RM Moment #12:

Data science is a core discipline in RM. Since we do not know all the variables that influence demand, the quality and correct treatment of known data (both observable and latent) play a fundamental role in improving results. In practical terms, one of the main functions of a RM team is precisely to be able to capture as much observable and latent data as possible, in order to reduce the weight of unknown data.

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RM Moment #11:

On average, it is estimated that only around 55% of the variables that influence demand are known. These are considered to be observable or latent observable demand variables. As for the remaining 45% no one knows what they are, that is, they are considered to be unknown demand variables. In this sense, RM is, up to this day, considered the only revenue-side demand management process that presents a set of instruments and mechanisms to deal exactly with the unknown part of demand.

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RM Moment #10:

RM, like supply-chain management (SCM), are the only demand management processes that optimize their functions. RM maximizes revenue and SCM minimizes costs. It is the use of both at the same time that can lead to the greatest possible profit.

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RM Moment #9:

The civil aviation industry possesses an inflexible production. It was exactly this characteristic that led Robert “Bob” Crandall, president of American Airlines in the 1970s, to develop a demand management process that was very different from the traditionally used. This process was called Yield Management, in reference to the metric widely used in aviation, Passengers Yield, which would later be called Revenue Management..

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RM Moment #8:

RM is a process that is based on a socio-technical system. One of the major flaws in implementing RM in an organization is to take only into account the technical system part and disregarding the socio-organizational system component of it.

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RM Moment #7:

The optimal price is obtained when marginal revenue equals marginal cost. In companies with flexible production, this is relatively easy to calculate compared to companies with inflexible production. This is one of the biggest challenges in companies with inflexible production, or, if you prefer, candidates for the implementation of RM, because it is necessary to consider the marginal opportunity cost.

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RM Moment #6:

RM is an economic anomaly (or exception), because many businesses with inflexible production and high financial leverage (aviation, hotels, rent-a-car, etc...) even operating in an environment of strong competition (perfect competition), the prices/marginal revenue practiced are far or very far from being equal to their marginal cost, thus contradicting the economic principles of perfect or quasi-perfect competition. In this sense, the economic paradox that exists in companies capable of applying RM is that they tend to operate in market structures of strong competition (perfect or quasi-perfect competition), but applying, in practice, many economic principles typical of monopolies (e.g. price differentiation) and/or oligopolies (e.g. product differentiation).

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