Coping with Fluctuating Demand for Services. Copyright © Houghton Mifflin Company. All rights reserved.14 - 2 Why Is Services Demand a Problem? Demand.

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Presentation transcript:

Coping with Fluctuating Demand for Services

Copyright © Houghton Mifflin Company. All rights reserved Why Is Services Demand a Problem? Demand cycles Services must often cope with cycles of demand that may be deeply ensconced in the behavioral patterns of the customer. Perishability Services exist only for the time during which they are performed.

Copyright © Houghton Mifflin Company. All rights reserved The Nature of Service Demand Random fluctuation occurs without warning and cannot be easily managed. Predictable fluctuation occurs when customer demand follows a pattern over time that repeats itself.

Copyright © Houghton Mifflin Company. All rights reserved

Copyright © Houghton Mifflin Company. All rights reserved Chasing Demand with Service Capacity Service capacity has three aspects: The physical facility in which the service is performed or rendered; The personnel whose labors create the service and their skill level; The equipment that enables the service to occur.

Copyright © Houghton Mifflin Company. All rights reserved Capacity Issues Optimum capacity is the number of customers that can be effectively handled under ideal conditions. Sometimes maximum capacity is not optimum capacity.

Copyright © Houghton Mifflin Company. All rights reserved

Copyright © Houghton Mifflin Company. All rights reserved Smoothing Demand to Fill Service Capacity The activity of shifting patronage to times when a service's productive capacity is underused and deflecting or discouraging patronage when its capacity is oversubscribed.

Copyright © Houghton Mifflin Company. All rights reserved

Copyright © Houghton Mifflin Company. All rights reserved Managing the Perishable Product Pick segment mix with maximum total profitability over demand cycle. Smooth peaks and fill valleys by managing capacity and demand. Examine size and profitability. Segment mix - Segments and proportion of total Value mix - Long-term profitability of each segment Key is relationship management. Segments and customers Service preferences (value) Price sensitivity (costs)