SERVICE DEMAND & SUPPLY

Management of customer demand
‡ The task of managing markets &ensuring a good fit between demand & supply is usually very much complex for services than for goods. ‡ Because goods manufacturers are able to separate production from consumption,they have the ability to hold stock of goods that can be moved to even out regional imbalances in supply & demand.

Eight different demand situations
‡ Negative Demand
Occurs when most or all segments in a market possess negative feelings towards a service.Example-Medical services are perceived as unpleasant & are purchased only in distress.

‡ No Demand
Occurs where a product is perceived by certain segment as being of no value.Example- In the financial service sector,young people often see savings & pension policies as being of no value to them.

‡ Latent Demand
Occurs when an underlying need or service exists but there is no product that can satisfy need at an affordable prices to customers.Example- within the travel market, a latent demand for leisure travel to Australia exists,prevented from being actual demand by high costs of airfares.

‡ Faltering Demand
Is characterized by a steady fall in sales which is more than a temporary downturn.Example-Corner shops have often found themselves facing a faltering demand.

‡ Irregular Demand Is characterized by a very uneven distribution of demand through time. ‡ Full Demand Exists where demand is currently at a desirable level & one which allows the organization to meet its objectives. ‡ Overfull Demand Occurs where there is excess demand for a service on a permanent basis.Example-A pop group may find that tickets for all its concerts are sold out very quickly.

‡ Unwholesome Demand
Occurs when an organization receives demand for a service which it would prefer not to have.It may be forced to meet the demand because of legal requirements.

‡ ExamplePost office cannot refuse to deliver letters for customers who are very expensive to service

4 basic scenarios that can result from different combinations of capacity & demand 1. Excess demand. 2. Demand exceeds optimum capacity. 3. Demand & supply are balanced at the level of optimum capacity. 4. Excess capacity.

Capacity Constraints
‡ Time
For some service business,time is primary constraint.ExampleLawyer,Consultant,Hairdresser

‡ Labor
The firm that employs a large no.of service providers,labor or staffing level can be a constraint.Example-A law firm,A university dept.,consulting firm.

‡ Equipment
It can be a critical constraint.Example-for trucking or air-freight delivery services,the trucks or airplanes needed to service demand may be a capacity location.

Understanding demand patterns
‡ Charting demand patterns ‡ Predictable cycles ‡ Random demand fluctuations ‡ Demand patterns by management

Strategies for matching capacity & demand
1. Shifting demand to match capacity. it tells to match demand fluctuations themselves by shifting demand to match existing supply.Example-Many business travelers are not able to shift their needs for airline,car rental & hotel services but they can shift the timings of trip. 2. Vary the service offering. This general strategy is to adjust capacity to match fluctuations in demand.Example-Whistler Mountain,a ski resort in Vancouver,Canada offers its facilities for executive development & training programs during summer when snow skiing is not possible.

3. Shift demand
‡ Offer incentives to customers for usage during non peak times. ‡ Advertise peak usage time & benefits of non peak use. ‡ Take care of loyal or ´regular customers first. ‡ Offer discounts or price-reductions. ‡ Modify service offering to appeal new market segment. ‡ Bring service to customers.

4.Communicate with customers
‡ Let the customers know about the times of peak demand periods so they can choose to use service at alternative times & avoid crowding or delays. ‡ Example-signs in banks & post offices that let customers know their busiest hours & busiest days of the week can serve as a warning,allowing customers to shift their demand to another time,if possible.

5. Modify

timing & location of service delivery

‡ Some firms adjust their hours & days of service delivery to more directly reflect customer demand.Example-historically,U.S Banks were open only during ´bankers· hoursµ from 10a.m to 3p.m every weekday.obviously these hours did not match the times when most people preferred to do their personal banking. ‡ Example- Theaters also accommodate customers schedules by offering matinees on weekends & holidays· when people are free during the day for entertainment

6. Differentiation on price ‡ A common response during periods of slow demand is to discount the price of the service. ‡ Example- business travelers are far less price sensitive than are families traveling for pleasure. 7. Flexing capacity to meet demand ‡ Stretch existing capacity ‡ Stretch time ‡ Stretch labor ‡ Stretch time labor,facilities & equipmentscross train employees,hire part time employees,request overtime work from employees.

‡ 8. Stretch facilities
‡ Stretch equipment-Computers, telephone lines & maintenance equipment can often be stretched beyond what would be considered the maximum capacity for short periods to accommodate peak demand.

‡ 9. Align capacity &demand fluctuations
‡ The basic strategy us sometimes known as ´chase demandµ strategy. ‡ By adjusting service resources creatively, organizations can in effect chase the demand curves to match capacity with customer demand patterns.

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Specific actions can be taken:Use part time employees Rent or share facilities or equipments. Schedule down periods of low demand. Cross-train employees Modify or move facilities or equipments

Yield Management
‡ Yield management is a term that has been attached to a variety of methods, matching demand & supply in capacity constrained services. ‡ Using yield management models, organizations can find the best balance at a particular point in time among the prices charged, the segments sold to, & the capacity used. ‡ Its goal is to produce best possible financial return from a limited available capacity. ‡ It·s a process of allocating the right type of capacity to the right customer at right price so as to maximize revenue or yield.

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