The term yield seems a no brainer. In layman terms- the return on investment can be defined as yield.

A WARM UP EXERCISE !

ARRANGE IN ORDER OF RELEVANCE

INFLUENCE

ANTICIPATE

UNDERSATND

THE CORRECT ORDER

UNDERSATND

ANTICIPATE

INFLUENCE

The outcome of this little exercise coupled with our knowledge of the term yield can help us define yield management as: the process of understanding, anticipating and influencing consumer behavior in order to maximize yield or profits

Key points to aid understanding

Business theory and practice over the last fifteen to twenty years.
Yield maximization strategies and tactics meant to improve the profitability of certain businesses that focus on yield. It is complex because it involves several aspects of management control including rate management, revenue streams management, and distribution channel management, just to name a few

Multidisciplinary because it blends elements of marketing, operations, and financial management into a highly successful new approach.

Yield management strategists frequently must work with one or more other departments when designing and implementing yield management strategies.

There are three essential conditions for yield management to be applicable: That there is a fixed amount of resource available for sale. That the resources sold are perishable (there is a time limit to selling the resources, after which they cease to be of value). That different customers are willing to pay a different price for using the same amount of resources. o If all customers would pay the same price for using the same amount of resources, the challenge would perhaps be limited to selling as quickly as possible. o Yield management is of especially high relevance in cases where the constant costs are relatively high compared to the variable costs. o This is because it focuses on maximizing expected marginal revenue for a given operation and planning horizon. o It optimizes resource utilization by ensuring inventory availability to customers with the highest expected net revenue contribution and extracting the greatest level of willingness to pay from the entire customer base.

Grand Tours & Travels Ltd.

Vehicle Type

Qty in Nos.

KMs per lire of fuel

CTC of a Driver in Rs Lakhs

Annual Maintenance in Rs Lakhs per vehicle

40 seater Coach

10

1.2

SUVs

12

0.6

Sedan Cars

25

12

0.75

Hatchback cars

20

15

0.4

In addition, the administration and infrastructure cost to the company is Rs. 25 lakhs per anum irrespective of business it may do. This includes the staff, offices, phones etc. required by the company for conduct of its business. It also has its own infrastructure for internet booking and reservations.

When One Size Does Not Fit All

Some customers complex or unique needs require assistance to build a custom travel package. Providing this level of personal service is time consuming and therefore costly for travel agents due to the large number of decision variables and possible combinations. Current websites cannot replicate the travel agent's role because they cannot replicate the complex analysis performed by an experienced travel agent, and effectively interact with the customer.
Yield management solution which enables more efficient pricing and managing your inventory to adapt to changing market conditions in real time. DYMA can monitor and identify unexpected changes in customer demand, competitor availability and prices. In response to these changes DYMA can adjust product pricing, promotions, and supply contracts.

USE BY INDUSTRY
Airlines In the passenger airline case, capacity is regarded as fixed. When the aircraft departs, the unsold seats cannot generate any revenue and thus can be said to have perished. Airlines use special software to monitor how seats are being reserved and react accordingly, for example by offering discounts when it appears that seats will remain unsold. The airline needs to keep a specific number of seats in reserve to cater to the probable demand or high-fare seats. The price of each seat varies directly with the number of seats reserved, that is, the fewer seats that are reserved for a particular category, the lower the price of each seat. This will continue until the price of seat in the premium class equals that of those in the concession class. Depending on this, a floor price (lower price) for the next seat to be sold is set.

Hotels Hotels use this system in largely the same way, to calculate the rates, rooms and restrictions on sales in order to best maximize the return too. These systems measure constrained and unconstrained demand along with pace to gauge which restrictions e.g. length of stay, non refundable rate, or close to arrival. Yield management in hotels is selling rooms and services at the right price, at the right time, to the right people. Rental In the rental car industry, yield management deals with the sale of optional insurance, damage waivers and vehicle upgrades. It accounts for a major portion of the rental company's profitability, and is monitored on a daily basis. In the equipment rental industry, yield management is a method to manage rental rates against capacity (available fleet) and demand.