What are the applications of revenue management?

For years, it has been taught that in order for a business to apply revenue management, it must meet four conditions:

• Offer perishable products or services.

• Have limited capacity.

• Operate with a cost structure that is intensive in fixed costs.

• Serve a market that can be segmented according to price sensitivity.

Let’s examine how these conditions do—or do not—apply in practice.

The supposed need for perishable products
It is claimed that revenue management applies only to perishable products or services. However, almost everything offered in the market is perishable to some degree. A service that is not consumed today can no longer be offered tomorrow. It cannot be stored.

Even physical products like clothing, while storable, lose value as they go out of fashion. The same happens with technology, which quickly becomes obsolete. In this sense, most products and services have some degree of perishability.

Capacity is always limited
Another traditional condition is that only businesses with limited capacity can apply revenue management. But in practice, every business has some scarce resource that limits its operation. Factories have finite production capacity. Services that depend on people, such as education or healthcare, are limited by available man-hours.

Even in the digital environment, where physical limits seem nonexistent, scarcity exists. In online advertising, for example, the display space per user is limited, imposing real constraints.

Fixed costs vs. variable costs
It has also been argued that this discipline only applies to businesses with high fixed costs. This is why it has historically been used in sectors like airlines, hotels, or car rentals. But what really matters is not the proportion of fixed to variable costs, but knowing the minimum unit variable cost at which one can charge without losing money.

In insurance, that minimum is determined by the probability of a claim occurring. In a supermarket, the supplier’s purchase price sets the variable cost. The key is that any segmented price must exceed that threshold.

Segmentation by price sensitivity
The last requirement is that the market must be segmentable by price sensitivity. In reality, every market is, as long as the available segmentation tactics are applied correctly.

Apple segments through product design, offering multiple iPhone models with differentiated prices for customers who are less price-sensitive. Xiaomi, by contrast, serves more price-sensitive buyers with a wide range of more affordable models. The key is identifying which tactic to use depending on the type of business.

Applications across industries
Almost any business can benefit from the principles of revenue management. This discipline is, in essence, an advanced application of pricing, focused on balancing supply and demand through segmentation.

For example, the "time of purchase" tactic can attract customers to a restaurant during slow afternoon hours. Or the "place of purchase" tactic can encourage online ticket sales, reducing physical lines at parks, cinemas, or museums.

Even in aviation, product design adjustments can be made—such as removing the middle seat in a row and selling it as business class—improving cabin utilization without changing the aircraft’s physical structure.

What’s next?
These concepts form the foundation for designing pricing strategies oriented toward profitability. But their application must also consider the stage the market is in. The market lifecycle affects which tactics are most appropriate. In upcoming analyses, we’ll explore how to adapt pricing strategies depending on whether the market is in the introduction, growth, maturity, or decline stage.