Pricing & Revenue

Management in Service
Organizations
By Group 3
Daksh, Paridhi, Parul, Shalini
 Introduction to Pricing & Revenue
Management
• Pricing and Revenue Management (PRM) is a critical component
• Plays a pivotal role in maximizing profitability and ensuring
sustainable business growth
• Pricing Management involves strategically setting prices for services
to maximize profitability & ensure competitiveness
• Revenue Management focuses on optimizing revenue through
dynamic pricing, demand forecasting, capacity utilization, etc.
• This strategic approach involves the application of analytics,
technology, and managerial judgment to optimize the prices of
services offered by an organization.

2
Pricing & Revenue Management
 Amount of money or goods
Service For whom to provide
Pricing for which service can be
service?
bought & sold

Measure of value of service

Must decide its niche
in monetary or financial
market
terms

Revenue Art & science of predicting

Management Must segment the market
the swings in demand

Responding in a way that Take decision depending

maximizes the business’s upon the type of market
revenue

Pricing & Revenue Management 3

Pricing Issues
• How much to charge?

• What basis for pricing?

• Who should collect payment?

• Where should payment be made?

• When should payment be made?

• How should payment be made?

4
• How to communicate prices
 Key Components of Pricing and Revenue
Management:

Dynamic Pricing Strategies Optimizing Capacity Utilization

Segmentation & Targeting Data Analytics & Forecasting

5
Benefits of Pricing and
Revenue Management
 Importance of Pricing Of Services
Gain Profit: Maximize revenue from a fixed capacity by varying prices and target segments
over time. This is done typically using revenue management systems. Achieve a specific target
levels and long-term contribution.
Cover Costs: Cover costs of providing one particular service, Cover fully allocated
costs.
Build Demand: Maximize demand (when capacity is not a restriction), provided a
certain minimum level of revenue is achieved, Achieve full capacity utilization
Develop a User Base: Encourage trial and adoption of a service, Build market share
and/or a large user base.
Support Positioning Strategy:Promote a “We-will-not-be-undersold” positioning,
whereby a firm promises the best possible service at the best possible price.
Support Competitive Strategy: Discourage existing and potential new competitors.

Pricing & Revenue Management 7

How Does Competitors’ Pricing
Affect Revenue Management?

As revenue management systems monitor booking pace, they indirectly pick up the effects of
competitors’ pricing. For example, if an airline prices a flight too low, it will experience a higher
booking pace, and its cheaper seats fill up quickly. That is generally not desirable, as it means a
higher share of late-booking as well as high fare-paying customers are not able to get their seats
confirmed, and therefore will choose to fly on competing airlines. If the initial pricing is too high,
the firm will get too low a share of early booking segments (although this still tends to offer a
reasonable yield) and may later have to offer deeply discounted “last-minute” tickets to sell excess
capacity.
Pricing & Revenue Management 8
PRICING
STRATEGY STANDS
ON THREE
FOUNDATIONS
The foundations of pricing strategy
can be described as a tripod, with
costs to the provider, competitors’
pricing, and value to the customer as
the three legs.
 What Are The Types Of Pricing
Strategies?

Competitor-Based Pricing Strategy

Cost-Plus Pricing Strategy
Competitive pricing is the practice of
One way to price a product is to add a
setting your product or service prices
fixed percentage to the manufacturing
based on the pricing of your competitors
costs for each unit. This pricing technique
in your market or niche rather than on
is known as “cost plus” or “markup
your company’s costs or desired profit
pricing.”
margins.

Pricing & Revenue Management 10


Premium Pricing Strategy
Businesses that charge premium
This strategy aims to maximize income
prices do so because they have a
specific product or brand that no
one else can match
Skimming Pricing Strategy
Price skimming is a strategy usually
employed at a new product’s debut.
to the greatest extent possible when
customer interest in the product is
strong, and your company faces low
competition.

Pricing & Revenue Management 11

 Various Pricing Strategies applicable to
Service Industry
Dynamic Pricing Strategy – No specific price
tag can ever be put to any service. It is the
reason why service providers/ businesses use
this flexible price method in order to price the
services according to the market demand.
Dynamic prices take into consideration various
factors such as demand and supply, competitive
pricing, etc.
Penetration Pricing – this strategy entirely
focuses on the pricing factor. It is generally used
when a company is looking to launch a new
product or a service in a market. To attract
customers, the pricing of the goods/ services is
done in such a way that the prices of own
products are lower than those offered by their
competitors.
Pricing & Revenue Management
Value Based Pricing – This pricing concept
requires businesses to completely change their
model, this is done through repricing goods and
services according to their perceived value
rather than pricing them on the basis of their
perceived values. This strategy best works when
a business is providing an entirely unique
service.
Economy Pricing – This strategy is mostly
used by medical stores and grocery stores.
Rather than earning a huge margin on sale of
products, these stores focus more on selling
the goods in huge volumes to be in profits.
They believe in earning profits through
“selling more at a lower price” rather than
“selling less at a higher price”.
12
Dynamic Pricing in Ridesharing
Services: UBER

The ridesharing sector, particularly Uber, offers another excellent example of

dynamic pricing in action. Uber dynamic pricing, also known as surge pricing,
adjusts fares based on the demand and supply of drivers. Prices increase
during peak times, or in areas with high demand but few available drivers.
This strategy maximizes revenue during high-demand periods and
incentivizes more drivers to become available.
Pricing & Revenue Management 13
 Technological solutions in Services:
Hotel Industry
1.Duetto - Best for real-time pricing
capabilities
2.Roomdex - Best for automated room
upgrades
3.IDeaS Revenue Management Solutions -
Best for advanced analytics
4.Hotellab - Best for strategic revenue planning
5.Right Revenue - Best for adaptive pricing
algorithms
PRESENTATION TITLE
Hotel revenue management software, sometimes known
as an RMS or revenue platform, is a tool that hotel
businesses can use to manage and optimize revenue
streams and profit by optimizing prices, managing
inventory, and tracking demand in real-time.
Revenue management software uses machine learning
algorithms to ensure optimal yield by automatically
calculating demand and revenue forecasts while
recommending appropriate selling strategies.
14
PRESENTATION TITLE 15
Elements & Principals of Revenue
Management

Pricing & Revenue Management 16

Some highlighted Terms

Demand forecast: Demand forecasting helps the business make better-

informed supply decisions that estimate the total sales and revenue for a
future period of time.

Capacity Utilization: The capacity utilization rate is used by companies to

assess their current operating efficiency.

Pricing in revenue maximization: For firms, the pricing strategy determines

income generation. Service firms need to implement revenue management to 17
Revenue Management Steps
1) Gathering information (data collection)
2) Slicing and dicing (segmentation)
3) Seeing the future (forecasting)
4) Planning and executing (decision-making and optimization)
5) Iterating (dynamic reevaluation)

Pricing & Revenue Management 18

Thankyou
!