What is yield management pricing?

Yield management pricing refers to the strategy of pricing items at different levels to optimize revenue based on changing demand. This approach is particularly common in industries where the supply is fixed, such as airline tickets, hotel rooms, and event tickets. By analyzing customer behavior and demand fluctuations, businesses can adjust prices dynamically to maximize their revenue potential.

For instance, during peak demand periods, prices might be set higher, capitalizing on customers' willingness to pay more. Conversely, during times of lower demand, prices can be reduced to encourage purchases. This strategy allows businesses to sell their available inventory more effectively rather than sticking to a one-size-fits-all price, which would not take advantage of the variations in customer willingness to pay based on timing and availability.

Other options present less nuanced pricing strategies, such as setting a flat price for all products or offering discounts during off-peak hours, which don't reflect the complexity and adaptability inherent in yield management pricing. Additionally, while increasing prices based on demand forecasts can be a component of yield management, it does not encompass the full scope of pricing variations that yield management entails. Thus, the selected answer accurately captures the essence of yield management pricing.