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FUTURES

Expert opinions: Current pricing and revenue

management practice across U.S. industries

Laurie Garrow
, Mark Ferguson, Pinar Keskinocak and Julie Swann

Received: 13th June, 2006


Georgia Institute of Technology, School of Civil and Environmental Engineering, 790 Atlantic Drive, Atlanta,
GA 30322-0355, USA
Tel: þ 1 404 385 6634; Fax: þ 1 404 894 2278; E-mail: [email protected]

Laurie Garrow is an Assistant Professor of including a review article that appeared in

Civil and Environmental Engineering. Her Management Science. She served as the
research interests include travel behaviour cluster-chair for the Supply Chain Management
modelling and development of advanced dis- and the Manufacturing and Service Operations
crete choice models. She currently serves as Management tracks at INFORMS. Before
the Vice-Chair of the Urban Transportation joining the faculty at Georgia Tech, she
Special Interest Group of INFORMS and worked at IBM T.J. Watson Research Center.
co-chair of the AGIFORS Scheduling and She received the NSF Career Award in 2001
Strategic Planning Group. Prior to joining the and the Daniel H. Wagner Prize for Operations
faculty, she worked for five years in the Research Practice in 1998.
research and development revenue manage-
Julie Swann is an Assistant Professor in the
ment group for United Airlines and for one year
in customer science at Mercer Management School of Industrial and Systems Engineering.
In addition to her university experience, she
Consulting.
participated in several research projects at
General Motors and IBM, focusing on pricing
Mark Ferguson is an Assistant Professor in
in different industries. She is currently focused
the College of Management and coordinator
on the modelling and analysis of problems in
for the Pricing and Revenue Management
supply chain management and revenue man-
Initiative at Georgia Tech. He served as a
agement. Other research interests include
board member for the Pricing and Revenue
applications of economics and optimization to
Management subdivision of INFORMS and
has consulted with a number of companies on healthcare policy. She received the Doctoral
Dissertation Award from the Council of Logis-
price optimization. Two of his papers have won
tics Management in 2002 and an NSF Career
best paper awards at POM conferences.
Award in 2004.
Before joining the faculty, he worked for five
years as an inventory manager at IBM. ABSTRACT
KEYWORDS: dynamic pricing, revenue man-
Pinar Keskinocak is an Associate Professor agement, internet, applications
in the School of Industrial and Systems
Engineering. She has published several scho- On May 18, 2006, the second annual Revenue
larly papers on pricing and lead time decisions Management and Price Optimization conference was

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 Expert opinions

held at the Georgia Institute of Technology. The and Nell Williams,2 vice president of Marriott’s
theme of the conference was on how the Internet is Global Revenue Management Organization,
changing traditional revenue management and pricing who delivered the keynote address. The names,
practices. The conference brought together experts and titles, and companies of all panelists who
thought leaders from more than 30 companies participated in the conference are included as
spanning airlines, hotels, car rentals, cruise lines, notes and the agenda from the conference is
apartment rentals, aircraft manufacturing, retailing, included in Appendix A.
distribution, e-mail marketing, on-line travel, logis- This paper describes three themes that
tics, sports, performing arts, software providers, and emerged from the conference. First, common
others. This paper summarises the key discussions pricing practices and pricing trends across
from this conference and synthesises experts’ perspec- industries are synthesised. Next, impacts of
tives on near-term opportunities and challenges facing the Internet on traditional revenue manage-
their industries. ment and pricing are outlined. Finally, integra-
Journal of Revenue and Pricing Management (2006) 5, tion opportunities between pricing and
237–247. doi:10.1057/palgrave.rpm.5160042 revenue management and between demand
and supply chain management are presented.

INTRODUCTION PRICING PRACTICES

The second annual conference on Revenue While there is a large variation in pricing
Management and Price Optimization was held practices across industries, several panelists
at the Georgia Institute of Technology on May mentioned a recent focus on centralising
18, 2006. The primary goals of this annual pricing decisions. Alignment of sales incentives
conference are to foster academic and industry with corporate revenue, pricing, and profit
research collaboration and to seek out lessons, goals was also mentioned as a key driver of
similarities, and differences between the various success. According to AMR Research, com-
applications of revenue management and price panies on the leading edge of price manage-
optimisation. This year, more than 30 panelists ment achieve their success by a centralised
representing a diverse set of industries were pricing function and the adjustment of sales
invited to share their best practices, experi- incentives to include margin, not just volume
ences, and challenges in implementing pricing (Preslan and Newmark, 2004). Panelists also
and revenue management solutions. The pane- emphasised important distinctions in pricing
lists represent a mix of profit and non-profit practices between industries that are able to
companies as well as a mix of established and ‘price the experience’ and industries that sell
new users of revenue management. The theme commodity-like products. Bundling (or packages)
of the conference was on understanding if and is generally viewed as an important future
how the Internet is changing traditional component of successful pricing, but there are
revenue management and pricing applications. diverse opinions and applications envisioned
The conference included eight panel dis- for how best to use bundling.
cussions and two invited presentations. The
panel discussions included representatives from Centralisation of pricing decisions and
airlines, hotels, car rentals, cruise lines, apart- alignment with sales compensation
ment rentals, aircraft manufacturing, retailing, While certain industries such as airlines have a
distribution, e-mail marketing, on-line travel, history of setting prices centrally, a trend towards
logistics, sports, performing arts, software centralised pricing based on data analytics and
providers, etc. The two invited speakers were software support was mentioned by several, less
Robert Cross,1 chairman and CEO of Reven- traditional users of revenue management,
ue Analytics, who presented opening remarks, companies including Coca-Cola Enterprise,

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 Garrow et al

UPS, BlueLinx (building product distributor Demirtas,8 vice president at InterContinental

that handles 40 per cent of sales by phone), Hotels Group (IHG), mentioned the desire to
Archstone-Smith (apartment rental), and the have centralised price optimisation. However,
InterContinental Hotels Group. For example, the relationship between IHG and the individual
Coca-Cola Enterprise recently transferred the hotels that carry their name depends on the
pricing decision authority from individual ownership structure and whether the hotel is
divisions (totalling more than 20) to head- owned, managed, or franchised. As Sharon
quarters. Divisions have the ability to override Duffy,9 vice president at Hilton Hotels, states,
rate increase recommendations by interacting ‘when it comes to the owned and managed
directly with headquarters and presenting a hotels, we can do a lot moreydictating
business case based on their knowledge of local behaviory‘we want you to do this, we want
market conditions. They also have plans to you to price this way, these are our rules.’
align sales compensation to the new centralised When it comes to franchise hotels, it’s a lot
pricing goals (Hal Kravitz3 and Shawn McMil- more of ‘these our best practices, and it is in
lian,4 Coca-Cola Enterprise). your best interests to adopt these.’ In cases
UPS and BlueLinx also set prices centrally, where prices for hotels can be set centrally,
but provide a range of acceptable prices from executives like Nell Williams2 of Marriott
which sales agents may choose. Monitoring is perceive ‘huge opportunities in aligning com-
done to ensure that individual sales representa- pensation’ of the sales representatives to profit
tives are complying with system recommenda- versus volume.
tions and not always quoting the lowest price in In summary, while several panelist men-
the recommended range. Monitoring also helps tioned the trend towards centralised pricing
in (at least partially) aligning the compensation and the desire not to ‘farm out pricing’
of sales representatives with pricing goals (Rajeeve Kaul,10 Auto Zone), successful im-
(Joe Kniple,5 UPS). Even when the incentive plementation was viewed as critically depen-
systems are not aligned, monitoring and perfor- dent on adoption by the user community,
mance reports allow the pricing department which often involves aligning sales compensa-
to influence the action of sales agents tion and pricing objectives.
(Bill Dudziak,6 BlueLinx).
Archstone-Smith recently transitioned from Pricing the experience
having individual apartment buildings set rental During the conference, an important distinc-
rates to determining these rates centrally. They tion emerged between non-profit organisations
also use compliance reports to monitor whose revenue depends critically on a loyal
whether property managers are following the customer base and organisations that sell
recommended rates. However, unlike UPS, commodity-like products.
they do not tie compensation of property As an example, consider the Atlanta
managers directly to compliance reports. In- Symphony Orchestra (ASO), a non-profit
stead, they emphasize that compliance helps organisation that depends critically on building
them to better protect themselves against long-term relationships with donors. Faced
fair housing lawsuits (Donald Davidoff,7 with decreasing revenues, ASO tried two
Archstone-Smith). When pricing is done by a different approaches for generating revenue.
centralised software package, the company is First, ASO started to aggressively promote its
less likely to price-discriminate against a renter convenience packages that enable customers to
based on race, gender, or appearance. attend multiple concerts at a discounted rate.
In addition to the companies above who Convenience packages differ from ‘series
have actively transitioned to centralised pricing, packages’ in the sense that specific concerts
several other panelists, including Apo that are part of the package are not determined

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 Expert opinions

in advance by ASO, but rather by the and more on revenue and attracting new
consumer. However, as Charlie Wade,11 vice customers.
president at ASO, describes, ‘While conveni- The ability to price the experience and
ence is king, convenience also has a certain protect degradation in revenue streams from
corrosion effect for the institution. An orches- loyal customers was also mentioned by the
tra which relies a great deal on contributed Georgia Tech Athletic Association. The focus
revenue really requires a certain level of loyalty for this organisation is on recruiting and
and a certain level of commitment to the retaining loyal season ticket holders while
institution. And what we discovered was that leveraging pricing and marketing tools to
these folks who bought the convenience attract new customers. As Director Scott
packages really didn’t want to invest much McLaren13 states, ‘y we’re selling not just
more. They didn’t give as much in terms of the game you’re coming to, but everything
donations, and they didn’t buy additional single around the event’ which includes entertain-
tickets.’ ment targeted at families that begins two-and-
This discovery led to an alternative approach a-half hours before kickoff. His organisation is
for generating revenue, which involved re- also creating a flexible pass plan this year that
pricing seats to reflect the experience of allows a consumer to purchase any three of the
attending the performance. Pricing was de- seven home games. In the past, the flex passes
signed to segment two types of customers: were created by bundling a popular game with
those who are location-sensitive and those who two less popular games. The challenge moving
are price-sensitive. As described by Anil forward is to balance the objective of convert-
Malhotra,12 a strategy consultant for the ing flex packs to future season ticket holders
performing arts, location-sensitive individuals with the need to prevent revenue leakage on
want a good seat ‘because they love the art the most popular games.
form, they want to get the best experience that Pricing around the experience also occurs
they can.’ Consequently, ASO increased prices outside non-profit organisations such as Carni-
at prime locations (such as the left side of the val Cruise Lines. The ability to ‘price the
stage near the piano) that sold out for almost experience’ and create differentiated products
every event and added additional price points across cruise line companies lead to very
on the main floor. A new minimum price of different pricing models. Specifically, compe-
$10 was added to attract new price-sensitive titor prices are not a direct input into revenue
customers. Also, distinct from the traditional management and pricing decisions. In addition,
revenue management practice, prices were even though Carnival Cruise Lines is a wholly
changed dynamically based on booking pace owned subsidiary of Carnival Corporation,
versus booking availability. That is, although which owns multiple brands that can legally
the number of seats for a particular class $10 talk to each other about price, Vice President
does not change, the price for the seats could Brenda Yester14 states ‘we don’t have a lot of
be raised by $5 or another amount if the time, and even if we did, I wouldn’t be able to
booking pace (which tends to be highly input it because my product is very differ-
predictable for similar concerts) comes in entyit isn’t a key input to my decision
strong. Thus, even though the entire concert process.’
may only fill 60 per cent of seating capacity, if As observed by Kevin Geraghty,15 president
the booking pace is strong, prices are raised. To of Revenue Research, the ability to price
accommodate dynamic pricing, price ranges experience takes consumers’ focus off price.
for tickets were not posted in advance in print However, it is not clear if this approach will
advertisements. Finally, performance metrics work in industries such as the airlines. While
were changed to focus less on sales volume Krishnan Saranathan,16 director at United

240 Journal of Revenue and Pricing Management Vol. 5, 3 237–247 & 2006 Palgrave Macmillan Ltd, 1476-6930 $30.00
 Garrow et al

Airlines, views the ability to price individual mercial Airplanes, states that bundling is often
components of an airline ticket as a potential used when selling commercial aircraft to help
direction (such as the strategy Air Canada is shift the focus from price and make it more
currently employing via menu pricing for difficult for airline customers to know exactly
preferred seating, preferred menu service, and ‘what the metal’ sold for. Common bundling
other amenities), Bill Brunger,17 former senior tactics include adding maintenance or pilot
vice president at Continental Airlines, dis- training and/or combining the price of two
agrees, pointing out that ‘our products are too different aircraft.
thinyand our jumps [in price] are pretty big.’ Several panelists, particularly those in the
Consequently, ‘the value that the sum of the travel industry, also mentioned the ability to
attributes of a radically commotized leisure protect brand value while effectively selling off
product and the value of what a business distressed inventory as motivation for working
passenger gets [is not rational].’ with on-line travel agents such as Travelocity,
Thus, while certain industries have had Expedia, Orbitz, Priceline, or Hotwire. The
initial success in ‘pricing for the experience,’ it ability to maintain an opaque price differs
remains to be seen if this practice will work in across these on-line travel agents. Consistent
other industries. It is plausible that other with the bundling model, hotels may offer
supporting factors, such as a rational price highly discounted rates to Travelocity, Expedia,
structure employed by ASO, are needed to or Orbitz for use in creating travel packages.
guarantee success. However, in the case of Priceline or Hotwire,
hotel rooms are generally not bundled with
Bundling other products, but offered at a substantial
The discussion of flex passes relates closely to discount to consumers who offer bids for
the concept of bundling, which is ‘the practice rooms meeting certain criteria. Lee Jones,19
of joining related products together for the vice president at Marriott, states that, in
purpose of selling them as a single unit’ (http:// general, the experience with Priceline and
www.investorwords.com/620/bundling.html). Hotwire has been positive and has generated
Bundling is often used when two or more incremental revenue because they see more
products and services have ‘synergies,’ that is, price-sensitive customers who do not normally
they appeal to consumers more as a package stay at Marriott come though these channels.
than as individual offerings (eg, phone and DSL However, Jones also views this as a very low
service). In general, it is less expensive to buy volume, niche market. Apo Demirtas,8 vice
the products and services as a bundle than president at the InterContinental Hotels Group
separately. Bundling is also often used to create (IHG), also mentioned that he likes the ability
a larger market for relatively low value products to have an opaque price ‘as long as the product
by combining them with a higher value and price is truly opaque.’ He notes that there
product, for example, selling a high-valued have been instances in which hotels are not
Notre Dame football ticket only if it is truly opaque to customers (eg, they are the
purchased as a bundle with a less popular only four-star hotel in the consideration set
football game. returned by a search engine) and that monitor-
While the traditional uses of bundling were ing has become important in ensuring the price
mentioned by several organisations, including remains opaque to consumers in these channels.
the Atlanta Symphony Orchestra and Georgia Another use of bundling was mentioned by
Tech Athletic Association, several panelists Travelocity. Rich Saleh,20 director at Travelo-
also mentioned the importance of bundling city, states that he expects to see larger, more
in other contexts. For example, Richard customised bundling (or packaging) in the
Lonsdale,18 regional director at Boeing Com- future as on-line data is effectively mined and

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 Expert opinions

cross-selling opportunities can be better iden- the hotel industry where margins on hotel
tified. Beju Rao,21 senior principal at Sabre room rates tend to be higher, coexisting with
Holdings, which works with Travelocity, states on-line travel agents has led to ‘awkward’
that the use of packages by on-line agencies relationships (Rich Saleh,20 Travelocity)
could also be used to build loyalty. and both are ‘still in the learning process’
While the use of bundling, particularly in (Beju Rao,21 Sabre Holdings) and looking for
on-line channels, is expected to play a larger ways to build a loyal customer base. Panelists
role in future pricing practices (Craig Eister,22 envision a broad range of future applications that
InterContinental Hotels Group; Darren leverage the unique characteristics of on-line data.
Arrington,23 Dollar Thrifty Automotive Group;
Rich Saleh,20 Travelocity, etc), business motiva- Pricing parity and tension with on-line
tions will likely be driven by factors other than travel agents
price, such as the ability to attract loyal The desire to provide a clear message to
customers and create cross-selling opportunities. consumers via maintaining pricing parity across
distribution channels was expressed by several
IMPACT OF THE INTERNET panelists. Brenda Yester,14 vice president at
While experts sometimes disagree about how Carnival Cruise Lines, states that the recent
the Internet is driving customer behaviour, transition to this price policy has ‘really helped.’
none deny that, in certain industries, the Specifically, after September 11, Carnival
growth of the Internet as an on-line channel Cruise Lines introduced select agent pricing.
has been explosive. As Nell Williams2 reports, This led to limited control on what travel
when the Marriott.com site was launched in agencies were selling and different mark-ups on
1996, it took on average one reservation per products ensued. Subsequently, select agent
hour; today it processes an average of 1,480 rates were eliminated and common retail prices
reservations per hour. In 1996, 0.03 per cent of were instituted. However, pricing parity from
all reservations for Marriott lodging represent- the consumer perspective was not achieved
ing $1.5 million in revenue was generated by until September 2004 when Carnival created
on-line reservations; today 15 per cent of an ‘advertised price policy.’ Under this policy,
reservations representing a daily revenue of Carnival dictates the price that can be adver-
$11 million and 85 per cent of all on-line tised such that consumers see the same price
revenues are made through Marriott.com. through all channels and print media. Agents
Further, as volume has increased on Marriott.- can still offer different prices if consumers
com, the channel has become reflective of the contact them directly, but consumer expecta-
overall ‘Marriott customer,’ that is, there is no tions for cruise prices are set directly by
difference in price sensitivities between the Carnival.
customers who purchase from the Marriott While Carnival obtains less than 1 per cent
website versus via phone reservation agents of its revenue at Carnival.com, other industries,
(Lee Jones,19 Marriott). such as hotels, depend more heavily on (and
Consistent with findings reported in the indeed are encouraging) the use of the Internet
literature, the majority of panelists agree the as a distribution channel. Similar to Carnival,
Internet has increased price transparency for the institution of pricing parity was motivated
consumers and has blurred traditional segmen- by a desire to instill confidence in consumers
tation lines. While new trends, such as ensuring and reassure them that the rate they see on the
pricing parity across channels, was mentioned hotel website will not be undercut. However,
by many panelists, there was little convergence as John Kaufman,24 vice president at Starwood
in opinions regarding best practices for working Hotels, states, another underlying motivation
with on-line travel agents. Particularly within of the best rate guarantees instituted by the

242 Journal of Revenue and Pricing Management Vol. 5, 3 237–247 & 2006 Palgrave Macmillan Ltd, 1476-6930 $30.00
 Garrow et al

hotels was to stem volume going through third- supplier lures customers back in with award
party channels (such as Travelocity, Expedia, points; we tolerate it, but we try to forge
and Orbitz). This is another reason why relationships that are win-win and try to do
Starwood has established a policy that custo- best by our customers and best by our suppliers’
mers do not get preferred guest points for their (Rich Saleh,20 Travelocity).
stays if they book through third-party channels, In summary, while the relationship between
which ‘has been a very effective way to encour- on-line travel agents and hotels is still in
age loyal customers to come to our site to book transition, both have ideas for how to use on-
their stays.’ Needless to say, this has led to much line channels to create value for customers. For
debate and tension with the third-party on-line example, both Travelocity and Expedia view
travel agents, particularly in the hotel industry customised packages as a future direction (Rich
where margins on hotel room rates tend to be Saleh,20 Travelocity; Utpal Kaul,25 Expedia)
substantially higher than in other travel in- while hotels view the Internet as an opportu-
dustries, such as airlines or car rentals. This is nity to provide richer information about their
best seen in quotes from the hotel panelists and products and better differentiate themselves
on-line travel agents: from competitors. In addition, it is worth
‘We all have discussions and debates about noting that while the hotel representatives on
how big you want to play in third party the panel have a strong brand presence (and
channels and things like that, but I think the thus may not need to rely heavily on on-line
fact of the matter is that if you don’t play, travel agents to be in a consumer’s considera-
people don’t see you when you need to be tion choice set), other industries such as Dollar
out there and visible’ (John Kaufman,24 Thrifty Automotive Group feel that the
Starwood). Internet has helped them get in front of
‘I view commoditization as the biggest consumers and compete against other brands
threat to our businessyand [third party (Darren Arrington23). Thus, relative benefits
channels] create an environment that is non- for merchants and on-line travel agents may
conformist.yIHG took a very bullish move likely differ by the merchant’s brand presence.
pulling out of Expedia and hotels.com. A lot of
people questioned if it was the right strate- Long-term opportunities
gyybut an opportunity cost analysis showed Several other opportunities provided by the
that in not even one hotel, not even once, did Internet related to customisation of offers,
pulling out of these channels create a dent in screen presentation, or prices were mentioned
topline revenues or the revpar [revenues per by panelists including NCR, Revenue Analy-
available room] index. This confirms our latest tics, Dollar Thrifty Automotive Group, the
studies that consumers usually shop on-line and InterContinental Hotels Group, and Manugis-
use on-line channels, but at the end of the day tics. For example, in the area of e-mail
they go back to the hotel or supplier site to marketing, Sundeep Kapur,26 director at
make bookings’ (Apo Demirtas,8 InterConti- NCR, reports that when Overstock.com
nental). initially set prices, they did so with little
‘I disagree [with Apo]. I agree with John. feedback from consumers and felt that they
There are so many customers on those may not be charging an appropriate price. To
channels, that if you’re not there, there is help address this issue, they created a first
market share you’re losing’ (Sharon Duffy,9 responders club where individuals pay to learn
Hilton). about sales before other consumers. Over-
‘Many times people will shop an on-line stock.com selectively uses this club to test
travel agency but then go and purchase direct. prices for a subset of its products. Specifically,
We have an awkward relationship when the small batches of e-mails are sent out starting at

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 Expert opinions

6 a.m. in the morning. The price in each confirms that marketing of the click-stream
subsequent batch of e-mails is raised until the data is currently part of the negotiations with
‘best’ price is determined. Typically, this price is merchants, but that a ‘lot of learning is
set by 10 a.m. in the morning and distributed to happening in this space’ as future uses of the
the larger customer base. In the future, it is data are explored.
envisioned that e-mail marketing will become Additional insights are offered by Paul
more customised to individual consumers’ Campbell,28 vice president of travel solutions
needs (Sundeep Kapur,26 NCR). A second at QL2 Software, a company that helps clients
advantage of e-mail marketing is the ability to extract unstructured data from the Internet (eg,
price experiment, something retailers found perform ‘screen scraping’). Clients of QL2
very difficult to do during the days when the Software include traditional travel industries in
only communications with customers were addition to pharmaceutical, life sciences, fi-
through catalogues and print ads. nancial services, retail, catalogue, office suppli-
The ability to set price appropriately ers, etc. Campbell notes that while revenue
depends partly on the ability to monitor sales management comes naturally to airlines and
in real time and quickly link a significant other travel providers, as ‘you go outside of
number of purchase sales to price offerings. travel, it is not very natural, and a lot of it has to
Within the broader perspective, the ability to do with the fact that the data really hasn’t been
further customise offers, screen presentations, available in these other industries and the
prices, etc to individual consumers will be Internet has brought in all this data and turned
driven by the ability to analyse click-stream everything transparent. They are all chomping
data. As Robert Cross,1 chairman and CEO of at the bit to get the data, but now they’re
Revenue Analytics, states, ‘the thing that I love getting to the point thatythey don’t know
most about the potential of the Internet is the what to do with it.’ Campbell sees these
ability to use data from the Internet to read the industries focusing first on understanding their
customers’ minds and get inside their head as own prices in the market (because it tends to be
they are making their purchase decisionyone decentralised), and then expanding out to think
of the big frontiers we all have to look about how to incorporate competitor informa-
atycomes in the area of click-stream analysis.’ tion. While incorporation of competitor in-
While click-stream analysis has been used formation was mentioned as a current area of
extensively in traffic analysis to aid in website research by both the InterContinental Hotels
design, cross feels ‘the huge breakthrough for Group (Apo Demirtas8) and Dollar Thrifty
us is going to be using click-stream analysis for Automotive Group (Darren Arrington23), in
revenue analysis.’ the retail space it was noted that although ‘there
The potential of click-stream analysis is seen is a ton of opportunity [in click-stream
by others as well, primarily in the travel analysis], I don’t see retailers thinking about
industries. For example, as Beju Rao21 of it’ (Douglas LaPointe,29 Manugistics).
Sabre Holdings states, based on his experience While the analysis of click-stream data is
in working with Travelocity, on-line channels seen as offering many new opportunities, it
have a lot of data from click-streams that they appears that innovations in this area will be led
have been using to study the buying and first by traditional users of revenue manage-
shopping patterns of customers. A lot of this ment, such as those in the travel industry.
data is unique to the on-line travel agents and
not available to merchants such as airlines. INTEGRATION OPPORTUNITIES
Consequently, as Andy Boyd27 of PROS points Aside from the Internet, other factors and
out, there is information gathering that Trave- trends that affect the state of the practice were
locity can provide back to airlines. Rao also reported by software providers. The first

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 Garrow et al

trend that clearly emerged was the integration more complex, simple to understand and
of demand with the supply chain, particularly accepted by the user community. Perceived
in the retail space. As Molham Aref30 of complexity was viewed as an obstacle to
Predictix states, ‘we are trying to crack the successful implementation (Molham Aref,30
nut that I think a lot of people are interested in Predictix; Douglas LaPointe,29 Manugistics).
cracking, which isyhow do you manage the Fundamentally, adoption is linked to clients’
demand side and supply side in a cohesive way.’ trust in system recommendations and the
Over the last year, tremendous consolidation ability of users to understand how to interact
has occurred in the software provider market with (and in some cases override) the system
with JDA buying Manugistics, SAP buying (eg, Tammy Farley,32 Raimaker; Molham
Khimetrics, and Oracle buying Retek and Aref,30 Predictix). However, while the ten-
ProfitLogic (Douglas LaPointe,29 Manugistics). dency of the technical community may be to
One of the key goals of this consolidation provide a wealth of information, Donald
is to make the supply chain more efficient Davidoff 7 of Archstone-Smith notes that when
(LaPointe,29 Maugistics; Jeff Moore,31 SAP- they first implemented automated pricing for
Khimetrics). For example, one of the common apartment rentals, they ‘learned quickly that it
requests from consumer goods companies was too much information’ they were present-
centres on how best to incorporate new point ing to system users and dramatically reduced
of sale and customer data that can measure the amount of technical material presented in
customer response when these companies have training. Tammy Farley32 of Rainmaker also
historically based their forecasts and supply notes that acceptance of new systems can be
chain decisions on shipment-level data. Both gained by performing post-implementation
Manugistics and SAP-Khimetrics expressed analysis to demonstrate that system recommen-
interest in exploring whether the best way to dations were accurate. Lessons may also be
address this integration issue is to directly learned from UPS and BlueLinx who, rather
model retail response and forward-buying than force the setting of prices in their
effects, or to measure at the consumption level organisations from an automated system, use
and apply conversions to convert actual con- their systems to offer recommendations to sales
sumption to shipment level information. representatives and then track their perfor-
The second integration thrust is seen in the mance, which allows users to gain confidence
travel industries where pricing and inventory in the system over time.
allocation decisions have historically been Thus, while integration trends differ across
separated. As Andy Boyd27 of PROS states, industries, experts agree that successful adop-
while the revenue management language is tion depends on the ability to build confidence
consistent across industries, ‘specific areas of in system recommendations. Various strategies
pricing have not solidified in terms of modeling were proposed for how best to build this
y and the core components [of pricing] are confidence.
not yet defined.’ Paul Campbell28 of QL2
Software concurs, stating that with the ability
to view price and availability simultaneously, he CONCLUSIONS
expects to see the integration of pricing of This paper summarises industry perspectives on
revenue management, something ‘that’s been current revenue management and pricing
talked about for 20 years’ but which has not yet practice that were brought up in a recent
been successful. conference at the Georgia Institute of Tech-
An important consideration that emerged nology. Several trends were noted, including
across panels was the best way to make the recent centralisation of pricing decisions,
integrated models, which tend to be inherently interest in bundled pricing, and consolidation

& 2006 Palgrave Macmillan Ltd, 1476-6930 $30.00 Vol. 5, 3 237–247 Journal of Revenue and Pricing Management 245
 Expert opinions

of demand and supply software providers. 19. Jones, Lee. Vice president of global revenue manage-
Current research directions include finding ment, pricing strategy, and analysis for Marriott
International, Inc. Panelist in hotels.
ways to leverage the unique characteristics of 20. Saleh, Rich. Director of pricing and revenue
click-stream data and the wealth of customer planning at Travelocity. Panelist in on-line travel.
information to support revenue analysis. 21. Rao, Beju. Senior principal at Sabre Holdings.
Panelist in airlines.
22. Eister, Craig. Director of pricing in the global
NOTES revenue management department at the InterConti-
1. Cross, Robert. Chairman and CEO of Revenue nental Hotels Group. Panelist in travel industry.
Analytics. Retail moderator and invited speaker for 23. Arrington, Darren. Director of science in the
introductory remarks. revenue management department at Dollar Thrifty
2. Williams, Nell. Vice president in Marriott’s Global Automotive Group. Panelist in travel industry.
Revenue Management Organization. Keynote speaker. 24. Kaufman, John. Vice president of global revenue
3. Kravitz, Hal. Vice president of business development management for Starwood Hotels and Resorts
and chief officer of Coca-Cola Enterprises, Inc. Worldwide, Inc. Panelist in hotels.
Panelist in retail. 25. Kaul, Utpal. Regional director of market manage-
4. McMillian, Shawn. Vice president in Coca-Cola ment for Expedia, Inc. Panelist in on-line travel.
Enterprise’s revenue growth management organiza- 26. Kapur, Sundeep. Director of strategic marketing for
tion. Panelist in retail. NCR Corporation. Panelist in non-traditional in-
5. Kniple, Joe. Director of pricing strategy and solutions dustries.
at UPS. Panelist in non-traditional industries. 27. Boyd, Andy. Chief scientist and senior vice president
6. Dudziak, Bill. Senior manager in the planning and of science and research at PROS. Airline moderator
analysis group of BlueLinx. Panelist in non-tradi- and panelist in software providers.
tional industries. 28. Campbell, Paul. Vice president of travel solutions at
7. Davidoff, Donald. Group vice president of pricing QL2 Software. Panelist in software providers.
and revenue management for Archstone-Smith. 29. LaPointe, Douglas. Director of consulting services
Panelist in non-traditional industries. for Manugistics. Panelist in software providers.
8. Demirtas, Apo. Vice president of market strategy for 30. Aref, Molham. CEO of Predictix, LLC. Panelist in
the InterContinental Hotels Group. Panelist in hotels. software providers.
9. Duffy, Sharon. Vice president of revenue management 31. Moore, Jeff. Senior research scientist at SAP-
at Hilton Hotels Corporation. Panelist in hotels. Khimetrics. Panelist in software providers.
10. Kaul, Rajeeve. Director of price and product 32. Farley, Tammy. Executive vice president and co-foun-
optimization at AutoZone. Panelist in retail. der of The Rainmaker Group. Panelist in software
11. Wade, Charlie. Vice president for marketing and providers.
concert promotions at the Atlanta Symphony
Orchestra. Panelist in special events.
12. Malhotra, Anil. Strategy consultant for the perform- REFERENCES
ing arts. Panelist in special events. Preslan L and Newmark E. (2004) ‘Price manage-
13. McLaren, Scott. Director of sales, marketing, and
ment: How the leaders succeed. AMR Research.
ticket operations at the Georgia Tech Athletic
http://www.investorwords.com/620/bundling.html,
Association. Panelist in special events.
14. Yester, Brenda. Vice president of revenue management Accessed June 8, 2006.
for Carnival Cruise Lines. Panelist in travel industry.
15. Geraghty, Kevin. President of Revenue Research.
Panelist in on-line travel.
ACKNOWLEGEMENTS
16. Saranathan, Krishnan. Director of enterprise optimi-
zation for United Airlines. Panelist in airlines. The authors are grateful to all panelists and
17. Brunger, Bill. Former senior vice president of moderators who participated in the conference.
network at Continental Airlines. Panelist in airlines. We would like to extend our special gratitude
18. Lonsdale, Richard. Regional director in the to Bob Cross, Steve Swope, Andy Boyd, and
passenger revenue analysis and fleet revenue manage- Jon Higbie for their guidance and help in
ment group within the marketing department of
Boeing Commercial Airplanes. Panelist in travel
planning the workshop. Sponsorship provided
industry. by Revenue Analytics and Rubicon helped

246 Journal of Revenue and Pricing Management Vol. 5, 3 237–247 & 2006 Palgrave Macmillan Ltd, 1476-6930 $30.00
 Garrow et al

subsidize registration fees for students. For Pricing and Revenue Management Initiative at
information about this conference (including Georgia Tech, which was funded by a grant by
sales of DVDs) and future conferences, please the Georgia Tech Focused Research program
contact the authors or visit the conference and initiated these conferences, can be found at
website at http://www2.isye.gatech.edu/ http://mgt.gatech.edu/fac_research/centers_
rmpo2006/. Additional information about the initiatives/pricing.html.

APPENDIX A
Conference Agenda:

Time Event

0830–0900 Registration
0900–0945 Welcome/Opening Bob Cross (Revenue Analytics)
0945–1045 Special Events Julie Swann (GA Tech) Hotels Steve Swope (Rubicon)
1045–1100 Break
1100–1200 Non-Traditional Industries Mark Ferguson (GA Airlines Andy Boyd (PROS)
Tech)
1200–1330 Lunch
1330–1430 Software Providers Paul Griffin (GA Tech) Travel Industry Laurie Garrow
(GA Tech)
1430–1500 Break
1500–1600 Retail Bob Cross (Revenue Analytics) On-Line Travel Jon Higbie
(Manugistics)
1600–1615 Break
1615–1645 Georgia Tech Research
1645–1700 Break
1700–1800 Keynote Speaker Nell Williams (Marriott)
1800–1900 Cocktails (The Globe)

& 2006 Palgrave Macmillan Ltd, 1476-6930 $30.00 Vol. 5, 3 237–247 Journal of Revenue and Pricing Management 247