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Revenue Management Application on Karaoke Industry in Taiwan

Industry Overview
The Karaoke culture is popular in East Asia. Unlike the karaoke in bars/clubs offered publicly, the karaoke style here I want to discuss is the one has private rooms for different size of parties, and that is why the concept of Revenue Management can be applied broadly in this industry. I will specifically focus in Taiwan, because the karaoke culture in Taiwan is mature, and the company even expand the business to other countries.

           

The word “Karaoke” is originated from Japanese, so is the culture. Karaoke is firstly developed in Japan in 1970’s and then expanded to other countries in Asia in 1980’s, but the origin of the idea is obscure. Reference: http://en.wikipedia.org/wiki/Karaoke

 

In Taiwan, karaoke plays an important role in people’s nightlife. It’s the place for family, friends, colleagues, and even doing business. The karaoke industry in Taiwan is dominant by one company which has two different brands, one for higher class (more expensive) and the other one for lower class (cheaper). Higher class brand charges more with its glorious and hotel-look lobby, fancier private room decoration, more delicious food, and convenience (in-room restroom). There is another premium venue of that company that doesn’t see as a brand but more like a status, because it is limited to members, and joining the membership is by invitation (http://www.cashboxvip.com/viprespect.html). Thus, people start to consider going to karaoke as a luxurious entertainment, not to mention it seems to be a trend for the hotels in Hong Kong and Macau to design presidential suites with an “entertainment room” when we visited last June. Since people can easily spend hours in karaoke, the revenue can be generated in many ways. I will discuss the application based on my observations and experiences in Taiwan, and karaokes in Taiwan also do a better job than karaokes in Singapore on applying revenue management.

(Website of karaoke in Singapore:

a. http://www.partyworldktv.com.sg/promotion-29305210352041938144.html

b. http://www.kbox.com.sg/StaticContent.aspx?u=6)

         

The following are the overview of basic levers applied in Taiwan:

Space: (not applied in Singapore)
Karaoke has limited capacity, as the number of private rooms are fixed. Also, the size of the private rooms usually vary from small for 3 to 4 people to party size, 18-20 people, or even super party size for up to 35 people.


Time:
The time slot is limited, but the minimum consumption unit vary as the size of private rooms. Usually the rack rate is charged by hour, but promotion packages are charged based on 3-hour consumption, and you can extend by hour as the basic unit.
Also, karaokes apply dynamic pricing according to peak/off-peak hour and high/low season. The prices are differentiated by time of day, day of week, and month of year.


Occupation: (not applied in Singapore)
In Taiwan, students and senior are privileged for cheaper price. People older than the age of 55 are able to enjoy senior discount, as 55 is the minimum age to retire in Taiwan. The reasons may be students are more price-sensitive, but they also have more free time to spend in karaokes, and seniors also have more free time once they retire.
(Unfortunately, the website of the dominant company is in Mandarin, but I think you can still figure out how variable their prices are! Variable pricing charged by per person: http://www.cashboxparty.com/ktv/web_ktv/web_ktv.asp
Rack rate charged by hour per room: http://www.cashboxparty.com/ktv/map/price/kp17.html)

The Levers
SPACE
The inventory unit for karaokes is private room. A karaoke can be as big as a maze with narrow hallways and unorganized directions so it can utilize the space to its maximum. Karaokes define the space implicitly, because the size categories vary according to the space of each branch. Likewise, the capacity of private rooms varies in different branches. The following are the different private room sizes of the biggest karaoke branch in that company:
Small – 2 to 7 people
Medium – 8 to 10 people
Medium big – 10 to 12 people
Big – 12 to 15 people
Super big – 15 – 18 peope
Party size (“Presidential Suite”) – 18 – 35 people

                           
Other utilizations of space:
a. Other than the main revenue generator, private rooms, karaokes utilize spaces for a major human need, food. Consumers not only can order in-room dining in a la carte style, but also can go to buffet area for all-you-can-eat service. Of course the delicacy level is depending on the class of the brand.

b. Another space utilization for karaoke is to selling company-branded products, such as stationary or products signed by famous singers, but it accounts for a very little part of the revenue.

c. In one of the signature karaokes of this company, there is a restaurant serving Cantonese Dim-Sum inside the karaoke. It is a rare but a brilliant concept. For people who go to karaoke but is not that into singing, they may go to that restaurant so they can eat food at the table with more comfortable height. Also, after an all-night singing, people in Taiwan like to have either a late night snack or early breakfast before dawn. The idea of the restaurant can attract people who bother which restaurant to go to. http://www.cashboxparty.com/ktv/cashboxdining/

         
Karaokes tend to save spaces for private rooms, as the more parties they can accommodate, the more revenue it can generate. To increase more revenue by using space, both brands may consider charging private rooms according to the distance to buffet area. The closer to buffet area, the more expensive the room rent, since people can save more time on going back and forth for food and drinks.

TIME
Karaoke sells time explicitly. The prices are either charged by per private room per hour, or by per person per certain time slot (ex. by per person for 3 hours). The pricing differs as follows:
a. Hour – separate a day into 5 different slots: (http://www.cashboxparty.com/ktv/map/price/kp17.html)
07:00-10:59 – the cheapest
11:00-15:59
16:00-17:59
18:00-19:59
20:00-22:59(Sunday to Thursday) 20:00-01:59(Friday and Saturday) – the most expensive
23:00-06:59(Sunday to Thursday) 02:00-06:59(Friday and Saturday)

b. Day of week
As what I mentioned above, Friday and Saturday are considered as “peak season”, and Monday to Thursday are “off-peak season”. The pricing for Sunday is slightly higher than weekdays but much lower than Friday and Saturday.

c. Month of year
This pricing differentiation is specially catered to student groups. Since students in Taiwan have winter vacation (3 to 4 weeks long in January and February) and summer vacation (8 to 9 weeks long in July and August), it is less often for students to go to karaokes with friends or classmates.

d. Special holidays
Public holidays are considered as peak season for karaokes, such as Christmas and spring break (can last from 3 – 5 days to celebrate Tomb-sweeping Day and Children’s Day)

Apart from the above explicit specifications of time, I suggest karaokes can consider to charge implicitly by the number of songs. It is not uncommon that the time we pay for the private room is about to end, but my favorite song is not played yet. If people can pay by songs, then such situation can be avoided and customers can also leave without pity.


PRICE
Karaoke uses physical and non-physical rate fences to differentiate its pricing, but the application of physical rate fences is far less than non-physical.
a. Physical rate fences are the size of private rooms, minimum charge for party size private room, and location of the karaoke branch. It is obvious that karaoke locating in downtown business area or in prime cities can charge higher than other locations. (Minimum rental list for Presidential Suite: http://www.cashboxparty.com/ktv/act/1001118_17/)

b. Non-physical rate fences are occupation (student), age (senior and birthday discount), membership (membership of karaoke and certain credit card holder), and time.

Other non-physical rate fences that I think is doable are advanced reservation and distance to buffet. To manage inventory more efficiently, karaokes can consider charge slightly higher for walk-ins in peak hour or hot season. Also, as what I have mentioned, it is possible for people to pay more for a private room which is closer to buffet area.

40,435 thoughts on “Revenue Management Application on Karaoke Industry in Taiwan”

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  20. Title: The Voyage of Virtue

    Once upon a time in a quaint seaside village nestled between towering cliffs and azure waters, there lived a young lad named Elias. Elias was known for his adventurous spirit and compassionate heart. He spent most of his days helping the fishermen repair their nets or aiding the elderly folk with their chores. But deep inside, Elias yearned for something more – he dreamt of embarking on a grand voyage across the vast ocean.

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    The next morning, Elias found himself aboard the captain’s sturdy vessel, the *Mermaid’s Song*. The salty breeze filled his lungs as the ship cut through the cerulean waters, leaving a foamy trail in its wake. Elias marveled at the vastness of the ocean, the endless expanse stretching out before him like a blank canvas waiting to be painted with adventures.

    Days turned into weeks as the *Mermaid’s Song* sailed ever onward, guided by the stars and the gentle rhythm of the waves. Elias soon became acquainted with the crew – a motley bunch of sailors, each with their own stories and quirks. There was Old Pete, the grizzled first mate with a heart of gold; young Timmy, the ship’s cook who could whip up a feast from the most meager of rations; and gruff but kind-hearted Bosun Jack, who taught Elias the ropes of life at sea.

    As they journeyed farther from land, Elias encountered trials and tribulations he had never imagined. Storms lashed at the ship, threatening to swallow it whole, yet the crew banded together with unwavering resolve, weathering the tempests with courage and camaraderie. In the calm between the storms, Elias found solace in the beauty of the ocean – the shimmering moonlight casting a silver sheen upon the waves, the playful dolphins darting alongside the ship, and the distant cry of seabirds soaring high above.

    Amidst the vastness of the ocean, Elias discovered the true meaning of friendship and resilience. Each day brought new lessons – the importance of perseverance in the face of adversity, the value of teamwork and cooperation, and above all, the power of kindness and compassion.

    One fateful night, as the *Mermaid’s Song* sailed under a star-studded sky, tragedy struck. A sudden squall descended upon the ship, catching the crew off guard. Amidst the chaos, Elias spotted a lone figure clinging to the railing, their cries drowned out by the howling wind. Without hesitation, he rushed to their aid, securing them with a lifeline and pulling them to safety.

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    As the first light of dawn broke through the storm clouds, the *Mermaid’s Song* emerged battered but triumphant, sailing into calmer waters once more. Captain Jonah gathered the crew on deck, his eyes shining with pride and gratitude.

    “My friends,” he said, his voice ringing out across the deck, “we have faced many trials on this journey, but through courage, perseverance, and the bonds of friendship, we have prevailed. Elias, you have shown yourself to be a true sailor – brave, compassionate, and steadfast in the face of adversity. It is with great honor that I name you my successor, the new captain of the *Mermaid’s Song*.”

    Elias stood speechless, his heart overflowing with gratitude and humility. He had embarked on this voyage in search of adventure, but along the way, he had discovered something far greater – the true essence of courage, kindness, and the indomitable spirit of the human heart.

    And so, with a newfound sense of purpose and determination, Captain Elias set sail once more, leading his loyal crew on a journey not just across the vast expanse of the ocean, but towards a future filled with endless possibility and boundless adventure. For as long as the seas continued to whisper their timeless tales, the legend of the *Mermaid’s Song* would live on, a testament to the power of virtue and the enduring spirit of the human soul.

  21. Title: The Voyage of Virtue

    Once upon a time in a quaint seaside village nestled between towering cliffs and azure waters, there lived a young lad named Elias. Elias was known for his adventurous spirit and compassionate heart. He spent most of his days helping the fishermen repair their nets or aiding the elderly folk with their chores. But deep inside, Elias yearned for something more – he dreamt of embarking on a grand voyage across the vast ocean.

    One sunny morning, as Elias sat by the harbor watching the waves dance, an old sailor named Captain Jonah approached him. “Ahoy there, young Elias! I’ve heard tales of your longing for adventure,” the captain boomed, his weathered face creasing into a smile.

    Elias’s eyes widened with excitement. “Yes, Captain Jonah! I’ve always dreamt of sailing the seas, of discovering new lands and experiencing grand adventures.”

    The captain chuckled, his eyes twinkling with amusement. “Well then, lad, how about you join me on my next voyage? We’re setting sail at dawn on the morrow.”

    Elias could scarcely contain his joy. He eagerly accepted the captain’s invitation and spent the rest of the day preparing for the journey ahead. As the sun dipped below the horizon, casting the sky in hues of orange and pink, Elias bid farewell to his village, his heart brimming with anticipation.

    The next morning, Elias found himself aboard the captain’s sturdy vessel, the *Mermaid’s Song*. The salty breeze filled his lungs as the ship cut through the cerulean waters, leaving a foamy trail in its wake. Elias marveled at the vastness of the ocean, the endless expanse stretching out before him like a blank canvas waiting to be painted with adventures.

    Days turned into weeks as the *Mermaid’s Song* sailed ever onward, guided by the stars and the gentle rhythm of the waves. Elias soon became acquainted with the crew – a motley bunch of sailors, each with their own stories and quirks. There was Old Pete, the grizzled first mate with a heart of gold; young Timmy, the ship’s cook who could whip up a feast from the most meager of rations; and gruff but kind-hearted Bosun Jack, who taught Elias the ropes of life at sea.

    As they journeyed farther from land, Elias encountered trials and tribulations he had never imagined. Storms lashed at the ship, threatening to swallow it whole, yet the crew banded together with unwavering resolve, weathering the tempests with courage and camaraderie. In the calm between the storms, Elias found solace in the beauty of the ocean – the shimmering moonlight casting a silver sheen upon the waves, the playful dolphins darting alongside the ship, and the distant cry of seabirds soaring high above.

    Amidst the vastness of the ocean, Elias discovered the true meaning of friendship and resilience. Each day brought new lessons – the importance of perseverance in the face of adversity, the value of teamwork and cooperation, and above all, the power of kindness and compassion.

    One fateful night, as the *Mermaid’s Song* sailed under a star-studded sky, tragedy struck. A sudden squall descended upon the ship, catching the crew off guard. Amidst the chaos, Elias spotted a lone figure clinging to the railing, their cries drowned out by the howling wind. Without hesitation, he rushed to their aid, securing them with a lifeline and pulling them to safety.

    It was only then that Elias realized the identity of the person he had rescued – none other than Captain Jonah himself. The old sailor had been swept overboard in the midst of the storm, his strength waning against the relentless fury of the sea.

    With Captain Jonah safe in his arms, Elias rallied the crew, guiding them through the treacherous waters with a steady hand and unwavering determination. Together, they fought against the raging tempest, their spirits buoyed by the knowledge that they were stronger united than they ever could be alone.

    As the first light of dawn broke through the storm clouds, the *Mermaid’s Song* emerged battered but triumphant, sailing into calmer waters once more. Captain Jonah gathered the crew on deck, his eyes shining with pride and gratitude.

    “My friends,” he said, his voice ringing out across the deck, “we have faced many trials on this journey, but through courage, perseverance, and the bonds of friendship, we have prevailed. Elias, you have shown yourself to be a true sailor – brave, compassionate, and steadfast in the face of adversity. It is with great honor that I name you my successor, the new captain of the *Mermaid’s Song*.”

    Elias stood speechless, his heart overflowing with gratitude and humility. He had embarked on this voyage in search of adventure, but along the way, he had discovered something far greater – the true essence of courage, kindness, and the indomitable spirit of the human heart.

    And so, with a newfound sense of purpose and determination, Captain Elias set sail once more, leading his loyal crew on a journey not just across the vast expanse of the ocean, but towards a future filled with endless possibility and boundless adventure. For as long as the seas continued to whisper their timeless tales, the legend of the *Mermaid’s Song* would live on, a testament to the power of virtue and the enduring spirit of the human soul.

  22. Title: The Voyage of Virtue

    Once upon a time in a quaint seaside village nestled between towering cliffs and azure waters, there lived a young lad named Elias. Elias was known for his adventurous spirit and compassionate heart. He spent most of his days helping the fishermen repair their nets or aiding the elderly folk with their chores. But deep inside, Elias yearned for something more – he dreamt of embarking on a grand voyage across the vast ocean.

    One sunny morning, as Elias sat by the harbor watching the waves dance, an old sailor named Captain Jonah approached him. “Ahoy there, young Elias! I’ve heard tales of your longing for adventure,” the captain boomed, his weathered face creasing into a smile.

    Elias’s eyes widened with excitement. “Yes, Captain Jonah! I’ve always dreamt of sailing the seas, of discovering new lands and experiencing grand adventures.”

    The captain chuckled, his eyes twinkling with amusement. “Well then, lad, how about you join me on my next voyage? We’re setting sail at dawn on the morrow.”

    Elias could scarcely contain his joy. He eagerly accepted the captain’s invitation and spent the rest of the day preparing for the journey ahead. As the sun dipped below the horizon, casting the sky in hues of orange and pink, Elias bid farewell to his village, his heart brimming with anticipation.

    The next morning, Elias found himself aboard the captain’s sturdy vessel, the *Mermaid’s Song*. The salty breeze filled his lungs as the ship cut through the cerulean waters, leaving a foamy trail in its wake. Elias marveled at the vastness of the ocean, the endless expanse stretching out before him like a blank canvas waiting to be painted with adventures.

    Days turned into weeks as the *Mermaid’s Song* sailed ever onward, guided by the stars and the gentle rhythm of the waves. Elias soon became acquainted with the crew – a motley bunch of sailors, each with their own stories and quirks. There was Old Pete, the grizzled first mate with a heart of gold; young Timmy, the ship’s cook who could whip up a feast from the most meager of rations; and gruff but kind-hearted Bosun Jack, who taught Elias the ropes of life at sea.

    As they journeyed farther from land, Elias encountered trials and tribulations he had never imagined. Storms lashed at the ship, threatening to swallow it whole, yet the crew banded together with unwavering resolve, weathering the tempests with courage and camaraderie. In the calm between the storms, Elias found solace in the beauty of the ocean – the shimmering moonlight casting a silver sheen upon the waves, the playful dolphins darting alongside the ship, and the distant cry of seabirds soaring high above.

    Amidst the vastness of the ocean, Elias discovered the true meaning of friendship and resilience. Each day brought new lessons – the importance of perseverance in the face of adversity, the value of teamwork and cooperation, and above all, the power of kindness and compassion.

    One fateful night, as the *Mermaid’s Song* sailed under a star-studded sky, tragedy struck. A sudden squall descended upon the ship, catching the crew off guard. Amidst the chaos, Elias spotted a lone figure clinging to the railing, their cries drowned out by the howling wind. Without hesitation, he rushed to their aid, securing them with a lifeline and pulling them to safety.

    It was only then that Elias realized the identity of the person he had rescued – none other than Captain Jonah himself. The old sailor had been swept overboard in the midst of the storm, his strength waning against the relentless fury of the sea.

    With Captain Jonah safe in his arms, Elias rallied the crew, guiding them through the treacherous waters with a steady hand and unwavering determination. Together, they fought against the raging tempest, their spirits buoyed by the knowledge that they were stronger united than they ever could be alone.

    As the first light of dawn broke through the storm clouds, the *Mermaid’s Song* emerged battered but triumphant, sailing into calmer waters once more. Captain Jonah gathered the crew on deck, his eyes shining with pride and gratitude.

    “My friends,” he said, his voice ringing out across the deck, “we have faced many trials on this journey, but through courage, perseverance, and the bonds of friendship, we have prevailed. Elias, you have shown yourself to be a true sailor – brave, compassionate, and steadfast in the face of adversity. It is with great honor that I name you my successor, the new captain of the *Mermaid’s Song*.”

    Elias stood speechless, his heart overflowing with gratitude and humility. He had embarked on this voyage in search of adventure, but along the way, he had discovered something far greater – the true essence of courage, kindness, and the indomitable spirit of the human heart.

    And so, with a newfound sense of purpose and determination, Captain Elias set sail once more, leading his loyal crew on a journey not just across the vast expanse of the ocean, but towards a future filled with endless possibility and boundless adventure. For as long as the seas continued to whisper their timeless tales, the legend of the *Mermaid’s Song* would live on, a testament to the power of virtue and the enduring spirit of the human soul.

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