service marketing 7 - (managing demand and capacity)
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Managing demand and capacity
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Demand & Capacity Imbalance
Demand & Capacity Imbalance
Wasted Capacity
Tight Capacity
Demand
Capacity
time
Good
Balance
Demand > capacity
lost customers
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Understanding Capacity Constraints andUnderstanding Capacity Constraints and
Demand PatternsDemand PatternsCapacity Constraints Demand Patterns
Time, labour, equipment and
facilities
Optimal versus maximal use ofcapacity
Charting demand patterns
Predictable cycles
Random demand fluctuations Demand patterns by market
segment
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Strategies forShifting DemandStrategies forShifting Demand
to Match Capacityto Match CapacityDemand Too High Demand Too Low
Use signage to
communicate busy days
and times
Offer incentives to
customers for usage
during non-peak times
Take care of loyal or
regular customers first
Advertise peak usage
times and benefits of non-peak use
Charge full price for the
service--no discounts
Use sales and advertising
to increase business from
current market segments
Modify the service offering
to appeal to new market
segments
Offer discounts or price
reductions
Modify hours ofoperation
Bring the service to the
customer
Shift
Demand
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Strategies for Flexing CapacityStrategies for Flexing Capacity
to Match Demandto Match DemandDemand Too High Demand Too Low
Stretch time, labor,facilities and equipment
Cross-train employees
Hire part-timeemployees
Request overtime workfrom employees
Rent or share facilities
Rent or shareequipment
Subcontract oroutsource activities
Perform maintenance
renovations
Schedule vacations Schedule employee
training
Lay off employees
Shift
Demand
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What is the Nature ofDemand Relative toWhat is the Nature ofDemand Relative to
Supply?Supply?
Extent of Demand fluctuations over time
Wide Narr ow
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What is the Constraint
on Capacity?What is the C
onstraint
on Capacity?
Na t re f t e c stra i t y e f se rvice
ime y Lega
y onsu t ng
y Ac count ng
y Me d c a
Lab r y La f rmy Ac count ng f rm
y onsu t ng f rm
y ea th c n c
Equi me t y De very serv ces
y e ecommun ca t on
y Ut t es
y ea th c ub
Facilities y o te sy estaurants
y osp ta s
y A r nes
y Sc hools
y heaters
y hurches
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Waiting Line Issues andS
trategiesWaiting Line Issues andS
trategiesUnoccupied time feels longer
Preprocess waits feel longer
Anxiety makes waits seem longer
Uncertain waits seem longer than finite waits
Unexplained waits seem longer
Unfair waits feel longer
Longer waits are more acceptable for valuable services
Solo waits feel longer
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ManagingD
emandManagingD
emandProduct Variations over time
Modifying Timing and Location ofDelivery
Pricing
Communication with Customers
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ManagingD
emandManagingD
emandPricing.
Advertising and Promotion.
Reservations.
Change the Nature ofDemand.
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ManagingD
emandManagingD
emandPerishability
Services can not be stored.
When demand fluctuates, service firms have problems.
Strategies can be formulated for producing better match between
demand and supply.
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ManagingD
emandManagingD
emandTailor Capacity
(Strategy leverage to manage peaks and falls)
Manage Demand Level (Productive capacity constituents and constraints)
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Strategies
on the demand side
Differential pricing
x Noon shows in theatres are priced low
Non-peak demand
x Off-season holiday packages
Complementary services
x Benihana Tokyo
Reservation systems
x Airlines, Hotels
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Managing CapacityManaging CapacitySchedule employees and equipment intelligently.
Stretch the capacity: Squeeze more people in.
Speed up service.
Schedule downtime during periods of low demand
(repair, maintenance, vacations)
Employ part-timers, flex-timers, call-in workers, seasonal
workers.
Rent/share extra facilities equipment.
Cross-train employees
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Patterns andD
eterminantsofD
emandPatterns andD
eterminantsofD
emandDemand cycle - Predictable / Duration
Cause behind cyclic variation
Any random change symptom.
Disaggregation by segmentation
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Using Market Mix t
oshape
Demand patterns
Using Market Mix t
oshape
Demand patterns
Product variations
Pricing strategies
Delivery system/Time modification
Communication efforts
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Strategies
on the supply side
Part time employees
Extra assistant in polyclinic or part-time teachers in colleges
Peak-time efficiency routine
Kitchen staff working as waiters in crowded restaurants.
Increased customer participation
Customers picking theirown grocery.
Shared services
Banks working with DSAs for selling loans and credit cards.
Facilities for future expansion
College building buys surrounding land for later developments.
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QuestionsQuestions