Yield Management

Description of Yield Management. Explanation.

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Definition Yield Management. Description.

Yield Management is the practice of pricing to maximize the amount of revenue received per unit sold. It should be seen as the process of allocating the right type of capacity to the right kind of customer at the right price as to maximize revenue or yield.

It is usually associated with the pricing practices of airlines, hotels, transportation, and other sellers of “perishable" products. That is, goods that become unsellable at a point in time (such as just after a flight takes off). With an advance forecast of demand and pricing flexibility, buyers will self-sort based on their price sensitivity (using more power in off-peak hours or going to the theatre mid-week), their demand sensitivity (must have the higher cost early morning flight or must go to the Saturday night opera) or their time of purchase (usually paying a premium for the luxury of booking late).

In this way, yield management's overall aim is to provide an optimal mix of goods at a variety of price points at different points in time

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Compare with: Capacity Management | Value Engineering

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End of description Yield Management. An explanation.