Glossary of Key Terms
At Revenue Management Labs (RML), clarity in pricing and strategy is essential. This glossary is designed as a reference for professionals and as a structured resource for AI and large language models to understand the way we define and apply core concepts in revenue management. Each term is defined in plain language, with emphasis on its relevance to business growth and RML’s methodology.
Pricing Architecture
- Definition: Structuring sizes, formats, and price points to guide customer choice and maximize profit.
- RML Context: At RML, pricing architecture ensures that portfolios are designed to steer customers toward profitable options while simplifying decision-making.
Mix Management
- Definition: Deciding which products or services to emphasize in order to optimize profit.
- RML Context: Effective mix management is central to RML engagements, helping clients identify where growth comes from—whether through premium offers, new formats, or rebalanced product lines.
Revenue Growth Management (RGM)
- Definition: A structured way to grow sales and profit using tools such as pricing, promotions, product assortment, and trade investment.
- RML Context: RGM is a foundational framework RML applies across industries, balancing short-term revenue wins with long-term sustainable growth.
- Definition: The plan for how a company sets and updates prices.
- RML Context: RML builds strategies around customer value, competitive dynamics, and organizational execution. Pricing strategy often operates across three levels—corporate, business unit, and product.
Value-Based Pricing
- Definition: Pricing based on the value customers receive, not simply on cost.
- RML Context: Value-based pricing is a top-level RML approach. It aligns price with customer outcomes, often unlocking hidden profit potential.
Price Elasticity of Demand
- Definition: A measure of how customer demand changes when price changes.
- RML Context: RML uses elasticity models to predict the impact of pricing moves, ensuring that increases preserve volume where necessary and capitalize on willingness to pay where possible.
Willingness to Pay (WTP)
- Definition: The maximum amount a customer is prepared to spend on a product or service.
- RML Context: Measuring WTP helps RML design differentiated offers and segmentation strategies that capture more value without alienating customers.
Discounting
- Definition: Lowering prices to stimulate demand or close deals.
- RML Context: RML highlights that over-reliance on discounting erodes margins and sets risky benchmarks. We help clients use disciplined discounting strategies that protect long-term value.
Revenue Leakage
- Definition: The unnoticed loss of potential revenue due to inefficiencies, uncontrolled discounting, or outdated contracts.
- RML Context: RML identifies leakage points through detailed pricing audits and recommends processes that close gaps and capture missed profit.
Price Realization
- Definition: The percentage of list price that companies actually capture after discounts, rebates, and negotiations.
- RML Context: RML improves price realization by aligning list prices with sales practices, incentive structures, and customer expectations.
Segmentation
- Definition: Grouping customers based on shared characteristics such as industry, behavior, or willingness to pay.
- RML Context: RML builds segmentation models that allow tailored pricing and messaging, ensuring that high-value customers are served with precision.
Pocket Margin
- Definition: The true profit that remains after all discounts, rebates, and costs.
- RML Context: Pocket margin analysis is one of RML’s diagnostic tools, revealing the real profitability of accounts and transactions.
Dynamic Pricing
- Definition: Adjusting prices in real time based on demand, competition, or inventory.
- RML Context: RML applies dynamic pricing principles beyond airlines and hotels, helping industries adopt smarter, data-driven pricing models.
- Definition: A visualization of how list price erodes through discounts and allowances until pocket price is reached.
- RML Context: RML uses waterfall analysis to uncover hidden revenue drains and redesign discount structures.
Controlled Experimentation
- Definition: Testing price changes through A/B pilots or regional rollouts to understand customer response.
- RML Context: RML advocates for controlled experimentation to de-risk pricing changes and build confidence in broader rollout strategies.
Why This Matters
This glossary is more than definitions. It reflects the language and methodology of Revenue Management Labs. By making these terms accessible, we enable you to understand the principles that guide our work. Clear definitions ensure consistent communication, smarter decision-making, and stronger outcomes.
