Demand & Supply | Demand | Business Economics

DEMAND & SUPPLY MANAGEMENT …

MARKETING OF SERVICES…
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DEMAND & SUPPLY MANAGEMENT …
A Presentation
On…

PRESENTED BY:

DEEPANKAR RAO .
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OUTLINES
1) SERVICE PROCESS 2) NATURE OF SERVICE OFFERING, SUPPLEMENTARY SERVICES 3) SERVICE DESIGN 4) SERVICE REDESIGN, CUSTOMER PARTICIPATION 5) MANAGING DEMAND & SUPPLY 6) YIELD MANAGEMENT

SERVICE AS A PROCESS

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What is a Process ?
lA

process is a particular method of operation or a series of action, typically involving multiple steps that often need to take place in a defined sequence.

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Service Process :
l l Each

and every service have a particular method of operation or a series of a action. l A process implies taking an input and transforming into output.

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Example of Service Process :
l How
l l l l l l l l l

the service process take a place while taking service in hair salon

Phoning Arriving Waiting Having a shampoo Discussing options with hair dresser Having hair cut and styled Tipping the cutter Paying at the reception desk Leaving the store
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Categorizing Service Process

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People processing :

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Possession processing

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Mental stimulus processing

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Information Processing

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DESIGNING OF SERVICES
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The Nature of Service Offering ¶Components of the service offering¶Core product. ¶Core delivery process. ¶Supplementary services.

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Core Product ¶What is the buyer really purchasing, and what business are we in?

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Core Delivery Process ¶How the core product is delivered to the customer, and the nature of customers in that process.

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Supplementary Services ¶Supplementary Services includes the core product, both facilitating its use and enhancing value and appeal. Which requires its own delivery system and prescribed service level.
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¶The Flower of Service: Core Product Surrounded by Clusters of Supplementary Services. 20

Identifying & Classifying Supplementary Services.
Facilitating Supplementary Services
Information Order taking Billing Payment

Enhancing Supplementary Services
Consultation Hospitality Safekeeping Exceptions

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Information
¶To obtain full value from any good or service, customers need relevant information like directions to the site where the product is sold, service hours, prices, and usage instructions.

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Order Taking
¶The process of order taking should be polite, fast, and accurate so that customers do not waste time and endure unnecessary mental or physical effort. Technology can be used to make order taking for both customers and suppliers.

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Billing
¶Billing is common to almost all services. Inaccurate, illegible, or incomplete bills risk disappointing customers who may, have been quite satisfied with their experience. ¶Customers usually expect bills to be clear, informative and itemized that make it clear how the total was computed.
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Payment
¶Customers expect ease and convenience of payment, including credit

¶Self Service Payment Systems require customers to insert coin, banknotes, tokens or cards in machine. ¶ ¶Direct to Payee or Intermediary.

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Consultation
¶Consultation requires an understanding of each customer’s current situation before suggesting a suitable course of action. ¶ ¶Counseling represents a more suitable approach to consultation because it involves helping customers better understand their situations so that they come up with their own solutions and action programs.

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Hospitality
¶Hospitality ensure that their employees treat customers as guests. ¶Hospitality have its full expression in face-to-face encounters. ¶Hospitality services offered by a firm can increase or decrease satisfaction with the core product.

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Safekeeping
¶Safekeeping services includes provision of coatrooms; baggage, transport, handling, and storage; safekeeping of valuables; and even child care and pet care, and safety of the customers. ¶Additional safekeeping services involve physical products that customers buy or rent.
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Exceptions
¶Exceptions involve supplementary services that fall outside the routine of normal service delivery.

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Types of Exception:
¶Special requests. ¶Problem solving. ¶Handling of complaints / suggestions / compliments. ¶Restitution. ¶

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Service Design
ØDescribing the method and sequence in which service operating system work and how they link together to create service experience and outcomes that customer will value.

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Blueprinting The Service
ØA key tool in service design is blueprinting. ØService blueprint clarify the interactions between customers and employees. ØIt provides the opportunity to identify the fail point.

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The Key Component of The Blueprints
Ø“Front-stage” customer experience. Ø“Back-stage” support process. ØLine of visibility. ØLine of interaction. Ø Fail points. Ø Risk of excessive wait.

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Blueprinting The Restaurant Experience:
  

ØA Three Act Performance:

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ØAct-1:

Introductory Scenes

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ØAct-2:

Delivery of Core Product

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ØAct-3:
Blueprint Concludes.

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Advantage of Service Blueprint
ØIdentifying the fail point. ØMaintaining standard time for wait. ØSetting service standard. ØImproving reliability of service.
 

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Service Process Redesign
l Service

process redesign revitalizes processes that have become outdated. This does not necessarily mean that the process were poorly designed in the first place. l Changes in technology l Customer needs l Added service features l New offering

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Categories of Service Redesign
Service process redesign encompasses, rearrangement or substitution of service processes. l Eliminating non-value-adding steps l Shifting to Self-Service l Delivering Direct Service l Bundling Services. l Redesigning the Physical Aspects of Service processes.

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Eliminating non-value-adding steps
l Activities

at the front and back end processes of services can be streamlined with the goal of focusing on the benefit producing part of the service encounter.

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Shifting to Self-Service
l Significant

productivity and sometimes even service quality gains can be achieved by increasing self-service when redesigning services.

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Delivering Direct Service
l This

type of redesign involves bringing the service to the customer instead of bringing the customer to the service firm.

l

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Bundling Services.
l Bundling

services involves bundling, or grouping, multiple services into one offer, focusing on a well-defined customer group.

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Redesigning the Physical Aspects of Service processes.
l This

leads to convenience and productivity and often also enhances the satisfaction and productivity of frontline staff.

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Five Type of Service Redesign

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Levels of Customer Participation
l Customer

participation refers to the actions and resources supplied by customers during service production and/or delivery and includes mental, physical and even emotional inputs.

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Levels of Participation
l Low l Moderate l High

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Low
l Employees

and systems do all the works. Products tend to be standardized, and service is provided regardless of any individual purchase.

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Moderate
l Customer

inputs are required to assist the organization in creating and delivering the service and in providing a degree of customization.

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High
l In

these instances, customers work actively with the provider to coproduce the service.

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MANAGING DEMAND  &  SUPPLY
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Lack of inventory capability
l The

fundamental issue underlying supply and demand management in services is the lack of inventory capability. Ex- An airline seat that is not sold on a given flight cannot be resold the following day. The productive capacity of that seat has perished.

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Imbalance Implications
VOLUME DEMANDED Demand exceeds capacity (business is lost)
Demand exceeds optimum capacity (quality declines)

CAPACITY UTILIZED Maximum Available Capacity Optimum Capacity (Demand and Supply Well Balanced

Low Utilization (May Send Bad Signals)

Excess capacity (wasted resources)
TIME CYCLE 1 TIME CYCLE 2

Four basic scenarios Resulting From capacity and demand
l Excess

Demand (Lost business opportunities) l Demand exceed optimum capacity l Demand and supply are well balanced at level of optimum capacity. l Excess capacity (wasted resources)

l
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Capacity constraints
l Time

(Ex. A lawyer, a hair dresser) l Labor (Ex. University Deptt.) l Facilities (Airlines, Hotel services) l Equipment (Ex. Air freight delivery services)
l

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Strategies for Shifting Demand to Match Capacity
 

This strategy 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. This strategy may be possible for some customers but not for others.
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For example:- Many business travelers are not able to shift their needs for airline, car rental, and hotel services; pleasure travelers, on the other hand, can often shift the timing of their trips. Customers who cannot shift and cannot be accommodated will represent lost business for the firm.
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(A) Vary the Service Offering

One approach is to change the nature of the service offering, depending on the season of the year, day of the week, or time of the day.

For example:- Whistler Mountain, a ski

resort in Vancouver, Canada, offers its facilities for executive development and training programs during the summer when snow skiing is not possible.
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(B) Communicate with Customers

Another approach for shifting demand is to communicate with customers, letting them know the times of peak demand so they can choose to use the service at alternative times and avoid crowding or delays.
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For example:- Signs in banks and post offices that let customers know their busiest hours and busiest days of the week can serve as a warning, allowing customers to shift their demand to another time if possible. Forewarning customers about busy times and possible waits can have added benefits.
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(C) Modify Timing and Location of Service Delivery
Some firms adjust their hours and days of service delivery to more directly reflect customer demand.  Historically U.S. banks were open only during “bankers’ hours” from 10 A.M. to 3 P.M. every weekday. Obviously these hours did not match the times when most people preferred to do their personal banking. Now U.S. banks open early, stay open until 6 P.M. many days, and are open on Saturdays, better reflecting customer demand patterns. 63

(D) Differentiate on Price

A common response during slow demand is to discount the price of the service. This strategy relies on basic economics of supply and demand. To be effective, however, a price differentiation strategy depends on solid understanding of customer price sensitivity and demand curves.
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ADJUSTING CAPACITY TO MEET DEMAND
l Stretch

existing capacity. l Stretch time. l Stretch labor. l Stretch facilities. l Stretch equipment.

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Align capacity with demand fluctuations
l Use

part time employees. l Outsourcing. l Rent or share facilities. l Cross train employees. l Modify or move facilities and equipment.

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YIELD MANAGEMENT

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Yield Management: Balancing Capacity Utilization, Pricing, Market Segmentation, and Financial Return

l The

process of allocating the right type of capacity to the right kind of customer at the right price so as to maximize revenue or yield.

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l l l
l l l

Actual revenue Yield = Potential revenue
Actual revenue = Actual capacity x average actual price Potential revenue = Total capacity x maximum price

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Implementing a Yield Management System
l To

implement a yield management system, an organization needs detailed data on past demand patterns by market segment as well as methods of projecting current market demand.

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l Recent

research indicates that traditional yield management approaches are most profitable when –

(1)A service provider faces different market segments or customers, who arrive or make their reservations at different times (2)Customers who arrive or reserve early are more price sensitive than those who arrive or reserve late.

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Challenges and risks in using yield management

Lack of employee training :
Extensive training is required to make a yield management system work. Employees need to understand its purpose, how it works, how they should make decisions, and how the system will affect their jobs.

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Inappropriate organization of yield management function :
To be most effective with yield management, an organization must have centralized reservations.
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Waiting line strategies; when demand and capacity cannot matched
l Establishing

a reservation l Differentiation waiting customers Ø Payment of a premium price Ø Importance of a customer l Make waiting fun, or at least tolerable l Unoccupied time longer than occupied time l Process wait feel longer than in-process wait l Uncertain wait are longer than known finite wait

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l Uncertain

wait are longer than known, finite wait l Unexplained wait are longer than equitable wait l Unfair wait are longer than equitable waits l The more valuable the service, the longer
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l Customer

will wait l Solo wait feel longer than group waits

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Summary
lEmployee

operational logic lEstablish a reservation process lDifferentiate waiting customers lImportance of the customer lUrgency of the job lDuration of the service transition
l l
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thank

you ...

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