Revenue management was pioneered as “yield management” by American Airlines in the 1980’s and subsequently deployed by Marriott International and others in diverse industries attempting to maximize their revenues. It has been defined as “the application of disciplined analytics that predict consumer behaviour at the micro-market levels and optimize product availability and price to maximize revenue growth. The primary aim of revenue management is selling the right product to the right customer at the right time for the right price and with the right pack.” (Wikipeida, 7/12/20).
Yet maximizing revenues is not synonymous with maximizing profits and that’s where the skills of management accountants/controllers come in. In management accounting we traditionally focus on costs and cost management, giving little thought to revenue decisions. Yet revenue management decisions are important financial decisions. Management accountants/controllers need to be concerned with all aspects of their organizations’ financial success, bring the tools of their profession to bear on the analysis of revenue, cost, and investment decisions.
This is basic premise of Profitability Analytics - providing decision makers with better information grounded on sound economic principles and on operational models of organizations’ revenues and costs. By employing profitability analytics management accountants/controllers can better serve as strategic business partners within their organizations, helping to increase their profitability, and helping to ensure their long-term sustainability.