Unit -III

1. What do you mean by sharing capacity?

Capacity Sharing between Competitors. ABSTRACT. Market competition may lead to mismatch
between supply and demand. That is, overpricing may give rise to underselling, and underpricing
may yield stockout. Capacity sharing is a common practice to align excessive capacity with
excessive demand.

2. Give the meaning for yield management?

Yield management is a variable pricing strategy, based on understanding, anticipating and

influencing consumer behavior in order to maximize revenue or profits from a fixed, time-
limited resource (such as airline seats or hotel room reservations or advertising inventory).

Yield management is particularly suitable when selling perishable products, i.e. goods that
become unsellable at a point in time (for example air tickets just after a flight takes off).

Yield = actual revenue/ potential revenue

Actual revenue= actual capacity used* averages actual price

Potential revenue = total capacity* maximum price

3. What is service setting?

A service setting, sometimes called a servicescape, includes all aspects of the physical
environment in which the service provider and customer interact (Bitner 1992). Key
Considerations in Designing the Service Setting. Several important issues must be addressed
when designing a successful service setting.

4. What are waiting line strategies?

The waiting line or queue management is a critical part of service industry. It deals with issue of
treatment of customers in sense reduce wait time and improvement of service. Queue
management deals with cases where the customer arrival is random; therefore, service rendered
to them is also random.

5. What is service guarantee?

A service guarantee is a marketing tool service firms have increasingly been using to
reduce consumer risk perceptions, signal quality, differentiate a service offering, and to
institutionalize and professionalize their internal management of customer complaint and service
recovery.By delivering service guarantees, companies entitle customers with one or more forms
of compensation, namely easy-to-claim replacement, refund or credit, under the circumstances of
service delivery failure. Conditions are often put on these compensations; however, some
companies provide them unconditionally.

6. What is service recovery?

Service recovery is the act of reaching out to customers who had a negative service
experience to rectify the situation. Contact centers collect a range of customer data, from
common support questions to customer satisfaction survey

7. What is Triage?

Triage means storing and it's mechanism that directly manages demand in services triage
mechanism can serve to segment demands of different kinds and route them to different service
process.

8. What is service planning?

Service planning begins by defining the purpose of the service domain. There should always be
a valid reason for an organization to spend money on a specific ... Service Plan means a written,
individualized plan for services, developed by a service planning team and the resident or the
resident's legal representative, that reflects the resident's capabilities, choices, and if applicable,
measurable goals, and managed risk issues.

9. What is systematic listening?

Listening to the customer requires both a systematic and comprehensive approach—systematic

to ensure consistency and regularity, and comprehensive to ensure there are no unintentional
blind spots that skew analyses and leave customers by the wayside. Market leaders are
exceptionally good at listening to their markets. It's one of the reasons they are market leaders.

10. What are the steps to be taken from improving service productivity?

Some of the ways to improve productivity of services:

1. Improving Staff
2. Introducing Systems and Technology
3. Reducing Service Levels
4. Substituting Products for Services
5. Introducing New Services
6. Customer interaction
7. Reduce the Mismatch between Supply and Demand.
• Output increases faster than input.
• Output remains unchanged with fewer inputs.
• Output increases from the same inputs.
• Input decreases more than output.
• Maximum increase in the ratio through an ideal combination of outputs and inputs.
Whatever method is selected the true test will be the effect on the quality of service delivered.
Productivity improvements in the service sector are possible and a number of ways of improving service
productivity are suggested.
1. Improving Staff:
One way is through improving the knowledge, skills, attitudes and behaviour of existing and new staff
involved in service delivery and performance through better systems of recruitment, training,
development and motivation.
2. Introducing Systems and Technology:
service organisations can reap productivity improvements if they become more systems and technology
oriented.

3. Reducing Service Levels

Productivity can also be improved by reducing the quantity of service and/or the quality of service (e.g.
doctors could give less time to each patient).
4. Substituting Products for Services:
Productivity can be improved by providing a product substitute for the service (e.g. new data transfer
technology has removed the need for the telegram service).
5. Introducing New Services:
It is possible to design a more effective service that eliminates or reduces the need for the less effective
service.
6. Customer interaction:
It is possible to change the way in which customers interact with service providers. This is particularly
possible with ‘high contact’ services.
7. Reduce the Mismatch between Supply and Demand:
A significant feature of many service organizations is the mismatch that often exists between supply of
the service and demand for it.

12. Explain the needs for capacity planning?

Capacity planning helps businesses with budgeting and scaling so they can identify optimal levels of
operations:
Budgeting benefits: Capacity planning helps determine how services are offered, and the appropriate
time frames and staff required to meet current demand and cover all operational costs.

13. What is the various type of demand situation?

Types of demands in Marketing:

1) Negative Demand
2) Unwholesome demand
3) Non-Existing demands
4) Latent Demand
5) Declining demand
6) Irregular demand
7) Full demand
14. Difference between internal marketing and external marketing?

15. How can the demand different from capacity situation– discuss?
 Strategies for matching capacity and demand
4.1 Shifting demand and capacity
4.2 Reduce Demand during peak times
4.3 Increase demand to match capacity
4.4 Adjusting capacity to meet demand

Lack of inventory capability: The lack of inventory capability combined with fluctuating demand leads to
a variety of potential outcomes. There are basically four scenarios that result from difference in
combination of capacity and demand:
• Excess Demand: In this situation some customers will be turned away, resulting in the lost
business opportunity.
• Demand exceeds optimum capacity: No one is being turned away, but the quality of service may
still suffer because of overuse, crowding, or staff being pushed beyond their abilities to deliver
consistent quality.
• Demand and supply are balanced at the level of optimal capacity: Staff and facilities are
occupied at an idea level. No one is over worked, facilities can be maintained, and customers are
receiving quality service without undesirable delays.
• Excess capacity: Demand is below the optimal capacity. Productive resources in the form of
labor, equipment, and facilities are underutilized, resulting in low productivity and lower profile.
Capacity constraints: Time, Labor, Equipment and Facility: For some business, the primary
constraint on service production in time. Optimal versus maximum use of capacity: To fully
understand capacity issues, it is important to know the difference between optimal and maximum use of
capacity.
16. Explain the strategies’ for managing demand?
Strategies for matching capacity and demand. When an organization has a clear grasp of its
capacity constraints and an understanding of demand patterns. It is in a good position to develop
strategies for matching supply and demand.

4.1 Shifting demand and capacity

By shifting demand and capacity an organization seeks to shift customers away from periods in which
demand exceeds capacity. Perhaps by convincing them to use the service during periods of slow demand.
4.2 Reduce Demand during peak times
One strategic approach to matching capacity and demand for a service provider focuses on reducing
demand during times when customer demand is at its peak for service.
4.3 Increase demand to match capacity
Other approaches service providers may consider in matching capacity and demand focus increasing
demand for service during times when the service is operating at less than full capacity.
4.4 Adjusting capacity to meet demand
A second strategic approach to matching supply and demand focuses on adjusting capacity. The
fundamental idea here is to adjust, stretch, and align capacity to match customer demand.

17. Discuss the various factors for managing capacity?

Capacity planning has seen an increased emphasis due to the financial benefits of the efficient
use of capacity plans within material requirements planning systems and other information
systems. Insufficient capacity can cause deteriorating delivery performance, unnecessarily
increase work-in-process, and frustrate sales and manufacturing personnel. However, excess
capacity can be costly and unnecessary. The inability to properly manage capacity can be a
barrier to the achievement of maximum firm performance.

Capacity planning is the process used to determine how much capacity is needed (and when) in
order to Manufacture greater product or begin production of a new product.

A number of factors can affect capacity—number of workers, ability of workers, number of

machines, waste, scrap, defects, errors, productivity, suppliers, government regulations, and
preventive maintenance.

Capacity planning:

• long term, short term

the long term, capacity planning relates primarily to strategic issues involving the firm's major
production facilities. In addition, long-term capacity issues are interrelated with location
decisions. Technology and transferability of the process to other products is also intertwined with
long-term capacity planning. Long-term capacity planning may evolve when short-term changes
in capacity are insufficient. For example, if the firm's addition of a third shift to its current two-
shift plan still does not produce enough output, and subcontracting arrangements cannot be
made, one feasible alternative is to add capital equipment and modify the layout of the plant
(long-term actions).
Short term

In the short term, capacity planning concerns issues of scheduling, labor shifts, and balancing
resource capacities. The goal of short-term capacity planning is to handle unexpected shifts in
demand in an efficient, economic manner. The time frame for short-term planning is frequently
only a few days but may run as long as six months.

Alternatives for making short-term changes in capacity are fairly numerous and can even include
the decision to not meet demand at all.

18. What are the strategies to follow when demand and capacity cannot be matched?

❖ Waiting line
The waiting line or queue management is a critical part of service industry. It deals with
issue of treatment of customers in sense reduce wait time and improvement of service.
Queue management deals with cases where the customer arrival is random; therefore, service
rendered to them is also random.
❖ Queuing System
To solve problems related to queue management it is important to understand characteristics
of the queue. Some common queue situations are waiting in line for service in super-market
or banks, waiting for results from computer and waiting in line for bus or commuter rail.
General premise of queue theory is that there are limited resources for a given population of
customers and addition of a new service line will increase the cost aspect to the business. A
typical queue system has the following:
❖ Arrival Process: As the name suggests an arrival process look at different components of
customer arrival. Customer arrival could in single, batch or bulk, arrival as distribution of
time, arrival in finite population or infinite population.
❖ Service Mechanism: this looks at available resources for customer service, queue structure to
avail the service and preemption of service. Underlining assumption here is that service time
of customers is independent of arrival to the queue.
❖ Reservations
Reservations systems enable demand to be controlled and smoothed out in a more
manageable way. They can also help pre-sell services and provide opportunities to inform
and educate customers.
Reservations systems are necessary for possession-processing businesses in fields like repair
and maintenance. By requiring reservations for routine maintenance, management can ensure
that some time will be kept free for handling emergency jobs that generate much higher
margins because they carry a premium price. Households with only one car, for example or
factories with a vital piece of equipment often cannot afford to be without such items for
more than a day or two and are likely to be willing to pay more for faster service.
19. What is internal marketing?

Internal marketing refers to the process of motivating and empowering employees to work as a
team for the overall wellbeing of the company and consequently, the clients. A synchronised
effort within the company is essential to providing clients with services at the desired level. The
interaction of employees with clients mostly influences service quality and client satisfaction to
such an extent that it has become important for companies to focus on ways to influence and
manage these interactions.

20. What is external marketing?

External marketing is the action of promoting and selling services or products, which includes
market research and advertising to clients and potential clients. In service industries, employees
represent their company to clients through their interactions with them, and therefore these
interactions must be positive, so clients will keep coming back.

21. What is service triangle Service triangle?

The service marketing triangle or the Service triangle as it is commonly called, underlines the
relationships between the various providers of services, and the customers who consume
these services. As we know, relationships are most important in the services sector.