By EyeforTravel.com Correspondent in Amsterdam<br><br>Relationship between RM and marketing has had a substantial effect
Published: 24 Nov 2005
By EyeforTravel.com Correspondent in Amsterdam
Relationship between RM and marketing has had a substantial effect on revenues, both up and down, says John Waddington, manager of revenue management, Eurostar Group.
"At worst, it has damaged revenue, wasted resources and led to political infighting. At best, it has driven both volumes and yields up and built previously untapped revenue streams. We have in place tactical (short-term, "off-the-shelf") and strategic (long-term) promotional plans, which have been developed to drive incremental revenues," he said, during the EyeforTravel.com's 'Revenue Management and Pricing in Travel Europe 2005' being held in Amsterdam. He also referred to RM input into Marketing Communications plan, with econometrics modelling identifying price sensitivity of markets to determine RM Promotions strategy.
On measuring efficacy of revenue management decision, independent of sales and marketing initiatives, he told EyeforTravel.com, "Some elements of RM actions are easily measurable. The revenue earned through over-booking, amended class configurations and additional trains is easy to calculate and directly attributable to RM actions. It is also relatively easy to measure the impact of one-off large-scale RM experiments. Other overall results are a combination of Sales, Marketing, PR and RM initiatives. The commercial department at Eurostar prefers to measure the effects of these as a whole rather than breaking out the individual elements."
On issue of sales and marketing conflicting with RM priorities, Waddington said, "RM priorities can regularly conflict with sales and marketing targets, either through day-to-day sales activities or through targeted strategic promotions. Partners and agencies all expect the "best" offers at the lowest prices, and sales and marketing targets are regularly volume rather than revenue-based. For the overall success of the business, RM need to take an objective view and ensure that dilution is minimised whilst balancing the volume demands with the lower-yield requirements. If applied correctly the volume strategies of sales and marketing can lead to significant revenue gains throughout the business."
He added, "Long-term business objectives can also conflict with short-term RM priorities. Within Eurostar, following the events of July, there was pressure from Sales and Marketing to drive volumes through significantly reduced prices. As it was proving difficult to increase volumes of traffic to London from the continent, from an RM perspective there would not be enough demand to generate the same amount of revenue at such reduced prices. However, for the long-term benefit of the business it was necessary to lower the prices in the short-term to re-ignite demand in Europe."
On relationship between RM and sales, he said there is a flexible leisure demand of Tour and Group Operators market. He referred to shifting of high volume/low yield demand away from peak departures, increasing volume, yield and revenue. He added, "(there is a) Close working relationship with Tour and Group Operators to determine appropriate tours and rotations at appropriate prices; Long term strategic seasonal planning; Price & Upgrade offers to fill low-demand periods."
He added that successful management of events can significantly increase Eurostar's revenue contribution. "The significant events require harmonisation of sales, marketing, operations and revenue management strategies. With the right communications strategy "mini" events can be expanded and new events created. There is increased importance of internal communication between all departments."
Waddington said that integrated RM, Sales and Marketing strategies is vital to ensure optimum revenue earned. He also spoke about close relationship minimising conflict between the three areas of the business and two-way relationship (compromise is required on both sides). "RM, sales and marketing departments CAN work together in harmony," he said.
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