Revenue management and customer relationship management

Wang, Xuan Lorna (2013) Revenue management and customer relationship management. In: Revenue management for hospitality and tourism. Legohérel, Patrick, Poutier, Elisabeth and Fyall, Alan, eds. Goodfellow, Oxford, UK, pp. 194-212. ISBN 9781908999504. [Book Section]

Abstract

Revenue management (RevM) may have been one of the most examined subjects in hospitality and tourism research but its effect on CRM and on organisations’ marketing strategies remains a largely overlooked area. The value of customers and customer relationships are widely acknowledged in the field of marketing, which shows that acquiring customers is usually much more expensive than retaining them (Anton, 1996, p.11; Stone et al., 2000), and a well-developed relationship with customers, especially those strategically important business-to-business key accounts, offers critical benefits and opportunities for profit enhancement to both selling and buying companies (McDonald & Rogers, 1998). However, if the concept of RevM is primarily driven by desire for short-term revenue maximisation, the sustainability of the revenue growth is questionable for two reasons. First, the current RevM practice is revenue-oriented, which emphasises the revenue yield maximisation from relative capacity such as airline seats, hotel rooms and conference spaces rather than profit yield from all possible yielding sources (e.g. customers). Second, to date, RevM has been practiced mainly to accommodate the needs of selling organisations to increase their revenue and has taken limited consideration of the relationship needs of their buyers, namely the customers. Hence, if the short-term revenue growth takes place at the cost of customer relationship, the organisations’ future financial success will be at risk. On the other hand, RevM and CRM could and should complement each other if both practices are focused on the same goal. An integrated approach to RevM and CRM could offer greater opportunities for companies to better understand customers’ behaviour and their relationship needs. Revenue managers could therefore take proactive, rather than their previously reactive, actions to work with identified preferred customers or customer groups to co-create mutual benefits in a competitive market.

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