Whitepaper Summary 2 Key Findings 3 Detailed Findings 4 Results Interpretation 5 JDA’s Viewpoint 6 Conclusion 11 Table of Contents: 2010 Pulse on Pricing and Revenue Management Study
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Whitepaper
Summary 2
KeyFindings 3
DetailedFindings 4
ResultsInterpretation 5
JDA’sViewpoint 6
Conclusion 11
Table of Contents:
2010 Pulse on Pricing and Revenue Management Study
Garneringseniorexecutivesupporttofundpricingandrevenuemanagementinitiativesmaybeoneofthebiggestobstaclesfacingrevenuemanagers,butwhentechnologyandbestpracticesareimplementedtherightway,theseskepticalexecutivescanbecomethebestadvocatesforrevenuemanagementprojects.That’sbecauseautomatedpricingandrevenuemanagementtechnologyoffersthekindofbusinessbenefitsseniorexecutivesvaluemost:rapidreturnoninvestmentandastrongincrementalrevenuegain.
JDASoftwarerecentlyqueried120customersandprospectsfromvariousindustriesforits2010 Pulse on Pricing and Revenue Management Study.Thegoalwastoidentifythebusinessimpactthatpricingandrevenuemanagementtechnologycanhave—andgetasnapshotofthestateofpricingandrevenuemanagementacrossarangeofindustries.ConductedattheannualJDAPricingandRevenueManagement2010Conference,thesurveyfoundthateventhoughalargepercentageoforganizationshadalreadyimplementedrevenuemanagementsystemsandexperiencedsubstantialpaybackfromtheirdeployments,therestillremainsasizablenumberofcompaniesthathaveyettodeploypricingandrevenuemanagementsystemsduetoanumberofchallenges,includingexecutivebuy-in.
Amongthosewithrevenuemanagementsystems,thestudyfoundthatmorethan75%earnedatleast1%inincrementalrevenuegainsasaresultoftheirtechnologydeployment,withclosetoathirdearningmorethan3%inincrementalgains.Asforreturns,awhopping96%ofpricingandrevenuemanagementsystemusersreportedachievingareturnoninvestment(ROI)withinthreeyearsofdeployment.Infact,morethan42%ofthosewithdeployedsystemsachievedROIwithinthefirstyear.
Andthosearejustthehardnumbers.Respondentswithrevenuemanagementsystemsinplacereportedotherpositivebenefitsfromtheirsystems,includingareducedneedforheadcount,betterandmoreobjectivedecisionmakingandbetterdataandreportstosupportthebusiness.
Thestudyalsofoundthat64%ofthosesurveyedhadnoautomatedrevenuemanagementsysteminplace.Withsuchclearvaluedrivenbypricingandrevenuemanagementsystems,theprevailingquestionremains:Whywouldanorganizationthatcouldbenefitfromdynamicpricingnotautomateitsprocesses?
Whenaskedaboutthebiggestbarrierstoacquiringanddeployingautomatedpricingandrevenuemanagementsystems,theresponsefromparticipantswasoverwhelming.Morethanhalfoftheparticipantscitedtheirinabilitytoattainseniormanagementsponsorshipand/orfundingastheirtopobstacle.
2
Key Findings
Thefollowingkeyfindingsofferaninterestingperspectiveonthestateofpricingandrevenuemanagementwithintheaverageorganizationtoday.Clearly,therecognitionofpricingandrevenuemanagementbenefitsisgrowing.Thosewhohaveimplementedsystemsareexperiencingahostofadvantages.Buttherestillremainthosewhomustovercomeanumberoforganizationalchallengesbeforedeploying.Amongallparticipants,thereisalsoanexpectationforthepricingandrevenuemanagementindustrytoevolvetomeetchangingmarketconditionswithmoreadvancedautomatedcapabilities:
• 64%ofparticipantshavenotyetdeployedanautomatedrevenuemanagementsystem;9%useanin-houserevenuemanagementsystemand28%useathird-partyrevenuemanagementsystemeitherfromJDAoranothervendor
• 57%ofrespondentsagreedthatpricingandrevenuemanagementwasawellunderstoodandimportantfunctionoftheirbusiness
• 60%ofrespondentsreportedthattheircurrentrevenuemanagementpracticesgivethemfullflexibilityinpricingdecisions
• 75%ofthosewithautomatedrevenuemanagementsystemsearnedatleast1%inincrementalrevenuegainsasaresultoftheirtechnologydeployment,withclosetoathirdearningmorethan3%inincrementalgains.
• 96%ofpricingandrevenuemanagementsystemusersreportedachievingROIwithinthreeyearsofdeployment
• 35%ofrevenuemanagementsystemusersreportedthatautomationallowsthemtousefewerpeopletomanageprices
• 35%ofrevenuemanagementsystemuserssaidthetechnologyallowsthemtomakeobjectivedecisions
• Nearly18%ofrevenuemanagementsystemusersbelievethattheirdeploymentsgivethembetterdataandreportsthanamanualprocesswould
• Only15%ofrespondentsbelievethatconsumersunderstandthatdynamicpricingisaneffectivemeansofbalancingsupplyanddemand
• 47%ofparticipantssaidtheystilldonothavegood,usablecompetitorpriceinformationwithwhichtomakedecisions
Foradeeperdiveintothesefindingsandadditionaltrendsexaminedbythe2010 Pulse on Pricing and Revenue Management Study,pleasecontinueontotheDetailedFindingssection.
3
4
Profiling
Atotalof120externaldelegatesattendedtheJDAPricingandRevenueManagement2010ConferenceonMarch24,2010.Followingarejustafewdetailsabouttheparticipants:
• 72%oftheparticipantsaremale;28%ofparticipantsarefemale
• Thelargestnumberofparticipantsrepresentedtherailindustry(28%),followedbyhospitality(18%),touroperators(12%)andconsulting(8%)
• 16%oftheparticipantsarecurrentlyusingaJDAsolution;12%usesoftwarefromanotherprovider;and9%oftheconferenceattendeeshaveanin-houserevenuemanagementsystem
• Approximately64%oftheconferenceattendeesdidnotcurrentlyhaveanautomatedrevenuemanagementsystem
Detailed Findings
Figure 1: Industry Breakdown
5
1. Current industry practices around pricing and revenue management
Q:Doyourcurrentrevenuemanagementpracticesallowyoufullflexibilityinyourpricingdecisions?
A:60%ofrespondentsagreedorstronglyagreedwiththisstatement,withthoserespondentsrepresentingcompaniesfromlessregulatedindustries,suchasleisuretravelandhospitality,beingthemostpositive.Thosefromindustrieswherefareorpricechangesaremorerestricted,suchaspassengerrail,respondedmorenegatively.
Results Interpretation
Figure 3: Response Breakdown by Industry
Figure 2: Total
Tour
Air Cargo
Rail
Hospitality
6
Q:Inyourindustryandcountrywhatisthebestdescriptionofconsumers’perceptionofdynamicpricing?
A:Almosthalfoftherespondentsindicatedthatdynamicpricingwasperceivedasatrickbytheoperatorstomakemoremoney,whereasone-thirdoftherespondentsagreedthatconsumersgenerallytoleratedadynamicpricingenvironmentasa“factoflife.”Interestingly,only15%ofrespondentsbelievedthatconsumersunderstandthatdynamicpricingisaneffectivemeansofbalancingsupplyanddemand.
Figure 5: Rail Response(toillustratethelowestlevelofacceptanceinthisindustry)
Figure 4: Total Response
Thereisclearmarketevidencethatproductsandservicesarebeingtradedinamoredynamicandflexiblepricingenvironment,withanincreasingpropensitytowardgreaterpricetransparencyandmorefrequentchanges.
2. Understanding the importance of pricing and revenue management and the associated benefits
Q:Myorganizationfullyunderstandstheimportanceofpricingandrevenuemanagement.
A: Acrossallindustries,around57%ofrespondentsagreedthatpricingandrevenuemanagementwasawellunderstoodandimportantfunctionoftheirbusiness.However,amongcompaniesthathaverecentlyintroducedautomatedpricingandrevenuemanagementsystems,almost73%ofrespondentsagreed.
JDA’s Viewpoint
7
Figure 6: Total Responses
Figure 8: Responses from those who have revenue management automation
Figure 7: Respondents who’ve had a revenue management system for one to three years
Figure 9: Responses from those with revenue management automation for longer than three years
Q:Howmuchnetfinancialbenefitdoyoubelieveisgeneratedbyanypricingandrevenuemanagementautomationyoumayhave?
A: Amongthosewhohaveautomatedpricingandrevenuemanagementcapabilities,30%ofrespondentsexpectedorwereachievingmorethan3%incrementalrevenuegains,withone-thirdofthosebelievingthatbenefitsexceed5%.Oftheremainingrespondents,45%believetheyareachievingbetween1%and3%incrementalrevenuefromtheirautomatedsystems.Interestingly,respondentsagreethatbenefitsamongcompaniesthathavebeenusingautomatedsystemsformorethanthreeyearsareevengreater.
8
Q:Howlongdoesittaketopaybacktheinitialinvestmentofimplementinganautomatedpricingandrevenuemanagementsystem?
A: Morethan40%ofrespondentsrepresentingcompaniesthathaveimplementedsystemsfromthird-partysoftwarevendorsindicatedthattheyachievedareturnoninvestmentwithinoneyear,withmorethan96%ofrespondentsachievingROIwithinthreeyears.
Q:Apartfromfinancialgains,whatdoyouseeasthemainbenefitofautomation?
A: Forthoserespondentsrepresentingcompanieswithexistingautomatedcapabilities,thefollowingkeythemesemergedasimportantfactors:
(a)Fewerpeoplerequiredtomanageprices
(b)Betterandmoreobjectivedecisionmaking
(c)Betterdataandreports
Figure 11: Respondents with revenue management automation
Figure 10:
9
3. Embarking on automation of pricing and revenue management functions
Q:Whatarethebiggesthurdlestoasuccessfulacquisitionandimplementationofanautomatedpricingandrevenuemanagementsystem?
A: Conferenceparticipantsbelievedthatthebiggesthurdlestothesuccessfulimplementationofanautomatedpricingandrevenuemanagementsystemareseniormanagementsponsorshipandfunding.
Q:Whatisthemostimportantfactorinselectingarevenuemanagementsystem?
A:Nearlyhalfofthesurveyparticipants(49%)believedthatprovenresultsarethemostimportantfactorwhenchoosingarevenuemanagementsystem,followedbybusinessfit(22%).
Figure 12: Total Responses
Figure 13: Total Results
10
4. Most important features of future revenue management systems
Q:Whichconceptsholdthegreatestpromiseintermsoffuturepricingandrevenuemanagementdevelopment?
A: Surveyparticipantsbelievedthatpricesensitivitymodeling,forecastaccuracy,real-timepricingandcompetitorpricingarethetopfourareasforfutureinnovationforsuccessfulpricingandrevenuemanagementsystems.
Q:Ihave“good”usablepriceinformationaboutmycompetition.
Figure 14: Important Future Revenue Management Concepts
Figure 15: Total Responses
11
Conclusion
Inlookingcloselyatthefindingsfromthe 2010 Pulse on Pricing and Revenue Management Study,itbecomesclearthatorganizationsareincreasinglyrealizingthebenefitsofimplementingrevenuemanagementtechnologyandbestpractices.However,automateddeploymentsarenotwithouttheirchallengesandrisks,andsomerevenuemanagersarestillfiguringouthowtoovercomeobjectionstogainseniorexecutivesupportandfundingtoadoptandimplementpricingandrevenuemanagementsystems.
Clearly,moreorganizationsthaneverseethevalueinadoptingrevenuemanagementtechnology.Morethanhalfoftheparticipantssaidtheirrevenuemanagementpracticesarevaluabletotheirorganizations.Ifpresentedtoasimilargroupadecadeago,onlyone-fourthofrespondentsmayhaveansweredthatway.Yet,therestillremainsalargecontingentoforganizations(64%)thatstillhavenotautomatedrevenuemanagementprocesses.Additionally,participantsreportedthatcommunicatingthevalueofpricingandrevenuemanagementsolutionstoseniorexecutives,gainingtheirbuy-inandsecuringprojectfundingremainsthebiggestobstacle.
Itisourbeliefthatparticipantsseekingtoovercomeexecutiveobjectionsshouldconnectwiththosestudyparticipantswhohavealreadydeployedsolutionstogainanunderstandingofbestpracticesonbuildingabusinesscase.TheJDAstudyrevealedachievementofrapidROIamongthosesurveyedwhohaddeployedanautomatedrevenuemanagementsystem(96%achievedpaybackinthreeyearsorless).Thoserespondentsalsoindicatedasignificantgaininincrementalrevenueasaresultofimplementation(1to3%gainswereshowntobemostcommon).
Butthesurveyalsoconfirmedthatevenascompanieslooktoadopttechnologytointroducemoreflexiblepricingandgainthesebenefits,theyunderstandthereisachallengeincommunicatingthebenefitstotheirkeyconstituents.Thesechallengesexistbecausemanyorganizationsbelievecustomerswillreactnegativelytowardsignificantmovementsinprices,perceivingthatmovementassomekindoftricktosqueezemoneyoutoftheirpocketbooks.Thoughthisisawell-understoodpracticewithintheairlineindustry,inotherindustries,suchasrail,thereisstillaperceptionproblem.Interestingly,thisperceptionlagischangingaspricetransparencyincreasesacrossthetravel,transportationandhospitalitysectors.Theperceivedriskassociatedwithautomateddeploymentsalsocausesconcern.Surveyparticipantsseekingnewpricingtechnologyreportedthataboveallotherfactors,theywerelookingforasystemwithprovenresultswithintheirgivenindustry,evenaboveconsiderationsastowhetherasolutionhasalloftherightfeaturestosuittheirbusinesses.
Withgoodevidencethatpricingandrevenuemanagementsystemsofferprovenresults,moreandmoreorganizationsacrossthetravel,transportationandhospitalityindustriesarelikelytobuildacaseformovingtoanautomatedpricingandrevenuemanagement.Becauseevenwithjusta2%increaseinincrementalrevenueasaresultofdeployingasystem,a$1billionorganizationstandstoadd$20milliontoitsbottomlinewithnegligibleaddedcost;revenuemanagementrevenueuplifthasnocostassociatedwithit,soitgoesstraighttoprofit.
Thereisanobviousupsideintheadoptionofpricingandrevenuemanagementtechnologyintermsofrevenueimprovement,businessperformanceandcompaniescanrespondtotheirconsumers.Thedownsideisthatthesesystemsarerarelyperceivedasmissioncritical,especiallycomparedwithbig-ticketitemssuchasmaintenanceandupkeepofequipmentliketrainsandairplanes.Ifyoudon’timplementautomatedpricingandrevenuemanagement,businesswillcarryonasitalwayshas,justlessprofitably.
12
Thisyear’sstudyalsofoundthatasmarketforceschange,pricingandrevenuemanagementtechnologyandpracticeswillcontinuetogrowinimportance.Themeansbywhichcustomersareacquiringticketstotravelisforcingthedynamicpricingenvironmenttobecomemuchmoreofareality.Asmultiplesaleschannelsopenupforvariousservices,themarketplacewillfeaturealmostcompletepricetransparencyinthecomingyears.
Therewillalsobeavastnumberofdifferentchannelstomarket,andconsumerswillhaveaccesstoatremendousvarietyofsourcesandproductvariationsforthesameservices.Understandinghowtomanageyourownpricinginaneraofcompetitivepricetransparencywillbeofparamountimportancefororganizations.Inmostsituationswe’veobservedthatthetechnologycapabilitiesofpricingandrevenuemanagementsystemsareverymuchleadingtheway.Thesecapabilitiescanhelpcompaniesmovefromatraditionalrevenuemanagementmodeltoacomprehensivepricingandrevenuemanagementmodelthatincludesfluiddynamicpricinganddynamiccompetitivepricingthatenablesaccuratedemandforecasting,pricingandrevenueoptimization.
Asthestakesrise,sodotherequirementsthatorganizationshavefortheirfuturepricingandrevenuemanagementsystems.Ourstudyalsoexaminedwhatparticipantswillexpectoffuturepricingandrevenuemanagementtechnologytomeetmarketdemands.Weheardloudandclearfromthosewequeriedthatthefourmostimportantrequirementsforsuccessfulpricingandrevenuemanagementsystemsofthefutureinclude:
• Pricesensitivitymodeling
• Forecastaccuracy
• Real-timepricing
• Competitorpricing
Whilenotconsideredmissioncriticalinthepast,webelievethatasconditionschange,pricingandrevenuemanagementtechnologywillbecomeamust-havewithinthenextfewyears.JDAstandscommittedtohelpingcompaniesachievethecomparableresultsillustratedbythislateststudy.
About JDA Pricing and Revenue Management Group
UK&NorthernEurope+44 (0) 1344 354500
France&SouthernEurope+33 (0)1 56 79 27 00
US+1 800 479 7382
Canada&LatinAmerica+1 480 308 3555
WEB www.jda.com
ASIA PACIFICSingapore
+65 6305 4350Australia
+61 2 8912 7900
Bangalore+91 80 3028 8888
Mumbai+91 22 3088 7878
Japan+81 3 4461 1000
China+86 21 2327 9400
EUROPEAMERICAS
Copyright©2010,JDASoftwareGroup,Inc.Allrightsreserved.JDAisaRegisteredTrademarkofJDASoftwareGroup,Inc.AllothercompanyandproductnamesmaybeTrademarks,RegisteredTrademarksorServiceMarksofthecompanieswithwhichtheyareassociated.JDAreservestherightatanytimeandwithoutnoticetochangethesematerialsoranyofthefunctions,featuresorspecificationsofanyofthesoftwaredescribedherein.JDAshallhavenowarrantyobligationwithrespecttothesematerialsorthesoftwaredescribedherein,exceptasapprovedinJDA’sSoftwareLicenseAgreementwithanauthorizedlicensee.
08.20.10
4-Color
JDAPricingandRevenueManagementGroup,aglobalbusinessunitwithin
JDASoftware,isaleadingproviderofPriceSensitiveRevenueManagement™
solutionsthathelpcompaniesimproveprofitsbybalancingsupplyand
demandthroughinnovativeforecasting,pricingandrevenuemanagement.
Formorethan25years,companiesinthetravel,transportation,hospitality
andmediaindustrieshavebenefitedfromtheongoinginnovationand
deepdomainexpertisefromJDA.TolearnmoreaboutJDA,pleasevisit
www.jda.com/revenuemanagement.
Related Documents
