sm lecture 5b - demand and capacity

7/30/2019 SM Lecture 5b - Demand and Capacity

1/25

Services Marketing

unit-4B,5 B

MBA-3rd 2009-11

Managing service delivery

Balancing demand and capacity


2/25

Topics

Service blueprinting

Design and layout of service delivery

Capacity and demand management.


3/25

Learning Objectives

To understand the role of design and lay out inservice delivery

To be familiarise with the process of blueprinting

of a service process To understand the role of customer in the

service delivery process

To understand the relationship between

Capacity and demand To understand the use of an effective

reservation system


4/25

ServiceCharacteristics

IntangiblePerformance not the object

Process = experience

= importance

InseparableDesign Customers involvement

Into the delivery process

Educate customers

how it works

Personal information =

Important

Managing customer behaviour

Perishable

Demand and Capacity balancePromote specific periods when

necessary

Capacity cant be stored

Inventory demand

Use resources productively =

increasing capacity

Issues in service delivery


5/25

Service Blueprinting: Key

Components1. Define standards for front stage activities2. Specify physical evidence

3. Identify principal customer actions

4. ------------line of interaction (customers and front stagepersonnel)--------

5. Front stage actions by customer-contact personnel

6.------------line of visibility (between front stage and backstage)--------------

7. Backstage actions by customer contact personnel

8. Support processes involving other service personnel

9. Support processes involving IT


6/25

Simplified Example: Blueprinting a Hotel Visit

PhysicalEvidence

CustomerActions

Employee

ActionsFace-to-faceF

ron

t

Stage

PhoneContact

Backstage

Makereservation

Rep.

records,

confirms

Arrive,valet park

Check-inat reception

Doorman

greets, valet

takes car

Enter

data

Valet

Parks Car

Make up

Room

Register

guest data

Receptionist

verifies, gives

key to room

Go to

room

Hotel exterior, lobby,employees, key

Elevator, corridor,room, bellhop

Line ofInteraction

Line ofVisibility


7/25

Developing a Blueprint Some

Basic Advice

Identify key activities in creating anddelivering the service(theatrical metaphor) Distinguish betweenfront stage, what customers experience, and

back stageChart activities in sequenceShow how interactions between customers

and employees are supported by backstageactivities and systems

Establish service standards for each stepIdentify potential fail pointsFocus initially on big picture later, can

drill down for more detail in specific areas


8/25

Service Firms as Teachers:

Well-trained Customers Perform Better Firms must teach customers roles as co-

producers of service Customers need to know how to achieve

best results

Education can be provided through: Brochures Advertising

Posted instructions

Machine-based instructions

Websites, including FAQs Service providers

Fellow customers

Employees must be well-trained

to help advise, assist customers


9/25

The Problem of Customer Misbehavior

Identifying and Managing Jaycustomers

What is a jaycustomer?A customer who behaves in a thoughtless or abusivefashion, causing problems for the firm itself,employees, other customers

Why do jaycustomers matter?

Can disrupt processes

Affect service quality

May spoil experience of other customers

Can you give some examples of jaycustomers?


10/25

Six Types of Jaycustomer

Thief seeks to avoid paying for service

Rule breaker ignores rules of social behaviour and/or procedures forsafe, efficient use of service

Belligerentangrily abuses service personnel (and sometimes othercustomers) physically and/or emotionally

Family Feuders fight with other customers in their party

Vandaldeliberately damages physical facilities, furnishings, andequipment

Deadbeat fails to pay bills on time

What should a firm do about them?

Try to avoid attracting potential jaycustomers Institute preventive measures

Control abusive behavior quickly

Take legal action against abusers

BUTfirm must act in ways that dont alienate other customers


11/25

Balancing supply and demand


12/25

Relating Demand to Capacity:

Four Key Concepts

Excess demand: too much demand relative tocapacity at a given time

Excess capacity: too much capacity relative to

demand at a given time Maximum capacity: upper limit to a firms ability

to meet demand at a given time

Optimum capacity: point beyond which servicequality declines as more customers are serviced


13/25

Variations in Demand Relative to

Capacity

VOLUME DEMANDED

TIME CYCLE 1 TIME CYCLE 2

Maximum AvailableCapacity

Optimum Capacity(Demand and Supply

Well Balanced

Low Utilization(May Send Bad Signals)

Demand exceeds capacity(business is lost)

Demand exceedsoptimum capacity(quality declines)

Excess capacity

(wasted resources)

CAPACITY UTILIZED

Lovelock and Wirtz (2004:260)


14/25

Defining Productive Capacity

in Services

Physical facilities to contain customers

Physical facilities to store or process goods

Physical equipment to process people,

possessions, or information

Labour used for physical or mental work

Public/private infrastructuree.g., highways,

airports, electricity, internet bandwidth.


15/25

Crush chaos at Ikea store opening(Edmonton, North London 2005)

The did not put in

place the right

infrastructure to

deal with that.

People became agitated

and eventually they

started trying to charges

the doors

One woman

pushed her way

forward

screaming with

excitement.


16/25

Capacity Management Strategies

Level capacity (fixed level at all times)

Stretch or shrink offer inferior extra capacity at peaks (e.g. bus as alternative to train)

vary seated space per customer (e.g. elbow room, leg room) extend/cut hours of service

Chase demand (adjust capacity to match demand) schedule downtime in low demand periods

use part-time employees rent or share extra facilities and equipment

cross-train employees

Flexible Capacity (vary mix by segment)


17/25

Predictable Demand Patterns and

Their Underlying Causes (Table 9-1)

Predictable Cyclesof Demand Levels

day week

month

year

other

Underlying Causes ofCyclical Variations

employment

billing or tax payments/refunds pay days

school hours/holidays

seasonal climate changes

public/religious holidays

natural cycles

(e.g. coastal tides)


18/25

Alternative Demand Management

Strategies

Take no action let customers sort it out

Increase demand (when demand is too low) lower prices

communication, including promotional incentives vary product features to increase desirability

more convenient delivery times and places

Reduce demand (When demand is too high)

higher prices communication promoting alternative times

Inventory demand by reservation system

Inventory demand by formalized queuing


19/25

Alternative Queuing Configurations

(Fig. 9-4)

Single line, single server, single stage

Single line, single servers at sequential stages

Parallel lines to multiple servers

Designated lines to designated servers

Single line to multiple servers (snake)

Take a number (single or multiple servers)28

2921

20

24

23

30 25

3126

2732


20/25

Tailoring Queuing Systems to Market Segments:

Criteria for Allocation to Designated Lines

Urgency of job

emergencies vs. non-emergencies

Duration of service transaction

number of items to transact

complexity of task

Payment of premium price

First class vs. economy

Importance of customer

frequent users/loyal customers vs. others


21/25

Ten Propositions on the Psychology of

Waiting Lines

1.Unoccupied time feels longer

2. Preprocess/postprocess waiting feel longer than in-process

3. Anxiety makes waiting seem longer

4. Uncertain waiting is longer than known, finite waiting

5. Unexplained waiting seems longer

6. Unfairwaiting is longer than equitable waiting

7. Waiting alone feels longer than in groups8. Physically uncomfortable waiting feels longer

9. Waiting seems longer to new or occasional users

10.People will wait longer for more valuable servicesSources: Maister; Davis & Heineke; Jones & Peppiatt


22/25

Benefits of Effective Reservations

Systems

Controls and smoothes demand

Pre-sells service

Informs and educates customers in advance of

arrival Customers avoid waiting in line for service (if

service times are honoured, giving specific time)

Data capture helps organizations prepare financialprojections


23/25

Strategies fornon-shows

& over-booking

Provide alternativechoices

When 1st choiceis unavailable

Accommodatepreference

Options forself-service

Can answer customerquestions

Fast & user friendlyFor customer &

staff

Well-designed

reservation system


24/25

Setting Capacity Allocation Sales Targets for

a Hotel by Segment and Time Period

Out of commission for renovation

Executive service

guests

Transient guestsWeekend

package

Groups and conventions

Airline contracts

100%

50%

Week 7(Low Season)

MNights: TuTime

W Th F S Sn

Executive service guests

Transient guests

W/Epackage

Groups (no conventions)

Airline contracts

Week 36(High Season)

M Tu W Th F S Sn

Capacity (% rooms)

(Fig. 9-5)


25/25

Information Needed for Demand and

Capacity Management Strategies

Historical data on demand level and composition,noting responses to marketing variables

Demand forecasts by segment under specifiedconditions

Fixed and variable cost data, profitability ofincremental sales

Site-by-site demand variations

Customer attitudes towards queuing

Customer evaluations of quality at different levels ofcapacity utilization

sm lecture 5b - demand and capacity

Documents