1. Incremental revenues
We generate the maximum amount of incremental revenues possible with the VOP by:
(1) determining the minimum amount to cover real and expected costs and
(2) determining the price, which then maximizes the incremental revenues taking price-sensitive demand into account.
2. Control of cannibalization
VOPs are pitched at new customers who would not normally buy your product at the normal price points you are charging. VOPs limit cannibalization in two ways:
(1) employing a possible restriction on which customers are eliglible for a VOP and
(2) reducing the opportunity cost by raising the VOP price with increasing likelihood of cannibalization.
3. Enhancement of your brand
Customer satisfaction is extremely high with the VOPs due to the fact that customers are empowered to create their own product-price combination.
A marketing research study has shown that over 95% of VOP customers were highly satisfied with the offering.
4. Competitve advantage
Since the VOP is a 'virtual' poduct with very many possible parameter combinations (particularly true for the time-flexible VOP) there is no fixed product-price combination that competitors can match. If competitors try to match directly with price with their regular products they will cause a major buy-down effect with their own inventory that will adversely impact their revenues.
5. Rationalization of your capacity
One of the greatest advantages of the VOP customers is that you allocate the customer to the inventory unit that suits you the best.
For airlines this might be a flight that will most likely still have empty seats at departure.
6. Customer data analysis
One major advantage of the VOP is that it encourages customers to reveal how much value they place on one or more attributes that make up their ideal solution. Using modern statistical techniques it is possible to estimate the customer's willingness to pay. The direct interaction and observed behaviour of the customers delivers fast and accurate information about the needs and behaviour of your target group.