Service marketing Recommendation
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BUS296_Module3_Managingdemand_VIDEOslides.pptxModule 3 Balancing Productive Capacity and Demand (Chapter 7)
BUS296 Services Marketing
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Objectives
Describe productive capacity
Distinguish the different supply–demand situations with fixed capacity
Explain and use capacity management techniques
Identify demand management strategies and techniques.
Apply the marketing mix elements to reduce fluctuations in demand.
Courtesy of Bankwest
Bankwest has extended its capacity to service by engaging Bank@Post via Australia Post outlets, as well as ATMs, Internet and personal phone banking
© pryzmat/Shutterstock.com
Christmas time is typically one of the busiest times of the year, prompting many employers to hire part-time workers
Defining productive capacity
Productive capacity can take several forms:
1. Physical facilities designed to host customers
2. Physical facilities designed for storing or processing goods
3. Service-provision equipment used to process people, possessions or information
4. The number, experience and expertise of personnel
Resources or assets to generate goods or services.
Financial success in businesses that are limited in capacity depends largely on how capacity is used
In services:
hotels, classrooms – limited by size of facility
2) warehouses, carparks
3) Toll gates, scanners, atms. – single equipment not sufficient
4) Labour - Sufficient staffing -> customers kept waiting - professional services service providers value add.
The capacity challenge
Stretch or shrink:
Offer inferior extra capacity at peaks
Use facilities for longer/shorter periods
Reduce amount of time spent in process by minimizing slack time
Offer inferior extra capacity at peaks (e.g. bus/train standees)
Adjusting capacity to match demand
Chase demand (adjust capacity to match demand):
Schedule downtime during periods of low demand
Cross-train employees
Use part-time employees
Invite customers to perform self-service (co-production)
Ask customers to share
Create flexible capacity
Rent or share extra facilities and equipment
1 schedule downtime: repairs done when demand is low
Cross-train: servers or cashiers
Part-time: employee people during busy periods
Invite customers to self-service: airline check-in
Customers to share: tables at restaurants, taxis
Create flexible capacity: combine seats
Rent extra facilities or equipment: avoid fixed costs
Understanding demand by market segments
Demand may seem random, but analysis may reveal a predictable demand cycle for different segments
Keep good records of transactions to analyze demand patterns
Record weather conditions and other special factors that might influence demand
e.g. business vs leisure travellers in hotels
Good records: past experiences, previous transactions, weather patterns
Sophisticated software can help to track customer consumption patterns
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Understanding the patterns and determinants of demand
Shows combination of time of day (Morning, mid-day, afternoon peak, evening), day of week (weekday vs weekend) and season of year (off-peak, shoulder, peak) can be combined to create different demand periods.
Demand and supply imbalance
Fixed capacity may face 4 conditions:
Excess demand
Too much demand relative to capacity at a given time
Demand exceeds optimum capacity
Upper limit to a firm’s ability to meet demand at a given time
Optimum capacity
Point beyond which service quality declines as more customers are serviced
Excess capacity
Too much capacity relative to demand at a given time
Excess demand: customers to be turned away
Demand exceeds desired capacity: crowded, service quality seems low and customers are dissatisfied.
Optimum capacity: well balanced, staff not overworked and customers received god service
Excess capacity: below capacity, productive levels. Customers may thing the firm wont survive
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Demand and supply imbalance (2)
SMH Picture by ROBERT PEARCE
The ambulance service: a service where demand often exceeds supply
Basic approaches to managing demand
Take no action and leave demand to find its own levels
2. Reduce demand in peak periods
3. Increase demand in low periods
4. Inventory demand until capacity becomes available
When demand exceeds supply -> most profitable segment
When supply exceeds demand -> use price and product discrimination
Take no action: customers may get irritated and never come back/ if excess demand, they might be dissapointed
Reduce demand: higher prices and IMC to increase attendance in other times
Increase demand in low periods: lower prices and ensure all costs if covered
Inventory demand: (reservations or queuing) priority systems for customers desired. Shift other customers to off-peak.
Using marketing mix elements to shape demand patterns
Use marketing mix to stimulate demand OR decrease/shift demand:
Pricing strategies
Product variations
Modifying the timing and location of delivery
Communication and education efforts
Pricing: Increase non-monetary costs too
Charge more if demand exceeds supply
Product:
Offer customer different, position ski-resort as scenic spot
Modifying the timing and location of delivery
No change
Vary times when service is available
Offer service to customers at a new location e.g. mobile units
Communication and education efforts
Remind peak/off peak hours
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