Yield Management

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Yield Management



> Process of understanding, anticipating and influencing consumer in order to maximize profits from a fixed, perishable resource> Involves strategic control of inventory to sell it to the right customer at the

right time for the right price> Can result in price discrimination, where a firm charges customers

consuming identical goods or services a different price> Used in airline, hotels, car rentals, buses, trains, insurance

> Airline prices increase as one gets nearer to departure date and then drop> Airline business seats take twice the resources but cost three times as much

> Practitioners claim that this can equate to over 100% increase in profits> Essential conditions :

> That there is a fixed amount of resources available for sale> That the resources sold are perishable (there is a time limit to selling the

resources, after which they cease to be of value)> That different customers are willing to pay a different price for using the same

amount of resources

What is Yield Management



> Airlines may make a ticket on the Sunday after Thanksgiving more expensive than the Sunday a week later. Alternatively, they may make tickets more expensive when bought 3 days before the flight than when bought six months in advance but very cheap an hour before the flight

> The goal of this level of yield management is essentially trying to get demand to equal supply

> Yield maximization can be done by> Goods (such as a exit seat row on a flight or front seat at an opera)> By group of goods (such as the entire opera house or charter flight)> By market (such as trains from Tel-Aviv to Beer-Sheva)> By time of day (rush hour, evening, night, early morning)> Capacity dependent (e.g. trains) or independent (e.g. FedEx)> By quality of service (FedEx next day mail is twice as expensive than 2nd

day, though the cost to deliver is almost the same)

Yield Management Examples



Problems in the Telco today

3,000,000,000

2,500,000,000

2,000,000,000

1,500,000,000

1,000,000,000

500,000,000

0

Video On Demand Streaming Audio VoIP Anti-virus On-line

Service Consumer Price

Bandwidth Requirements

Number of bits sent for $1 revenue

Video On Demand $10 per movie

4 Mb/second * 1.5 hours = 21600 Mb 2.16*109 (1)

Voice over IP $0.05 per minute

16Kb/sec * 1 minute call = 960 Kb 1.9*107 (2800)

Anti-virusOn-line

$1 per month 100Kb * 2 updates = 200Kb 2*105 (10,800)



> Charge more for premium applications> Security Cameras - low bandwidth but high perceived value> Medication Delivery Systems - low bandwidth but high perceived value> High Quality of Service – e.g. twice the b/w but three times the price> Real time sport programs delivery (e.g. soccer) to smart phones

> Monetize available capacity> Give priority to roaming customs> Sell special services (video calls) at cut rate from 2am to 5am

> Prioritization> Delaying non-critical traffic such as emails or backups

> Pricing based on bandwidth utilization> Prioritize problem resolution

> Based on lost revenue and SLAs> Reduce revenue leakage due to fraud

Yield Management in Telecommunications



Sophisticated Pricing Models

Multi dimensional characteristics

Device Type

iPhone, iPad, Laptop, eReader…

Service Location

Home \ Office Zone, Roaming…

Network Status

Congestion

Traffic \ service type

Video, VOIP, Tethering, P2P, Facebook…

Customer Info setting hierarchies and priorities

Business,VIP, Family, Gov…

Tiered packages parameters

Qos

Speed, Latency

Quota \ Usage

Time, Credit, Volume

Complementary add-ons

Customer experience

Real time notifications

Redirect to choose additional /new packages

Monetization adds-on

QoSStep up, step down

Bandwidth on demand!



> Home security offer> When an alarm is triggered in a

remote site> Security application connects to

the cameras in the site with high QoS for this session

> The user can see live, real-time video streams from the site

> Short term bandwidth requirements, high perceived value

Service Bundling



Bundled Products

Jon purchases from his service provider’s store a brand new Canon camera bundled with a package of: • 1000 pictures uploads to Facebook • And 100 printings at the local Kodak store

Service Provider pays Canon and Kodak for their Products and services



Business Intelligence



> Use of computer based techniques, such as data mining, to extract and analyze business data, e.g.> Sales revenue by products , departments, costs or incomes> Correlation of drugs and their effectiveness per demographic, diet, history

> BI technologies provide historical, current and predictive views of business operations to support better business decision making

> Data Mining – extraction of novel knowledge from extremely large data sets to discover the non-obvious without a specific hypothesis in mind> When people buy beer then they often buy chips - so put then close together

in supermarket> Wal-Mart - when men buy diapers on Thursdays and Saturdays, they also

tend to buy beer – so put them close together> Bank - credit card usage and interest earned increase significantly if the bank

halved its minimum required payment> Households that make many lengthy calls between 3 p.m. and 6 p.m. are

likely to include teenagers who are candidates for their own phones

What is Business Intelligence



> Likelihood of customer churn> Based on history of churning, credit issues, number of calls to support desk

> Fraud> Identify inappropriate or unusual behavior or patterns such as mobile phone

usage from/to new country, calls from two different countries at same time> Focused Up-sell possibilities

> High data usage by person at particular times or for specific applications> Bought new smart-device> Promotions, recently married, new child, child went to university> Relocation

> Probability of network failure> Many failures of type X often result in failures of type Y> Frequency of alarm of type W is increasing

Business Intelligence in Telecommunications



> You are a telecom architect with many EMSs and thousands of alarms a day. Your boss wants to reduce the number of alarms as they take 1 hour per person on average to resolve

> You suggest to buy a leading Manager of managers to perform alarm aggregation, consolidation, and correlation

> Using the internet, prepare a 1-2 page report for your boss describing the value proposition and functionality of telecom fault management and alarm correlation systems> For example use Google to search for “telecom fault management”

and work from there

> Leading vendors include> IBM – Micromuse, Netcool, Tivoli> HP – TeMIP> TTI – Netrac

Assignment 2

Yield Management

Documents

right customer

level of yield management

right time

resources available

day mail

different priceused

time limit

valuethat different