Chapter 8: Digital Pricing

The digital revolution starts a new innovation cycle for the function of pricing and revenue management (PRM). Personalized content means the availability of customer preference data that can be used to microsegment customers and allow to move steps closer to a theoretical profit optimum of perfect price discrimination. It is conceptionally clear that all advancements on data capturing, algorithms and analytics will be created that become technically feasible, economically positive and ethically justifiable to the customer. But the technical increase of sophistication also “rings the bells” of well-known hurdles to PRM implementation success, e.g. black box perception, (perceived) lack of control of one of the key action variables, lack of competence and talent access to manage these advanced mathematical capabilities. This article takes a specific focus on hospitality and explores key elements of Digital PRM to embrace, and traps to avoid.