Lecture notes - Chapter 9: Balancing Demand and Productive Capacity - Services Marketing PDF

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MARK270 (Service Marketing) Week 5 / Lecture A Chapter 9: Balancing Demand and Productive Capacity FINAL EXAM FIVE CHAPTERS: 7, 9, 11, 13, 15 3 HOURS * 3 Essay Questions, (20 MM each) You get a scenario, or a paragraph, then you are asked two questions (could be theoretical or practical) (A topic, a concept, a definition, an idea). The answer is not in the scenario – it could help with getting an idea, set your way of thinking. Use your own language as long as it makes sense. Think, choose your words carefully, Give justice to your answer (quality over quantity) (Assume you are talking to someone who has no background on marketing). * A case study (A company we are extremely familiar with and discussed in class) (Two pages with the questions) (40 MM) 4 Questions 

Productive Capacity (more information on the slide) The limit to what one can offer. Usually services fall into a problem here when they are not able to accommodate all the demand – the system could crash. For example, if a service company can accommodate 1000 but receives 1005. Factors: External and Internal issues.

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Demand is a very important factor in the capacity dilemma. - Excess Demand: More demand than what they can offer. Customers can be denied services and business is lost. - Demands exceeds optimum capacity: No customers are turned away, but there will be a delay or a drop in service quality. - Optimum Capacity: Supply and Demand are well balanced. The service is good. Staff are busy but not overbooked. - Excess Capacity: Demand is below ideal capacity. Service is underutilized.

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Solution? 1. Adjust Capacity (Either More or Less) 2. Manage level of demand (Either More or Less) A Strategy – Stretch and Shrink. -

Offer extra capacity at peaks (Only when demand is high) Use facilities for longer/shorter period (Determined by the additional cost) Reduced amount of times spent in process by minimizing slack time

Adjusting capacity to match demand: Learn all the strategies under, with examples each. 

Demand varies by Market Segment: Analyze demand patterns by keeping records of previous transactions. 1. Weather 2. Health Problems 3. Accidents 4. Natural Calamities

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Managing demand: 1. Take no action: If you do not have the budget or the capability to change the capacity. This is risky. Because you will lose customers and business, and negative publicity will ensue. 2. Intervening approach: o Reduce demand in peak periods (higher prices) A risk of dissatisfying customer, could lose business. o Increase demands in excess capacity periods. 3. Record demand: Waiting lists, formal wait and queuing system, reservation. Depends on the company’s strategy and policy.

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Demand Inventory When it comes to waiting, it does not only occur physically. Thus, companies can rethink about the design of the que. - Manager perceptions of waiting by: o Entertainment o Tell customer an exaggerated wait time – if they finish in less than the given time, customer expectations will be exceeded. o Advertise the quality of the service, so that people think they are waiting for a premium service

o Duration of service transaction: Carrefour less than 10 items desk. o Importance of customer: (Related to the prestige of the company. You cannot treat a VVIP like a regular – Prioritize customer loyalty.)

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Five elements of an effective reservation system. •Reliability: dependable •Responsiveness: promptness to serve •Assurance: building confidence in consumers •Empathy: Customer attention •Tangible: New & modern equipment

Creating Alternative Use for Otherwise Wasted Capacity   

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Use capacity for service Differentiations: - Could be used as a hero of the ad if the competitor does not have it. USP. Customer and channel development: - Prioritize, update soft wares, enhance how you deal with your customers. Reward Employees: - Internally, you need to have employee satisfaction and motivation (could be financial rewards, incentives, promotions, benefits). Happy employees = happy customers. Barter free capacity: - Cross-employee training and capacity exchange in order to ensure customer satisfaction....