lecture 9 (yield management) Flashcards
Yield management
Guides the decision of how to allocate undifferentiated units of capacity to available demand (segments) in such way as to maximize profit or revenue (price)
What gap is yield management
Gap 3: Customer driven service designs and standards to service delivery
Example efteling Yield management
They have rollercoasters - shows - fairy tales - food
Children with (grand/parents) - couples - teens
Changes per season - week - day
So… Capacity adjustments, programming of shows, limits… How do we do this?
Have to make different decisions on what to have when, how many different things…
how can we use the capacity to the full potential
Determinants of Gap 3
Failure to smooth the peaks and valleys of demand
Overuse of capacity
Attracting inappropriate customer segments to build demand (if we have a restaurant from 4-11, there should be people interested at going at 4. IF they dont exist, theres no point…
Relying too much on price to smooth demand
Fluctuating demand for services:
Demand peaks and then goes back down and then peaks again. When it peaks demand exceeds capacity and business is lost, decrease in service quallity if staff is überfordert. If there is a valley, there is excess capacity (and youre wasting resources)
sometimes max capacity is also ideal capacity (e.g. soccer match)
Fluctuating demand (two problems)
+2 solutions
1) Off-peak too low –> overcapacity
2) Peak too high –> undercapacity
Two solutions:
1) shift peaks -> existing customers and services
Average utilization = constant
2) Fill up off peaks -> new customers and /or services, average utilization increases
Nature of demand-supply fit
Peak demand can usually be met without major delay & wide demand fluctuations over time: electricity, natural gas, telephone, police department
2: Peak demand can usually be met without major delay & narrow demand fluctuations over time: insurance, legal services, banking or dry cleaning
Peak demand regularly exceeds capacity &wide demand fluctuations over time: accounting and tax preparations, hotels, theatres
Peak demand regularly exceeds capacity & narrow demand fluctuations over time:
same as 2 with insufficient capacity for base demand level
Patterns and determinants of fluctuating demands:
1) predicable cycles:
going to work, its busy right before work starts for most people.
cycle duration? daily, weekly, monthly, annually or other…
2) determinants of cycle?
Employment, billing and tax cycles, wage and salary payment dates, seasonal changes in climate, holidays…
3) random change of level:
causes? -_> weather, health events, accidents, acts of god…
4) segmentable demand: Different use patterns, differences in profitability of transactions
single leg vs network yield management
single leg yield management: no dependance between (parts of ) service
e.g. airline that has a direct flight to your destination
Network yield management: a change in one part of the service system influences other parts of the service system:
e.g. airline that has several conneccting flights
Managing demand (partition demand9
segment the market makes life much easier.
E.g. train we have a lot of different people going to work, students, old people… if i can segment them somehow (train ticket off peak hours cheaper) then we can make the service better
Queuing on “first-come, first serve”
alternatives, e.g.
Urgency of service demand, duration of service transaction, importance of customer
e.g. ah has lines for only small baskets cause why wait so long…
macro has special parking lots for gold card members
Managing demand: Develop reservation systems
Reservations:
1) smooth demand in time
2) smooth demand in location
3) reduce waiting and guarantee service
Problem: reservation = mutual promise
No shows (fine) vs overbooking (downgrading of products)
Managing demand (promoting off peak demand)
E.g. fill up lecture rooms to watch movies during the hollidays
Communication based
Identify different motivations of demand or different segments
Communicate advantages of off peak (can be price based)
Managing demand (establishing price incentives)
Is service demand price elastic
Segments with different elasticities?
Dont want the customers that aready go a lot to start going when you charge less…
managing demand (develop complementary services)
service based:
Complementary anti-cyclic service to smooth
Ice-cream salon that sells rugs and carpets
Heading and air conditioning (its warm in winter, cool in summer and you can get ice cream)
NOT: complementary cyclic service to buffer
Managing supply: Increase customer participation
self service: advantages and disadvantages for provider and customer
Provider adv: increased speed, increased satisfaction, decreased costs, customization, no emotion personnel…
Disadvantages: lost of customer bond (ABN), increased possibility of failures in technology
Customer advantages: increased convenience (time), decreased costs (travel)
Disadvantages: No social experience, technology stress….