Revenue Management in Service Organizations

Revenue management is concerned with maximizing revenue fl ows while
controlling costs. This is a new management framework combining conventional
management accounting concepts and methods with notions of yield
management, pricing, and process management. The revenue objective provides
a unifying goal for the aforementioned concepts and methods that are
especially suitable for service organizations, where revenue considerations are
inextricably linked to the activities performed. While our focus is on service
organizations, any organization will fi nd something of value in this book.
For chief fi nancial offi cers, this book places revenue management at
the forefront of accounting, with cost management and performance
measurement in supporting roles. Revenue management introduces
new ideas, such as yield management, while uniting previously disparate
subjects such as project management, capacity costing, and the theory
of constraints. Methods of pricing and their associated strategies are
included as well as techniques for segmenting consumer markets.
Our focus is predominantly on service organizations, such as airlines,
hotels, restaurants, and cinemas, as well as professional service fi rms, such as
auditors, lawyers, and architects. Most service organizations differ from traditional
manufacturing in that services cannot usually be stored as inventory.
These organizations are critically dependent on the quality of service delivery.
In fact, any organization that has service as a key part of its value strategy will
benefi t from a systematic understanding of revenue management.
Our book will introduce the reader to some of the more important
methods, such as yield management, using simple examples as well as providing
practical guidelines to pricing and process management. While we
include conventional management accounting concepts and techniques,
our emphasis is on the use of these techniques in revenue management,
encompassing a focus on revenue drivers as well as cost drivers. We also use
several well-established techniques, with new applications, such as the use
of critical path analysis to model restaurant processes and key bottlenecks.