Ch9 Services Marketing Lovelock Wirtz Chaterjee Ch 09

8/2/2019 Ch9 Services Marketing Lovelock Wirtz Chaterjee Ch 09

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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 2

Overview of Chapter 9

Fluctuations in Demand Threaten Service Productivity Capacity-Constrained Service Organizations Patterns and Determinant of Demand Managing Demand Levels Inventory Demand through Waiting Lines and

Reservations Minimize Perceptions of Waiting Time Create an Effective Reservations System


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Fluctuations in Demand ThreatenService Productivity


4/30Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 4

From Excess Demand toExcess Capacity

Four conditions potentially faced by fixed-capacity services: Excess demando Too much demand relative to capacity at a given time => customer is

denied service => biz lost Demand exceeds optimum capacity

o

Upper limit to a firms ability to meet demand at a given time => no oneturned away, but conditions are deteriorating Optimum capacity

o Demand =Supply ; Staff not over worked and Customers face no delay Excess capacity

o Supply > Demand



Variations in Demand Relative toCapacity (Fig 9.1)

VOLUME DEMANDED

TIME CYCLE 1 TIME CYCLE 2

Maximum AvailableCapacity

Optimum Capacity(Demand and SupplyWell Balanced)

Low Utilization(May Send Bad Signals)

Demand exceeds capacity(business is lost)

Demand exceedsoptimum capacity

(quality declines)

Excess capacity(wasted resources)

CAPACITY UTILIZED



Many Service Organizations AreCapacity Constrained



Defining Productive Capacity inServices

Physical facilities to contain customers Ex aircraft,classrooms

Physical facilities to store or process goods -Warehouses

Physical equipment to process people, possessions, orinformation diagnostic equip

Labor used for physical or mental work hotel staff,nurses



Alternative Capacity ManagementStrategies

Level capacity (fixed level at all times)- No. of seats intheatre

Stretch and Shrink Capacity Offer extra capacity at peaks (e.g., bus/train standees)- Mumbai Trains . Introduce spl

trains Shabrimala Season Extend/cut hours of service Introducing token systems (prepaid) in hotels to reduce time for people to wait for billing.

Hence they leave and new customers can walk in. Chase demand (adjust capacity to match demand)

Use part time employees during peak season Rent /Share additional facilities at peak times. Eg. Renting cars for large conferences. Ask customers to share. At peak times customers asked to share taxis at Airports

If employees ltd, then customers to opt for SST .Ex platform ticket purchase Cross train employees to perform multi tasking in peak times

Flexible capacity (vary mix by segment): Boeing 777 canchange passenger cabins with hours for adjusting demand



Patterns and Determinants of

Demand The other side



Predictable Demand Patterns andTheir Underlying Causes (Table 9.1)

Day varies every hour Week varies every day

month every day/week Year month/season other

Employment Schedules

pay days

high demand

school hours and vacation seasonal climate changes public/religious holidays Natural disasters impact on

ambulance, fire coast guard

services

Predictable Cyclesof Demand Levels

Underlying Causes ofCyclical Variations


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Analyzing Drivers of Demand

Understand why customers from specific marketsegments select this service. Get the WHY behindchoice

Keep records of each transactions to analyze demand

patterns based on past experienceo Sophisticated software can help to track customer consumptionpatterns

Record weather conditions and other special factors (

big convention, price change etc) that might influencedemand


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Demand Levels Can Be Managed


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Alternative Demand Management Strategies(Table 9.2)

Take no actiono Let customers sort it out. They learn from WOM when is the slack

and peak time, where to stand and what is the possible waiting time

Reduce demando Higher priceso Communication : promoting usage of time slots. Evening Colleges

Increase demando Lower priceso Communication, including promotional incentiveso More convenient delivery times and places

Inventory demand by reservation system :

Provide priority to special customers, others attended later. Inventory demand by formalized queuing :

Special line for VIPs.


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Marketing Strategies CanReshape Some Demand Patterns

Use price and other costs( time, psychological cost) to manage demand Change product elements. Price discounting will not

boost sales in off peak seasons. Ex Hotels offer various

menus during different time of the day to cater todifferent customer needs Modify place and time of delivery

o No changeo Vary times when service is availableduring summer caf remain

open till late night. Shops extend working hours during Diwali anddusserao Offer service to customers at a new location Free dental check up in

mobile dental vans.

Promotion and education customers about peak periodand slack period


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Inventory Demand through WaitingLines and Reservations


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Waiting Is a Universal Phenomenon!

An average person may spend up to 30 minutes/daywaiting in lineequivalent to over a week per year!

Almost nobody likes to wait It's boring, time-wasting, and sometimes physically

uncomfortable


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Why Do Waiting Lines Occur?

Not all queues take form of a physical waitingline in a single location . Ex Waiting forcustomer care rep to answer the call.

Waiting for a taxi at a different location thanfrom where it was reserved( Taxi HQ)

Because the number of arrivals at a facilityexceeds capacity of system to process themat a specific point in the process

Queues are basically a symptom ofunresolved capacity management problems


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Saving Customers fromBurdensome Waits

Add extra capacity so that demand can be metat most times (problem: may increase costs toomuch)

Rethink design of queuing system to givepriority to certain customers or transactions Redesign processes to shorten transaction

time. Use of internet Manage customer behavior and perceptions ofwait Install a reservations system Ex Web check in

Al i Q i C fi i


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Alternative Queuing Configurations(Fig 9.5)

Single line, single server, single stageEx : Small railway reservation stations

Single line, single servers, sequential stagesGovt offices

Parallel lines to multiple servers

Large railway reservation centers

Designated lines to designated serversLadies Q, Credit card booking, Group booking Q

Single line to multiple servers (snake)-ExAirport Check inOne entrance and diff check in for diffflights

Take a number (single or multiple servers)Ex Banks

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C it i f All ti Diff t M k t


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Criteria for Allocating Different MarketSegments to Designated Lines

Urgency of jobo Emergencies versus non-emergencies at hospitals

Duration of service transactiono Number of items to transact Bulk Cash Deposit/ Withrawal >

Rs 5 Lacso Complexity of task -Spl Fx Transactions

Payment of premium priceo First class versus economy. Spl lines, check in facilities

Importance of customero Frequent users/high volume purchasers versus others.o Ex Spl Airport lounges for premium fliers.


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Minimize Perceptions of Waiting Time

Ten Propositions on Psychology of


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Ten Propositions on Psychology ofWaiting Lines (1) (Table 9.3)

Unoccupied time feels longer than occupied time PlaceTV

Pre- and post-process waits feel longer than in-processwaits Ex Movie: Wait 1 Buying Ticket, Wait 2 : Maneuvering vehiclefrom parking lot

Anxiety makes waits seem longer Uncertain waits are longer than known, finite waits Inform

customer the approx wait time Unexplained waits are longer than explained waits- Inform

customer reason for delay and possible time for recovery

Sources: Maister; Davis & Heineke; Jones & Peppiatt

Ten Propositions on Psychology of


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Unfair waits are longer than equitable waiting : Peoplejumping Q

People will wait longer for more valuable services Waiting alone feels longer than waiting in groups Physically uncomfortable waits feel longer Waits seem longer to new or occasional users Place a

lobby manager to take care of this

Ten Propositions on Psychology ofWaiting Lines (2) (Table 9.3)

Sources: Maister; Davis & Heineke; Jones & Peppiatt


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Create An Effective ReservationSystem


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Benefits of Reservations

Controls and smoothes demand Pre-sells service Informs and educates customers in advance of arrival Saves customers from having to wait in line for service

(if reservation times are honored) Data captured helps organizations

o Prepare financial projectionso Plan operations and staffing levels

Characteristics of Well-Designed


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Characteristics of Well-DesignedReservations System

Fast and user-friendly for customers and staff

Answers customer questions Offers options for self service (e.g., the Web) Accommodates preferences (e.g., room with view) Deflects demand from unavailable first choices to

alternative times and locations Includes strategies for no-shows

o Requiring deposits to discourage no-showso Canceling unpaid bookings after designated time

Setting Hotel Room Sales Targets by


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Setting Hotel Room Sales Targets bySegment and Time Period (Fig.9.4)

Out of commission for renovation

Loyalty Program

Members

Transient guestsWeekend

package

Groups and conventions

Airline contracts

100%

50%

Week 7(Low Season)

M

Nights:

Tu

Time

W Th F S Su

Loyalty Program Members

Transient guestsW/Epackage

Groups (no conventions)

Airline contracts

Week 36

(High Season)

M Tu W Th F S Su

Capacity% rooms)

Information Needed for Demand and


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Information Needed for Demand andCapacity Management Strategies

Historical data on demand level and composition Demand forecasts by segment under specified

conditions Segment-by-segment data Fixed and variable cost data, profitability of

incremental sales Meaningful location-by-location demand variations Customer attitudes toward queuing Customer opinions of quality at different levels of

capacity utilization


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Thank You

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Ch9 Services Marketing Lovelock Wirtz Chaterjee Ch 09