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The Future of Pricing
Book

The Future of Pricing

How Airline Ticket Pricing Has Inspired a Revolution

E. Andrew Boyd
Palgrave Macmillan, 2007
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Editorial Rating

9

Qualities

  • Innovative
  • Applicable

Recommendation

Sometimes the most obvious business practices are the most complicated – and the most interesting. This is the case with airline pricing, so E. Andrew Boyd has chosen a great topic. As an expert in the esoteric field of operations research, he has done business readers a great service by presenting the history, evolution, theory and practice of airline pricing, and by tracking how it revolutionized pricing in many other industries. Boyd weaves his personal stories and insights about mathematics, gambling and airline history into a very readable, high-level business book. While this is a seemingly esoteric topic, getAbstract highly recommends his book to those in the transportation, travel, tourism and restaurant businesses. It will be especially valuable to intrepid executives in other industries who want to push the frontiers of pricing based on the latest science about operations.

Summary

What’s the Price?

Setting prices is not easy. While pricing can determine the success of any company, most managers worry more about pricing their goods than about their actual pricing philosophies and policies. Companies choose prices that factor in their margins over the cost of production or they base their prices on what the competition charges. Pricing to accommodate a commission-based salesforce is a more complicated equation, in that managers must offer competitive prices and keep the sales staff happy.

Technology can make the complex job of setting prices more manageable. Airlines have been especially proficient in using computers to set prices amid heavy regulations. For instance, they developed computerized reservation systems that predated the Internet by years. Today airlines “practice the most sophisticated pricing ever conceived” as they continually update ticket prices based on consumer behavior, cancellations and bookings.

To derive the maximum benefit from your pricing policies, investigate the mathematics of “scientific pricing.” Companies use this calculation tactic to, for example, explore ways to increase a product’s profit potential. For...

About the Author

E. Andrew Boyd is the chief scientist and senior vice president of a consultancy that works with leading companies on pricing issues. He holds a Ph.D. in operations research from the Massachusetts Institute of Technology.

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