If you fly for business or pleasure, you know that buying a plane ticket has almost become an art form.
And when it comes to your final ticket price, it turns out that when you buy may matter more than where you fly.
According to Cheapair.com, the average fare difference between the best day to buy your airline ticket and the worst is more than $200 -- and that's not counting the premium fares you'll see if you're purchasing a ticket within seven days of travel.
That's because airlines don't have a fixed ticket-price system. They change fares constantly, as their goal is twofold: sell the most tickets for every flight (a goal best achieved with lower fares) and maximize the total amount received (a seemingly contradictory goal best achieved with higher ticket prices).
Introducing: Revenue Management
Instead, airlines utilize a system called "revenue management" -- a process that looks at consumer demand patterns and the company's business trends to ultimately determine best possible product or service prices at every point in time.
Revenue management, in this case, requires a dynamic fare adjustment. Airlines have mastered the science of adjusting fares to maximize total sales, getting the consumer to pay as much as they're willing to pay while still selling as many tickets as possible. (A half-empty flight would leave some revenue on the table.)
This isn't as simple as it may seem.
Revenue (or "yield") management actually originated in the hospitality industry, where selling as many hotel rooms as possible at the highest possible price is essential. These days, revenue management has become an important tool for many businesses selling a timed or perishable product or service.
In the case of airlines and hotels, there are many factors impacting the calculus. Just a few examples:
--Seasonality (i.e. holidays, which typically see more demand and are typically more expensive for consumers)
--Days of the week (Tuesday is often the cheapest day to travel or to book a room because vacations and business trips don't typically begin on that day)
--Speed at which the tickets or rooms are selling (indicating the basic demand in relation to the current price levels)
--Time left until the flight leaves or the number of rooms left to be filled
...all against the backdrop of competition within the same time frame.
This is why there are businesses that offer comparison shopping for hotels and travel.
Travel writers have made it a point to advise their readers of the optimal time to buy a plane ticket or book a room. Most of their advice calls for the same basic approach: don't book too early, but don't wait too late relative to your travel dates; avoid certain days of the week; and be flexible with your departure or arrival dates.
A problem with this kind of advice is that there's nothing keeping airlines and hotels from reading these articles and adapting to our changing behavior. The goal of revenue management remains the same -- to optimize (better yet, maximize) revenue and profits. And with revenue management technology becoming more and more sophisticated, with more and more analysis and real-time inputs incorporated and better and better forecasts possible, these subtle changes lead to the best possible results for the businesses using it.
This is why the methods of revenue management are now being applied in several businesses outside of the traditional hotel and travel sectors.
From its humble beginning in the 1970s, revenue management has expanded to industries like car rentals, cruises, retail and even healthcare.
Essentially, it's been a paradigm shift in the way companies sell their products and services, an advance in the never-ending fight to improve the efficiency of the business.
You might be surprised to see healthcare on the list of industries employing revenue management methods. But this business is extremely competitive, and anything that helps profitability is going to be exploited.
Plus, if you think about it, healthcare is similar in many ways to the hotel and the airline industries. Healthcare products and services are perishable; the capacity to provide these services and products is often limited; and their prices, especially those set via the contract system, can be quite flexible.
This Is A Game-Changing Field
It's no wonder we've seen more companies focused on providing revenue management services as the technology has progressed. The best of the best provide the software that goes well outside the traditional tasks of tracking revenue and collecting payments. And for life science and pharmaceutical companies, with their revenue-generation complications such as unique products and the need for strict compliance, proper revenue management tools can make all the difference between losing money on a product versus becoming successful and profitable.
As a result, an entirely new IT business has developed -- one that helps others make money by taking revenue management tasks off their hands and generating best possible solutions for maximizing business efficiency.
The newest pick for my premium newsletter -- Game-Changing Stocks -- is one such company. Not only is it the leader in revenue management software for life science and pharmaceutical companies, but it also helps technology companies in similar ways.
And because it's organized as a cloud company, giant multinationals such as Amgen (Nasdaq: AMGN), Bristol-Myers Squibb (NYSE: BMY), Johnson & Johnson (NYSE: JNJ), Merck (NYSE: MRK) and even Intel (Nasdaq: INTC), just to name a few, use its services across their multiple divisions and locations with ease.
I can't share the name of this particular pick with you today (that wouldn't be fair to my premium subscribers). But make no mistake: This is a game-changing field of business that could make investors a lot of money. If you do your homework and invest in the right player, you could wind up winning big.
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This article originally appeared on StreetAuthority.