sm lecture 5b - demand and capacity
TRANSCRIPT
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Services Marketing
unit-4B,5 B
MBA-3rd 2009-11
Managing service delivery
Balancing demand and capacity
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Topics
Service blueprinting
Design and layout of service delivery
Capacity and demand management.
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Learning Objectives
To understand the role of design and lay out inservice delivery
To be familiarise with the process of blueprinting
of a service process To understand the role of customer in the
service delivery process
To understand the relationship between
Capacity and demand To understand the use of an effective
reservation system
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ServiceCharacteristics
IntangiblePerformance not the object
Process = experience
= importance
InseparableDesign Customers involvement
Into the delivery process
Educate customers
how it works
Personal information =
Important
Managing customer behaviour
Perishable
Demand and Capacity balancePromote specific periods when
necessary
Capacity cant be stored
Inventory demand
Use resources productively =
increasing capacity
Issues in service delivery
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Service Blueprinting: Key
Components1. Define standards for front stage activities2. Specify physical evidence
3. Identify principal customer actions
4. ------------line of interaction (customers and front stagepersonnel)--------
5. Front stage actions by customer-contact personnel
6.------------line of visibility (between front stage and backstage)--------------
7. Backstage actions by customer contact personnel
8. Support processes involving other service personnel
9. Support processes involving IT
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Simplified Example: Blueprinting a Hotel Visit
PhysicalEvidence
CustomerActions
Employee
ActionsFace-to-faceF
ron
t
Stage
PhoneContact
Backstage
Makereservation
Rep.
records,
confirms
Arrive,valet park
Check-inat reception
Doorman
greets, valet
takes car
Enter
data
Valet
Parks Car
Make up
Room
Register
guest data
Receptionist
verifies, gives
key to room
Go to
room
Hotel exterior, lobby,employees, key
Elevator, corridor,room, bellhop
Line ofInteraction
Line ofVisibility
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Developing a Blueprint Some
Basic Advice
Identify key activities in creating anddelivering the service(theatrical metaphor) Distinguish betweenfront stage, what customers experience, and
back stageChart activities in sequenceShow how interactions between customers
and employees are supported by backstageactivities and systems
Establish service standards for each stepIdentify potential fail pointsFocus initially on big picture later, can
drill down for more detail in specific areas
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Service Firms as Teachers:
Well-trained Customers Perform Better Firms must teach customers roles as co-
producers of service Customers need to know how to achieve
best results
Education can be provided through: Brochures Advertising
Posted instructions
Machine-based instructions
Websites, including FAQs Service providers
Fellow customers
Employees must be well-trained
to help advise, assist customers
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The Problem of Customer Misbehavior
Identifying and Managing Jaycustomers
What is a jaycustomer?A customer who behaves in a thoughtless or abusivefashion, causing problems for the firm itself,employees, other customers
Why do jaycustomers matter?
Can disrupt processes
Affect service quality
May spoil experience of other customers
Can you give some examples of jaycustomers?
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Six Types of Jaycustomer
Thief seeks to avoid paying for service
Rule breaker ignores rules of social behaviour and/or procedures forsafe, efficient use of service
Belligerentangrily abuses service personnel (and sometimes othercustomers) physically and/or emotionally
Family Feuders fight with other customers in their party
Vandaldeliberately damages physical facilities, furnishings, andequipment
Deadbeat fails to pay bills on time
What should a firm do about them?
Try to avoid attracting potential jaycustomers Institute preventive measures
Control abusive behavior quickly
Take legal action against abusers
BUTfirm must act in ways that dont alienate other customers
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Balancing supply and demand
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Relating Demand to Capacity:
Four Key Concepts
Excess demand: too much demand relative tocapacity at a given time
Excess capacity: too much capacity relative to
demand at a given time Maximum capacity: upper limit to a firms ability
to meet demand at a given time
Optimum capacity: point beyond which servicequality declines as more customers are serviced
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Variations in Demand Relative to
Capacity
VOLUME DEMANDED
TIME CYCLE 1 TIME CYCLE 2
Maximum AvailableCapacity
Optimum Capacity(Demand and Supply
Well Balanced
Low Utilization(May Send Bad Signals)
Demand exceeds capacity(business is lost)
Demand exceedsoptimum capacity(quality declines)
Excess capacity
(wasted resources)
CAPACITY UTILIZED
Lovelock and Wirtz (2004:260)
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Defining Productive Capacity
in Services
Physical facilities to contain customers
Physical facilities to store or process goods
Physical equipment to process people,
possessions, or information
Labour used for physical or mental work
Public/private infrastructuree.g., highways,
airports, electricity, internet bandwidth.
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Crush chaos at Ikea store opening(Edmonton, North London 2005)
The did not put in
place the right
infrastructure to
deal with that.
People became agitated
and eventually they
started trying to charges
the doors
One woman
pushed her way
forward
screaming with
excitement.
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Capacity Management Strategies
Level capacity (fixed level at all times)
Stretch or shrink offer inferior extra capacity at peaks (e.g. bus as alternative to train)
vary seated space per customer (e.g. elbow room, leg room) extend/cut hours of service
Chase demand (adjust capacity to match demand) schedule downtime in low demand periods
use part-time employees rent or share extra facilities and equipment
cross-train employees
Flexible Capacity (vary mix by segment)
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Predictable Demand Patterns and
Their Underlying Causes (Table 9-1)
Predictable Cyclesof Demand Levels
day week
month
year
other
Underlying Causes ofCyclical Variations
employment
billing or tax payments/refunds pay days
school hours/holidays
seasonal climate changes
public/religious holidays
natural cycles
(e.g. coastal tides)
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Alternative Demand Management
Strategies
Take no action let customers sort it out
Increase demand (when demand is too low) lower prices
communication, including promotional incentives vary product features to increase desirability
more convenient delivery times and places
Reduce demand (When demand is too high)
higher prices communication promoting alternative times
Inventory demand by reservation system
Inventory demand by formalized queuing
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Alternative Queuing Configurations
(Fig. 9-4)
Single line, single server, single stage
Single line, single servers at sequential stages
Parallel lines to multiple servers
Designated lines to designated servers
Single line to multiple servers (snake)
Take a number (single or multiple servers)28
2921
20
24
23
30 25
3126
2732
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Tailoring Queuing Systems to Market Segments:
Criteria for Allocation to Designated Lines
Urgency of job
emergencies vs. non-emergencies
Duration of service transaction
number of items to transact
complexity of task
Payment of premium price
First class vs. economy
Importance of customer
frequent users/loyal customers vs. others
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Ten Propositions on the Psychology of
Waiting Lines
1.Unoccupied time feels longer
2. Preprocess/postprocess waiting feel longer than in-process
3. Anxiety makes waiting seem longer
4. Uncertain waiting is longer than known, finite waiting
5. Unexplained waiting seems longer
6. Unfairwaiting is longer than equitable waiting
7. Waiting alone feels longer than in groups8. Physically uncomfortable waiting feels longer
9. Waiting seems longer to new or occasional users
10.People will wait longer for more valuable servicesSources: Maister; Davis & Heineke; Jones & Peppiatt
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Benefits of Effective Reservations
Systems
Controls and smoothes demand
Pre-sells service
Informs and educates customers in advance of
arrival Customers avoid waiting in line for service (if
service times are honoured, giving specific time)
Data capture helps organizations prepare financialprojections
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Strategies fornon-shows
& over-booking
Provide alternativechoices
When 1st choiceis unavailable
Accommodatepreference
Options forself-service
Can answer customerquestions
Fast & user friendlyFor customer &
staff
Well-designed
reservation system
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Setting Capacity Allocation Sales Targets for
a Hotel by Segment and Time Period
Out of commission for renovation
Executive service
guests
Transient guestsWeekend
package
Groups and conventions
Airline contracts
100%
50%
Week 7(Low Season)
MNights: TuTime
W Th F S Sn
Executive service guests
Transient guests
W/Epackage
Groups (no conventions)
Airline contracts
Week 36(High Season)
M Tu W Th F S Sn
Capacity (% rooms)
(Fig. 9-5)
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Information Needed for Demand and
Capacity Management Strategies
Historical data on demand level and composition,noting responses to marketing variables
Demand forecasts by segment under specifiedconditions
Fixed and variable cost data, profitability ofincremental sales
Site-by-site demand variations
Customer attitudes towards queuing
Customer evaluations of quality at different levels ofcapacity utilization