chapter 9 Flashcards
what are the 4 demand-supply situations?
1.Excess demand: (business is lost) (customers turned away)
–Too much demand relative to capacity at a given time. (Christmas, Thanksgiving, disasters, others?)
2.Demand exceeds optimum capacity: (quality declines) (staff overworked)
–Upper limit to a firm’s ability to meet demand at a given time.
3.Optimum capacity: (well- balanced demand and supply) (service quality remain high and resources are used with no overstrained)
–Point beyond which service quality declines as more customers are serviced. (standing room on a subway)
4.Excess capacity: (wasted resources)
–Too much capacity relative to demand at a given time. ???
the problem with fluctuating demand (4 blocks)
1.Define productive capacity
-firms determine their available capacity to serve customers
2.Manage capacity
-once capacity is defines, make strategies to ensure efficient utilization
3.Understand patterns of Demand
-Recognizing demand trends allows firms to anticipate peak and off-peak periods.
4.Manage Demand
-insufficient capacity: increase price, reservations
-insufficient demand: promotions, discounts
what is productive capacity?
*Productive capacity in services refers to the maximum level of service output that a business can deliver at any given time.
–Physical facilities designed to contain customers
–Physical facilities designed for storing or processing goods
–Physical equipment used to process people, possessions, or information
–Labour
–Infrastructure
How to manage capacity?
*Stretch and shrink:
–Offer inferior extra capacity at peaks (e.g. bus/train standees, fewer servers when busy) (a little lower quality)
–Use facilities for longer/shorter periods (24/7 digital) (ex. Banks ) (ex. Hotel checkouts)
–Reduce amount of time spent in process by minimizing slack time (simplify menu)
give me some ways to adjust capacity to match demand
–Schedule downtime during periods of low demand
–Cross-train employees
–Use part-time employees
–Invite customers to perform self-service
–Create flexible capacity; use terrasse, serve meals at bar, add another car to train, more?
–Rent or share extra facilities and equipment
recognize patterns that vary (predictable)
*Predictable Cycles of Demand Levels.
–day
–week
–month
–year
oOther; (pay period, Black Friday, holidays, Long week-ends, etc.
recognize patterns that vary (Underlying)
*Underlying Causes of Cyclical Variations.
–employment
–billing or tax payments/refunds
–pay days
–school hours/holidays
–seasonal climate changes
–public/religious holidays
–natural cycles
– seasonality (change tires for winter / summer)
*Underlying causes of randomly changing demand levels.
–Weather
–Health problems
–Accidents, Fires, Crime
–Natural disasters
4 basic ways to manage demand
1.Take no action
–Let customers sort it out
2.Reduce demand
–Higher prices
–Communication encouraging use of other time slots; movies on Tuesdays less expensive
3.Increase demand
–Lower prices
–Communication, including promotional incentives
–Vary product features to increase desirability
–More convenient delivery times and places
4. Inventory demand by formalized queuing or by reservation system
how to use marketing mix to smooth fluctuations in demand
*Use price and nonmonetary costs to manage demand
*Change product elements
*Modify place and time of delivery
–No change
–Vary times when service is available
–Offer service to customers at a new location
*Promotion and Education
How to manage wait times, and types of lines
Reduce waiting time by
–Rethinking the design of the queuing system
–Installing reservations system
–Tailoring queuing system to different market segments
–Managing customer behaviour and their perceptions of the wait
–Redesigning processes to shorten the time of each transaction
–SST
**types of lines: take a number, single line to a single server, multiple lines for designated server, snake line
virtual lines
Virtual Waits
*One problem of waiting is the waste of customers’ time
*Virtual queues can eliminate the need to wait
*Customers register their place in line on a computer, which estimates the time they need to reach the front of the virtual line, customers then return later to claim their place
Queuing Systems
Queuing Systems
*Allocate queues based on:
–Urgency of job
–Duration of service transaction
–Payment of premium price
–Importance of customer
how customers perceive wait times
1.Unoccupied time feels longer than occupied time
2.Solo waits feel longer than group waits
3.Physically uncomfortable waits feel longer than comfortable ones
4.Pre- and post-process waits feel longer than in-process waits
5.People will wait longer for more valuable services
6.Unexplained waits are longer than explained waits
7.Unfamiliar waits seem longer than familiar ones
8.Uncertain waits are longer than known, finite waits
9.Unfair waits are longer than fair waits *Anxiety makes waits seem longe
10. Anxiety makes wait seem longer
Reservations Strategies Should Focus on Yield
*Yield analysis helps managers recognize opportunity cost of allocating capacity to one customer/segment when another segment might yield a higher rate later **ensure low paying customers don’t take high paying customers spots
*Decisions need to be based on good information
–Detailed record of past usage
–Supported by current market intelligence and good marketing sense
–Realistic estimate of changes of obtaining higher rated business
*When firms overbook to increase yield, victims of overbooking should be compensated to preserve the relationship.
