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.