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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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 3
Fluctuations in Demand ThreatenService Productivity
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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
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5/30Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 6
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
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6/30Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 7
Many Service Organizations AreCapacity Constrained
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7/30Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 8
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
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8/30Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 9
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
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9/30Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 11
Patterns and Determinants of
Demand The other side
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10/30Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 12
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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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 14
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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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 16
Demand Levels Can Be Managed
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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 17
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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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 18
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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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 20
Inventory Demand through WaitingLines and Reservations
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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 21
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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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 22
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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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 23
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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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 24
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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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 25
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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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 26
Minimize Perceptions of Waiting Time
Ten Propositions on Psychology of
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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 27
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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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 28
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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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 29
Create An Effective ReservationSystem
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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 30
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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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 31
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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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 32
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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Slide 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 9 - 33
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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