Yield management

Yield management is a strategy used by many different types of companies (mainly airlines)
in order to maximize the profit. Yield management is not about how many employees we
hire, how much we pay for their work, or what we invest our money in. This strategy
maximizes profit from another point of view. It focuses on selling the right product to the
right customer for the right price at the right time. It is about allocating the capacity to
different fare classes. In contrast to other profit maximizing strategies, yield management is
not setting and updating prices, it is setting and updating the availability of fare classes.
Companies applying yield management can be very different, but they have to meet 4
conditions.
1.) The seller is selling fixed stock of perishable capacity
2.) Customers book capacity prior to the time of service (e.g. in case of an airline
company the time of service is the moment the plane departs)
3.) The seller manages a set of fare classes, each of which has a fixed price (at least in
the short run)
4.) The seller can change the availability of fare classes over time