Yield management
Yield management is about maximising the total revenue you can earn from your activity business by regularly adjusting your prices up or down, based on on your knowledge of what is happening on the ground and what your competitors are doing.
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Lowering your prices can attract more customers. Price reduction is an effective way of maximising the total sales of a perishable product such as, for example, boat-days in the case of a boat-hire business.
Yield Management: Price Reduction Example
- A boat hire business charges €80 per boat-day, before VAT, or €90, plus VAT.
- Business is slow towards the end of the week and the owners realise that they are unlikely to rent out all their boats that weekend.
- They decide to post a special offer on their website, offering boat-days at €60, plus VAT.
- They receive bookings for all the boats and earn more total sales than they would have done, had they kept to their full-price.
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Yield Management: Price Increase Example
- The same owners are aware that an anglers’ conference is taking place in their town the following weekend.
- They update their website, posting an increased price of €100, plus VAT, as they believe there will be increased demand and know that their competitors are almost fully booked.
- They receive bookings for all the boats and earn more total sales than they would have done, had they kept to their original price.
Remember!
If you are over the VAT threshold of €37,500 in sales value per annum, you need to add 13.5% to your price.
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