ROME – Back in the late 1980’s, I attended a conference on “revenue management,” or the art of pricing airline seats to get maximize yield. Too high, and you lost business; too low, and you got less than people were willing to pay. Most of the speakers were from the airline industry, which already knew the tricks. Many of the listeners were from the hotel business; they were just learning. As a customer, I felt as if I had penetrated the enemy’s strategy session.
Over the years, I watched as more and more markets picked up two related concepts: time-based pricing and more efficient use of so-called “vanishing assets” – or capital goods that generate revenue only as they are used. In the old days, before computers, it was hard to manage complex pricing – or, for that matter, to reach the right customers with specific time-based or location-based offers. Hotels and airlines were a special case: their business is dependent on shared use of capital assets.
Of course, some businesses do use blunt versions of time-of-day or seasonal pricing. We take it for granted that health clubs charge more for memberships that include peak hours. But, in general, an asset is an asset, and you still hear complaints from people who don’t understand why the guy next to them in an airplane paid a lower price.
As real-time information about customers’ needs and vendors’ offers combines with a new concern for efficiency and optimization, there is a widespread shift to make use of the opportunities to personalize offers around location and time. The cost of complexity and targeting has dropped, even as the demand for return on assets has increased.