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Many services, such as health care or repair and maintenance, involve multiple actions delivered sequentially. What this means is that a service organization's capacity to satisfy demand is constrained by one or more elements of its productive capacity its physical facilities, equipment, personnel, or the number and sequence of services provided. Consequently, financial success in capacity-constrained businesses is, in large measure, a function of management's ability to use productive capacity as efficiently and as profitably as possible. Services involving tangible actions to customers or their possessions are more likely to be subject to capacity constraints than are information-based services. In the latter instance, however, similar capacity problems may occur when customers are obliged to come to a service site for delivery, as in live entertainment or traditional retail banking. In a well-designed, well-managed service operation, the capacity of the facility, supporting equipment, and service personnel will be in balance. Sequential operations will be designed to minimize the risk of bottlenecks at any point in the process. This ideal, however, may prove difficult to achieve. The level of demand may vary, often randomly, and the time and effort required to process each person or thing may vary widely at any point in the process. In general, processing times for people are more variable than for objects or things, reflecting varying levels of customer preparedness ("I've lost my credit card"), argumentative versus cooperative personalities ("If you won't give me a table with a view, I'll have to ask for your supervisor"), and so forth. But information processing and possession-processing service tasks are not necessarily homogeneous either. For both professional services and repair jobs, service delivery times vary according to the nature of the customers' needs. Managing Demand Under Different Conditions There are five basic approaches to managing demand. The first, which has the virtue of simplicity but little else, involves taking no action and leaving demand to find its own levels.Eventually customers learn from experience or word-of-mouth when they can expect to stand in line to use the service and when it will be available without delay. The problem is that they may also learn about a competitor who is more responsive. More strategic approaches attempt to influence the level of demand at any given time by taking active steps to reduce demand in peak periods and increase demand when there is excess capacity. Two additional strategies involve inventorying demand until capacity becomes available. A firm can accomplish this either by introducing a reservations systemthat promises customers access to capacity at specified times, or by creating formalized queuing systems (or by a combination of the two). Table links these five approaches to the two problem situations of excess demand and excess capacity and provides a brief strategic commentary on ach. Many service businesses face both situations at different points in their demand cycles and should consider using one or more of the strategies described above.
if customers learn that they are likely to spend more time and physical effort during peak periods. Price and Other User Outlays One of the most direct ways of reducing excess demand at peak periods is to charge customers more money to use the service during those times. and communication efforts can also play an important role. but changes in product. Price is often the first variable companies use to bring demand and supply into balance. this information may lead those who dislike waiting in crowded and unpleasant conditions to try later (or to use an arm's length delivery alternative like the Internet or self-service machines). distribution strategy. the lure of cheaper prices and an expectation .Using Marketing Strategies to Shape Demand Patterns Four of the 8Ps play a part in stimulating demand during periods of excess capacity and decreasing it during periods of insufficient capacity. Similarly. For instance. Although we discuss each element separately here. Increases in no financial outlays may have a similar effect. effective demand management efforts often require changes in two or more elements simultaneously.
will the same person be willing to pay more for a weekend stay in a hotel on Cape Cod in summer than in winter? The answer is probably "yes-") If so. managers must have some sense of the shape and slope of a product's demand curve that is. there may be separate demand curves for different segments within each time period (for instance. (For example. trial and error. each priced at levels appropriate to the . Research. To complicate matters further. One of the most difficult tasks facing service marketers is to determine the nature of all these different demand curves. significantly different pricing schemes may be needed to fill capacity in each time period. how the quantity of service demanded responds to increases or decreases in the price per unit at a particular point in time (Figure shows a sample demand curve). business travelers are typically less price sensitive than vacationers). For the monetary price of a service to be effective as a demand management tool. It's important to determine whether the demand curve for a specific service varies sharply from one time period to another.of no waiting may encourage at least some people to change the timing of their consumption behavior. and analysis of parallel situations in other locations or in comparable services are all ways of obtaining an understanding of the situation. Many service businesses explicitly recognize the existence of different demand curves by establishing distinct classes of service.
the operator has to change the service offering. entertainment. a distinction is made between rooms of different size and amenities. opening and closing the bar. with value being added to the core service through supplementary services to appeal to higher-paying segments. first-class service on airlines offers travelers larger seats. hold a certain number of seats for business passengers paying full fare and place restrictive conditions on excursion fares for tourists (such as requiring advance purchase and a Saturday night stay) in order to prevent business travelers from taking advantage of cheap fares designed to attract tourists who can help fill the aircraft.hour period. and sports to reflect customer preferences in different seasons. The intent is to appeal to different needs within the same group of customers. to reach out to different customer segments. A rather obvious example is provided by the respective demand problems of a ski manufacturer and a ski slope operator. some customers will buy early in order to save money. Small pleasure boats offer cruises in the summer and a dockside venue for private functions in winter months. product enhancement takes the form of faster turnaround and more specialized services. Some restaurants provide a good example of this. So. no skiers would buy lift tickets for use on a midsummer day at any price. the goal in a profit-seeking business should be to ensure that as much capacity as possible is utilized by the most profitable segments available at any given time. There can be variations in the product offering even during the course of a 24.demand curve of a particular segment. In computer and printing service firms. while parking lot views command the lowest prices. to encourage summer use of the lifts. Airlines. and in hotels. However. For example. All of these firms recognize that no amount of price discounting is likely to develop business out of season. or to do both. for instance. in the absence of skiing opportunities. If the skis are sufficiently discounted. and better food. variations in lighting and decor. The Outrigger Hotel on the Big Island of Hawaii charges premium prices for its ocean view suites and rooms. Rooms overlooking the hotel gardens and golf course are in the middle of the hotel's pricing tier. each segment receives a variation of the basic product. it is not quite as universally feasible for services as for goods. In essence. according to the time of day. free drinks. Similar thinking prevails in a variety of other businesses that undergo significant modifications according to the season. And resort hotels sharply alter the mix and focus of their peripheral services like dining. marking the passage of the hours by changing menus and levels of service. tax preparation firms like H&R Block offer bookkeeping and consulting services to small businesses in slack months. When capacity is constrained. The manufacturer can either produce for inventory or try to sell skis in the spring and summer at a discount. Modifying the Place and Time of Delivery Some firms attempt to modify demand for a . For instance. and different types of views. Changing Product Elements Although pricing is often a commonly advocated method of balancing supply and demand. and the presence or absence of entertainment. Educational institutions offer weekend and summer programs for adults and senior citizens.
During the summer. publicity. Retail shops may extend their hours in the pre-Christmas season or during school holiday periods. Networked systems allow firms to transfer demand across time zones to locations where capacity is readily available. service firms whose productive assets are mobile may choose to follow the market when that. Examples include requests and incentives to "Mail Early for Christmas. Signage. advertising." public transportation messages urging no commuters like shoppers or tourists to avoid the overcrowded conditions of the commute hours. Alternatively. in the form of Internet or telephone-based delivery from a remote server or core center. In these locations. by season. warmer evenings outdoors. and vans equipped with primary care medical facilities. combining both pricing and communication elements as well as other incentives. mobile car wash and windshield repair services. too. Management can ask service personnel (or intermediaries such as travel agents) to encourage customers with discretionary schedules to favor off-peak periods. cafes and restaurants may stay open later because of daylight savings time and the general inclination of people to enjoy the longer. is mobile. The first strategy involves varying the times when the service is available to reflect changes in customer preference by day of week. Short-term promotions. A second strategy involves offering the service to customers at a new location. may also provide customers with attractive incentives to shift the timing of service usage. home-delivered meals and catering services. Examples include traveling libraries. Customers using information-based services can be offered a cyberspace option. and so forth. A cleaning and repair firm that wishes to generate business during low-demand periods might offer free pickup and delivery during these times for portable items that need servicing. For instance. Promotion and Education Communication efforts alone may be able to help smooth demand even if the other variables of the marketing mix remain unchanged. some car rental firms establish seasonal branch offices in resort communities. Theaters and cinema complexes often offer matinees on weekends when people have more leisure time. in-ofBce tailoring services. they will tailor the schedule of service hours (as well as certain product features) to meet local needs and preferences. One approach is to operate mobile units that take the service to customers rather than requiring them to visit fixed-site service locations. and communications from sales reps for industrial maintenance firms advising customers of time periods when preventive maintenance work can be done quickly. and sales messages can be used to educate customers about the timing of peak periods and encourage them to use the service at off-peak times when there will be fewer delays.service by changing the time and place of delivery by choosing one of two basic options. .
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