One of the major applications of revenue management can be seen in the seasonal demand. Here we see a demand shift from the peak to the off-peak duration; hence a better balance can be maintained between supply and demand. It also generates higher overall profit.
The commonly used effective and efficient revenue management approach to coping with seasonal demand is to demand higher price during peak time duration and a lower price during the off-peak time duration. This approach leads to transferring demand from peak to off-peak period.
Companies offer discounts and other value-added services to motivate and allure customers to move their demand to the off-peak period. The best-suited example is Amazon.com. Amazon has a peak period in December, as it brings short-term volume that is expensive and reduces the profit margin. It tempts customers through various discounts and free shipping for orders that are placed in the month of November.
This approach of reducing and increasing the price according to the demand of customers in the peak season generates a higher profit for various companies just like it does for Amazon.com.
Seasonal peak of demand is a common occurrence.
1. For Amazon.com, Peak sales period is ‘December’. As a result of the seasonal peak, there is a significant increase in the requirement for picking and packing as well as transportation capacity. Bringing in short- term capacity is expensive and decreases Amazon’s margin. Off-peak discounting is followed for shifting demand to November. Free pickup and shipping are offered to customers in Nov, encouraging customers to shift demand from December to November.
2. A tactic is, to charge a higher price during the peak period and a lower price during the off-peak period. Trade-off between ‘revenue increase due to low-price https://www.facebook.com/ialwaysthink pretty things