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Yield Management . December 2011. Tomer Oster & Segev Cohen. The threat: non-profitable price models . Trend #1: Increase in the number of devices. Connected devices passed 5 Billion in 2010 – IMS, 2010 . Kinect Xbox units shipped in 2 months . Connected TVs shipped in 2010 .
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Yield Management December 2011 Tomer Oster & Segev Cohen
Trend #1: Increase in the number of devices Connected devices passed 5 Billion in 2010 – IMS, 2010 Kinect Xbox units shipped in 2 months Connected TVs shipped in 2010 iPads sold in 3 months 3M 8M 27M
0 Trend #2: Bandwidth-intensive services Core Services New Applications Capacity Required MB Gross margins on voice are ~90% 100 emails 1 email with picture 1 MP3 1 hour of browsing 5 minutes of video 1 minute of voice 1 160 characters SMS
The outcome: non-profitable price models 3,000,000,000 2,500,000,000 2,000,000,000 1,500,000,000 1,000,000,000 500,000,000 0 Video On Demand Streaming Audio VoIP Anti-virus On-line
Toll Roads • The Service: • Charging pricing method for toll roads • Pricing method: • Tolls are continually adjusted according to traffic condition - adjusting the price to the time when tolled lanes get relatively busy • Key takeaways: • Price will differ based on congestion • Identified as the most viable approach to reduce traffic congestion and generating revenues for highway agencies
Transportation Alternatives 08:00 • The Service: • Reduce unnecessary driving, promote environmentally sound transportation • Pricing method: • Use price to signal when drivers should consider taking mass transit, reschedule their trip or pay a higher fee for driving. • Use reduced prices for car pools • Give tax relieves for companies enabling/enforcing working from home • Key takeaways: • Real effect on congestion results – maximize the use of the existing traffic roads • Suggesting an alternative attractive offering 11:00
Concert Seats • The Service: • Popular Concert seats tickets • Pricing method: • No printed price on the ticket • Changing prices at regular intervals based on actual consumer demand • Sensitive to changes in demand over the lifecycle of the product • If the seats are selling well, the price of the ticket will go up… and up – kind of stock market • Key takeaways: • Perishable product based on product lifecycle • Prices are not limited for popular concerts seats
The Airline Industry • The Service: • Airline tickets • Pricing method: • Dynamically modulate prices over time by adjusting the number of seats available in each pre-defined fare class • Adding new type of seats like: • Original: creating new classes like Business which gets 1.5 more space then regular seat but cost 2 times the price • Preferred Couch (taking extra money for seats before emergency exists due to more leg room) • Options on Business class – paying extra money for option to upgrade to business class in case room is available
Mission Statement • The Cellular Company is the owner of the network that subscribers are using to consume services • The demand for capacity is rising but the revenue per bit is dropping so simply investing in enlarging the network is not a profitable solution • Propose the cellular company other solutions to maximize profit and management of the network assets