Advertisement

Journal of Revenue and Pricing Management

, Volume 17, Issue 2, pp 91–101 | Cite as

An approach to offer management: maximizing sales with fare products and ancillaries

  • Ben Vinod
  • Richard Ratliff
  • Vikram Jayaram
Practice Article
First Online:
Revised:
  • 86 Downloads

Abstract

With the growth in ancillary sales, an area of increasing importance for airlines is the concept of offer management, which entails the creation of dynamic, custom, personalized offers consisting of a flight itinerary and ancillary products offered by an airline. This practice-oriented, overview paper provides an end-to-end, future-oriented framework for determining the composition of optimal base fare and ancillary bundles by customer trip-purpose segment followed by 1:1 personalization to maximize total sales. Our focus in this paper is primarily on the proposed offer management framework and its sub-components.

Keywords

Revenue management Ancillary products Willingness-to-pay Bundles Customer segmentation Personalization Controlled experiments 
This is a preview of subscription content, log in to check access.

References

  1. Alexander, K.L. 2006. Paying more for small extras. Washington Post, January 31. http://www.washingtonpost.com/wp-dyn/content/article/2006/01/30/AR2006013001282.html.
  2. Balcombe, K., I. Fraser, and L. Harris. 2009. Consumer willingness to pay for in-flight service and comfort levels: A choice experiment. Journal of Air Transport Management 15: 221–226.CrossRefGoogle Scholar
  3. Ben-Akiva, M., and S. Lerman. 1985. Discrete choice analysis: Theory and application to travel demand. Cambridge, MA: MIT Press.Google Scholar
  4. Besbes, O., and A. Zeevi. 2015. On the (surprising) sufficiency of linear models for dynamic pricing with demand learning. Management Science 61 (4): 723–739.CrossRefGoogle Scholar
  5. Cary, D. 2004. A view from the inside. Journal of Pricing and Revenue Management 3 (2): 200–203.CrossRefGoogle Scholar
  6. Choubert, L., T. Fiig, and V. Viale. 2015. “Amadeus Dynamic Pricing”, presentation at the AGIFORS Revenue Management and Distribution Study Group meeting, Shanghai, China.Google Scholar
  7. Gallego, G., and M. Hu. 2014. Dynamic pricing of perishable assets under competition. Management Science 60 (5): 1241–1259.CrossRefGoogle Scholar
  8. Green, P.E., A.M. Krieger, and Y. Wind. 2001. Thirty years of conjoint analysis: Reflections and prospects. Interfaces 31: S56–S73.CrossRefGoogle Scholar
  9. Hague, N. 2008. The problem with price. B2B International. http://www.b2binternational.com/library/whitepapers/pdf/the_problem_with_price.pdf.
  10. Hair, J.S., R.E. Anderson, and R.T. Tatham. 1984. Multivariate data analysis with readings, 2nd ed. New York: Macmillan.Google Scholar
  11. IdeaWorks. 2016. Airline ancillary revenue projected to be $67.4 billion worldwide in 2016. Press release, 29 Nov. 29, 2016. No. 115. http://www.ideaworkscompany.com/wp-content/uploads/2016/11/Press-Release-115-Global-Estimate.pdf.
  12. Martin, J.C., C. Roman, and R. Espino. 2008. Willingness to pay for airline service quality. Transportation Reviews 28 (2): 199–217.CrossRefGoogle Scholar
  13. Nason, S.D. 2009. The future of a la carte pricing in the airline industry. Journal of Revenue and Pricing Management 8 (5): 467–468.CrossRefGoogle Scholar
  14. Ødegaard, F., and J.G. Wilson. 2016. Dynamic pricing of primary products and ancillary services. European Journal of Operational Research 251 (2): 586–599.CrossRefGoogle Scholar
  15. Ratliff, R.M., A. Walker, B.C. Smith, and T. Brice. 2003. Availability based value creation method and systems, U.S. Patent 20030191725, filed March 26, 2003, and issued October 9, 2003.Google Scholar
  16. Ratliff, R.M. 2016. A business overview of market adaptive dynamic pricing. Sabre white paper.Google Scholar
  17. Ratliff, R., and G. Gallego. 2013. Estimating sales and profitability impacts of airline branded-fares product design and pricing decisions using customer choice models. Journal of Revenue and Pricing Management 12 (6): 509–523.CrossRefGoogle Scholar
  18. Ratliff, R.M., and B. Vinod. 2005. Airline pricing and revenue management: A future outlook. Journal of Revenue and Pricing Management 4 (3): 302–307.CrossRefGoogle Scholar
  19. Ratliff, R.M., and B. Vinod. 2016. An applied process for airline strategic fare optimization. Journal of Revenue and Pricing Management 15 (5): 320–333.CrossRefGoogle Scholar
  20. Rickey, D. 2014. Total revenue management. Ascend 13 (4): 20–22.Google Scholar
  21. Scott, S. 2010. A modern Bayesian look at the multi-armed bandit. Applied Stochastic Models in Business and Industry 26: 639–658.CrossRefGoogle Scholar
  22. Smith, B.C., R. Darrow, J. Elieson, D. Guenther, B.V. Rao, and F. Zouaoui. 2006. Travelocity becomes a travel retailer. Interfaces 37 (1): 68–81.CrossRefGoogle Scholar
  23. Train, K.E. 2003. Discrete choice methods with simulation. New York: Cambridge University Press.CrossRefGoogle Scholar
  24. van Westendorp, P.H. 1976. NSS—price sensitivity meter (PSM)—a new approach to study consumer perception of price. Proceedings of the ESOMAR Congress, Venice.Google Scholar
  25. Vinod, B. 2008. The continuing evolution: Customer centric revenue management. Journal of Revenue and Pricing Management 7 (1): 27–39.CrossRefGoogle Scholar
  26. Vinod, B. 2015. The expanding role of revenue management in the airline industry. Journal of Revenue and Pricing Management 14 (6): 391–399.CrossRefGoogle Scholar
  27. Vinod, B., and K. Moore. 2009. Promoting branded fare families and ancillary services: Merchandising and its impacts on the travel value chain. Journal of Revenue and Pricing Management 8 (2–3): 174–186.CrossRefGoogle Scholar
  28. Zouaoui, F., and B.V. Rao. 2009. Dynamic pricing of opaque airline tickets. Journal of Revenue and Pricing Management 8 (2–3): 148–154.CrossRefGoogle Scholar

Copyright information

© Macmillan Publishers Ltd 2018

Authors and Affiliations

  1. 1.Sabre ResearchSouthlakeUSA

Personalised recommendations

Cite article

Buy options