What Is the Definition of Yield Management?

Yield management refers to the process of examining and analyzing the actions of consumers in order to set variable prices for a perishable product or service at the maximum amount of profit. Some of the factors considered include buying patterns, timing and price.

Many industries use yield management to set fluctuating prices based upon demand. For example, airlines use yield management to price seats on flights based in part on the number of remaining available seats compared to demand for a particular flight. A passenger booking early may pay significantly less than a passenger booking once the flight is nearly full. While many industries benefiting from yield management revolve around travel or hospitality, other industries, such as telecommunications and insurance, use variations of yield management to set prices.