The common process for companies developing a next generation Revenue Management system is to define requirements, create designs, test designs, implement solutions, and begin training and rollout.
However, the best practice for creating a successful Revenue Management system should include instituting guiding principles for evaluating designs – before moving forward with their implementation. But how does a company evaluate one option over another, or decide if a new design meets a level of excellence that is worthy of implementation?
Companies can avoid common mistakes by developing guiding principles to evaluate designs and plan their implementations. The following guidelines have been used repeatedly – and profitably – over the years to design world-class Revenue Management systems.
- Essentialism: Seek to do less and better than before, so you can drive the highest revenue contributions possible. It’s not about implementing less; it’s about implementing the right designs that drive contributions.
- Elegant Simplicity: Implement sophisticated analytical models on the back-end, but present information in a simple way for decision-makers. Avoid presenting too much information; provide critical information to inform the decision.
- Transparency: Make model recommendations fully transparent by showing all key input variables. Recommendations must earn acceptance by being reasonable, understandable and quickly executable.
- Focus Users on Inputs: Given the right demand, math models are better than humans at optimizing prices and controls to maximize revenue. Focus users on demand and avoid designing overrides to optimization models.
- Precision over Complexity: For forecasting and optimization, solve the problem at the level of detail that leads to the greatest precision and accuracy, not the most detailed level imaginable. Too much detail leads to complexity, small sample issues, and volatility.
Reviewing designs against these guiding principles will ensure you are achieving the highest potential contributions from your next generation Revenue Management system while driving user adoption during training and rollout.