Online Haggling and Revenue Management

Like haggling with a salesperson to get a better deal? You can now do something pretty similar online as you try and get the best deal and the seller tries to maximize revenue.

Online Haggling and Revenue Management

I was recently booking a hotel room and noticed something interesting.

Early on in the reservation process the hotel website suggested some upgraded rooms and suites. These were of no interest and I went ahead with the less expensive standard room.

After the reservation was complete I was offered the same upgrades again. This time they were presented as add-ons to the original reservation, and at lower prices.

By ignoring the more expensive options early on and sticking with the least expensive room I showed the hotel that I was less interested in upgrades and more interested in the cheapest possible room. They had responded by making me a counteroffer – they offered the same upgrades at a discount, the same way a car salesman might chase somebody out to make a better offer.

It is a great example of differential pricing and revenue management, and shows how sophisticated programming can automate salesmanship into a kind of virtual haggling.

More information on Differential Pricing, Revenue Management and Virtual Online Haggling in the Examples section.

Revenue Management