Abstract: In the nineteen years since I started working in the consumer products industry, I have worked with five companies, all of which were constantly looking for ways to deal with today's increasingly chaotic marketplace. Several of these companies were already experiencing desperate financial pressures when I arrived to lead up their sales forecasting and marketing analysis departments. Others were feeling the pressures from their Board of Directors to increase profits in a declining market that led to all kinds of solutions such as JIT (Just-in-Time), Quick Response, ECR (Efficient Consumer Response), and most recently Supply Chain Management. All of these new processes required drastic reengineering efforts, and almost all were very inward focused toward making the company more efficient and responsive by relying in many cases on downsizing. Many had tried cost cutting, reengineering, and downsizing with varying degrees of success, and many times were only delaying the inevitable - loss of market share and revenue, both of which ultimately lead to lost profits. In all cases, they felt more focus on efficiencies through better sales forecasting was the end all solution. Unfortunately, their understanding of fact-based forecasting was limited to trend extrapolating and goal setting, also known as sales targeting. In the forecasting discipline we refer to this as subjective forecasting based on past historical sales with a great deal of gut intuitive based thinking by the Juries of Executive Opinion. These strategies often led to corporate anorexia, and left serious side effects, including crippling the company's ability to grow. Not to say, what it did to give sales forecasting a very poor image. In each case, these companies were answering to increasingly impatient investors who were not satisfied with squeezing more profit out of a shrinking company. Nevertheless, they were deman-ding long-term, profitable volume growth. What they didn't consider was the ever-increasing fractious consumers, and vicious competitive atmosphere in the marketplace. Many of the problems being encountered by the executive management teams were never experienced before. Many of these seasoned executives are savvy business people, but their education and experience never prepared them for these new marketplace conditions. On the other hand, there have been a few brave executives who have found a way not only to stay alive, but prosper, as well. They have discovered an array of revenueenhancing tactics that helped them understand their markets better than ever before. They have also learned how to predict customer demand at the micromarket level and respond quickly, as demand changes. They have learned by using a technique (process) called Revenue Management (RM) to convert market uncertainty to probability, and probability to profitability. RM is a new proven competitive weapon that enables companies to better understand the complexities of today's diverse marketplace, deal with these issues on a micro-market basis, and make actionable decisions confidently and rapidly. WHAT IS REVENUE MANAGEMENT? Revenue Management is the art and science of predicting real-time customer demand at the micro-market level while optimizing price and availability of your products. The application of RM principles is unlimited, and has the potential to yield impressive levels of profit. Firms who have employed RM techniques have seen revenues increase by as much as 7% without adding significant amounts of capital expenditures, resulting in a50% to 100% increase in profits. Revenue Management in its basic form allows managers to more keenly observe the buying behavior of customers, thereby making price and product availability adjustments to achieve significant revenue gains. When used in its high-tech mode, RM is a disciplined process that enables companies to use massive amounts of customer data to dynamically forecast customer behavior at the micro-market level. …
Publication Year: 1999
Publication Date: 1999-04-01
Language: en
Type: review
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Cited By Count: 13
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