Name your price: The power of Big Data and mart analytics
2. Move quickly to automate key analyses. To meet the demands of large data sets and respond rapidly to fluctuations, targeted automation is a must have. To maximize use of inventory, for example, companies can develop automated utilization forecasts based on past booking patterns, current advance reservations, competitor information, and so on. Just as importantly, the output needs to be in easy-to-use, flexible formats, such as Excel-based tables or web interfaces. One tool we worked with automated the combination of revenue forecasts and inventory utilization data that was previously stored in separate systems; this allowed managers to track progress in real time and make pricing decisions that were much faster and better-informed. To analyze and simplify large volumes of sales data across locations, you’ll generally need customized IT solutions and applications. The best performers can get advanced systems in place in weeks then test and adjust, rather than waiting for months or even years to implement new applications. 3. Align the organization around pricing performance. Companies often spend most of their energies and resources on building advanced analytics tools. But in our experience, they need to spend as much or more time making necessary changes to organizations and processes. At one travel company, pricing team interactions with supporting business units were originally ad-hoc and unstructured. So they developed a systematic process that allocated responsibilities for pricing and revenue management amongst the relevant departments, including pricing, marketing, inventory management, and distribution – and described when and how they should work together to create alignment on pricing decisions. As one output of this process, inventory managers developed a new appreciation for revenue metrics, and understood that these should take precedence over the utilization metrics that had previously been their focus. It’s also important to develop clear incentives that reward managers for pricing performance; and to recruit a new generation of pricing talent with more of a “trader” profile than an “analyst” one, ie. results-driven, comfortable with risk and experimentation, and able to make quick decisions. 4. Train to sustain. Gains from improved pricing performance are hard to sustain unless companies commit to extensive and intensive training. Training should focus on the most critical elements of pricing that drive revenues, best practices for pricing and inventory management, and how to use new tools. Rather than using traditional classroom instruction, training needs to emphasize simulations involving real data and decisions that affect the company’s pricing in the market. This approach allows participants to review actual results and the impact of the decisions they’ve made. In addition, this type of training prepares participants to take calculated risks, rather than relying on standard pricing principles, and inculcates an innovative mindset that characterizes the best pricing managers. To be successful, such training must involve the relevant functions beyond pricing. For example, inventory and sales managers must also learn to calibrate demand and supply through pricing to maximize revenue generation. Pricing data is just going to get bigger and move faster. In the travel industry – and in many others, for that matter. Companies that can keep up will find the growth and margin to stay ahead of the competition.
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