College of Management The Business School at Georgia Tech Welcome! Title Date Carrie Crystal Mark Ferguson Jeff Stratman Jon Higbie (Manugistics) (c)2003 Robert G. Cross
Motivation “People, Processes, Systems – in that order” – Nell Williams, VP Marriott Global Revenue Management “The challenge has been on the cultural side. Systems can be developed. ” – Apo Demirtas, VP Intercontinental Hotels Market Strategy
Airlines vs. Hotels Airlines Hotels HQ HQ
Examples Project Approval Continuous improvement or ROI based projects? Alignment of Incentives Salesperson’s preferred Revenue Manager’s customer preferred customer $200 - $20 $180 $190
Examples General Manager Sales Director Revenue Manager General Manager Sales Director of RM
Key Questions Does it matter if a firm rewards salespeople on revenues but rewards revenue managers on profits? Given limited financial resources, how much should a firm invest in revenue mgt IT improvements versus other enablers such as training, marketing, etc. ? Is price experimentation worthwhile?
Market Segmentation Framework Pricing Forecasting Revenue Management Capability Revenue Management Performance Capacity Allocation Revenue Management Culture Information Technology Learning Aligned Incentives Organizational Structure Executive Commitment Education & Training
Cross-Industry Data (Dataset 1) • Why cross-industry? – To see broad trends across industries • Who answered the survey? – GT conference participants – Manugistics contact list • What types of responses are gathered? – Perceptual (Likert scale) questions to measure factors – Perceptual performance measures
Perceptual Questions • Initial questions found in existing studies/ literature • Questions refined through iterative Q-sort process • Inter-rater reliability tested • Example “Pricing” Questions (On a scale from 1 (strongly disagree) to 7 (strongly agree)…) – Customers’ price elasticity information is considered when setting prices – My firm has an effective policy for setting prices – We understand the value our customers place on our product or service and set rates accordingly
Initial Observations (Dataset 1) • Sample size = 22 • Significant, positive correlations: Performance and… – Pricing – Executive commitment – Learning (Experimentation, Benchmarking, Feedback, Suggestions) – Education and Training
Hotel data (Dataset 2) • Why hotels? – Lots of experience – Large sample size with variation • Who will answer the survey? – Revenue managers from specific hotel locations – Initial support from VPs of a few major chains • What types of responses are gathered? – Perceptual (Likert scale) questions for independent vars. – Hotel specific, financial performance measure
Summary • Theoretical framework for holistic revenue management • Preliminary results support model premise • Completed work will highlight key areas for best performance …… to be presented at INFORMS Nov 2006…
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