module 6

MBA@GIT http://www.mba.git.edu.

© Prof. Prasad Kulkarni, Gogte Institute of Technology, Belgaum. [email protected].



Services Marketing

Module 6Managing Demand and Capacity

According to VTU syllabus, Services Marketing 12MBA MM 314



ObjectivesAfter studying this module you will be able

to1. Understand demand patterns.2. Evaluate strategies and tools used for

matching capacity and demand.3. Discuss waiting line strategies.



Understanding Capacity Constraints and Demand Patterns

Time, labor, equipment and facilities

Optimal versus maximal use of capacity

• Charting demand patterns

• Predictable cycles• Random demand

fluctuations• Demand patterns by

market segment

Capacity Constraints Demand Patterns



Strategies for Shifting Demand to Match Capacity

Use signage to communicate busy days and times

Offer incentives to customers for usage during non-peak times

Take care of loyal or regular customers firstAdvertise peak usage times and benefits of

non-peak useCharge full price for the service--no discounts

• Use sales and advertising to increase business from current market segments

• Modify the service offering to appeal to new market segments

• Offer discounts or price reductions

• Modify hours of operation• Bring the service to the

customer

Demand Too High Demand Too LowShift Demand



Strategies for Flexing Capacity to Match Demand

Stretch time, labor, facilities and equipmentCross-train employeesHire part-time employeesRequest overtime work from employeesRent or share facilitiesRent or share equipmentSubcontract or outsource activities

• Perform maintenance renovations

• Schedule vacations• Schedule employee training• Lay off employees

Demand Too High Demand Too LowFlex Capacity



What is the Nature of Demand Relative to Supply?Extent of demand fluctuations over time

Extent to whichsupply isconstrained

Wide Narrow

Peak demand canusually be metwithout a majordelay

1ElectricityNatural gasTelephoneHospital maternity unitPolice and fireemergencies

2InsuranceLegal servicesBankingLaundry and dry cleaning

Peak demandregularly exceedscapacity

4Accounting and taxpreparationPassenger transportationHotels and motelsRestaurantsTheaters

3Services similar to those in2 but which haveinsufficient capacity fortheir base level of business



What is the Constraint on Capacity?Nature of the constraint Type of serviceTime Legal

ConsultingAccountingMedical

Labor Law firmAccounting firmConsulting firmHealth clinic

Equipment Delivery servicesTelecommunicationUtilitiesHealth club

Facilities HotelsRestaurantsHospitalsAirlinesSchoolsTheatersChurches



Waiting Line Issues and Strategies

unoccupied time feels longerpreprocess waits feel longeranxiety makes waits seem longeruncertain waits seem longer than finite waitsunexplained waits seem longerunfair waits feel longerlonger waits are more acceptable for “valuable”

servicessolo waits feel longer

module 6

Business