Project

Revenue Management & Pricing of Services

Goal: Examine customer acceptance of rate fences and pricing strategies for services.

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Jochen Wirtz
added 14 research items
Pre-print; author's draft Services are by nature perishable. As such, managing a service firm's capacity to match supply and demand has been touted as one of the key problems of services marketing and management practice. This paper advances an alternative perspective of unused service capacity. Based on a review of current literature and an exploratory study, this paper employs a theory-in-use methodology to map out a set of capacity strategy propositions. These propositions show a divergence between what literature suggests and what service firms actually practice with regard to reducing the occurrence of unused service capacity. The paper also demonstrates that capacity can be employed as a resource to achieve a series of strategic objectives that serve to improve the performance of the firm. Service firms should therefore approach capacity management not only from the standpoint of operations management but from that of marketing as well.
Restaurants have two strategic levers for revenue management: duration control and demand-based pricing. Reducing dining times, especially during peak periods, can add considerable revenue for the restaurant. Managing meal duration, however, can be far more complex than manipulating the price. This paper examines dinner duration expectations for a casual restaurant using an adaptation of a price sensitivity measurement tool, naming it ‘Time Sensitivity Measurement’ or TSM. TSM is then used to derive the expected dining time, the optimal and indifference duration points. The results show that there is a relatively wide spread of acceptable dining duration times. Furthermore, the optimal and indifference points were significantly shorter than the mean expected dining time, suggesting that many restaurants may be able to shorten dining duration significantly (some 20 per cent in this present study) without compromising customer satisfaction. Furthermore, the paper explores whether demographic variables have an impact on time preferences and finds only nationality effects to be significant. Specifically, North Americans and Asians have similar duration expectations, while Europeans preferred a significantly longer dining time.Journal of Revenue & Pricing Management (2002) 1, 220–233; doi:10.1057/palgrave.rpm.5170026
Jochen Wirtz
added a project goal
Examine customer acceptance of rate fences and pricing strategies for services.