Chapter 9

Relating Revenue Management to Customer Value

One theme in cost analysis has direct linkage to revenue management, namely the effort to classify costs as value-added or non-value-added costs. Value-added costs are those that provide something for which a customer is willing to pay. This concept has a direct role in revenue management; customers are willing to pay for the value they receive from a purchase.

Early research by McNair and Vangermeersch analyzed profitability as four concentric circles.1 The inner circle represents a core of activities that adds value to the company’s products or services. These activities may contribute to the functional characteristics of the product or service, their quality, customer support services, ...

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