Customers who are waiting may still be satisfied, depending on how
the service organization handles their needs.

Other approaches that service organizations may examine include:

a. The design of the queuing system should be revitalized

b Configuring the queuing system to meet the needs of different market

segments

c. Managing the behavior of clients and their impressions of the delay

(making the waiting time more pleasurable)

d Setting up a reservation system (booking or appointments to distribute

demand)

e. Shortening transaction time by redesigning the service process (installing

self-service kiosks).
 Queues of Various Types

The mathematical study of waiting lines, which is one of the most common
difficulties in ordinary life, is known as queuing theory. Queue at a café,
library, or bank, for example.

1. Stages with a single line and a sequential order. Customers move through
many serving operations or segments in this arrangement, similar to a buffet line

2. Multiple servers are connected through parallel lines. This is true for
businesses that serve a large number of individuals at any given moment.
3. Multiple servers on a same line. This is also referred to as a "snake."
Issues with line speed movements are addressed, in contrast to the
"parallel line in several servers" system.

4. Designated lines. This approach divides lines into different groups for
different clients.

5. Take a number Customers are given numbers from an automated

counter when they enter the company.

6. There is a waiting list. Customers are frequently asked to provide their

names as well as the size of their group when queuing at a restaurant.
 The First Law of Science is a clear formula that can be
written as follows:

P-E=S

The in this formulapresent for satisfaction, P for

perception, and "E' for are service and believe the service
reviewed to be higher You are if you perceive the
expectancy same level as before but anticipate it a satisfied
client if you expect a specific degree of to be greater.
 People's perceptions of waiting time in various situations were as follows:

1. In comparison to occupied time, unoccupied time feels longer When you are bored, time
seems to drag Customers need to be proactive, not idle, because perceived wait times are
longer than real wait times, according to studies. Customers don't feel as though they are
waiting long if they have the option of doing more during their wait period.

2. Waiting in preprocess feels longer than waiting in process.

Requesting a consumer to fill out a form as soon as they walk into a store is an example
of this. This activity keeps them "in-process," minimizing their feelings of impatience for
the rest of their day.
 3. Waiting times appear longer when you are anxious

Anxiety makes people feel as if time is slowing down and that waiting is taking longer.
The tension and sense of waiting are both reduced in a tranquil waiting room.

4. Wait times that are unexplained are longer than wait times that are explained.

Keep in touch with your waiting consumers in real time if feasible to keep them
informed and remind them why they are waiting. If an airplane is delayed in taking off,
for example, the captain will notify the passengers of the projected duration of the
delay as well as the reason for it.

5. Waiting times are longer when they are unfair than when they are equitable. People
who are waiting become more aware of the length of their own delays when they
perceive that others are receiving better service than they are. To combat this,
experience designers should make sure their waiting processes are fair.
6. The customer will wait longer for a better valuable service. Waiting is a
cost that is weighed against the price of the underlying good in some way.
People are willing to wait longer for a better desirable commodity, in part
because the proportionate cost of the wait is minimal. The quickness with
which fast food is delivered is an excellent example. People will gladly wait
there.
7. Waiting in a group seems to take longer than waiting in a solo one.
Waiting on one's own takes longer than waiting in a group or cohort. To get
around this, experience designers try to form groups whenever possible.

8. Ones that are physically unpleasant feel longer than waits that are
agreeable. People are more aware of the fact that they are waiting when
they are physically uncomfortable, and the opposite is also true. We are
less aware that we are waiting the more comfortable we are. The
establishment of airport lounges is a wonderful illustration of this, as they
make waiting for planes seem less taxing.