Services Marketing Ch. 13

Front 1

Low utilization

Back 1

Sends bad signals, there is excess capacity and wasted resources

Front 2

Optimal capacity

Back 2

Well balanced demand and supply, ideal use

Front 3

Maximum available capacity

Back 3

Demand exceeds optimal capacity, quality declines

Front 4

Capacity utilized

Back 4

Demand exceeds capacity, business is lost

Front 5

What happens when there is excess capacity?

Back 5

The level of demand exceeds max capacity. Some customers will be turned away, for customers who do not receive service, quality may be lacking bc of crowding or overtaxing of staff and facilities

Front 6

What happens when demand exceeds optimum capacity?

Back 6

No one is turned away but qual its may suffer

Front 7

What happens when demand and supply are balanced at optimum capacity?

Back 7

Staff and facilities are occupied at ideal level. No one is overworked, facilities can be maintained, customers are receiving quality

Front 8

What happens when there is excess capacity?

Back 8

Demand is below optimum. Resources are underutilized resulting in lower profits. Some customers may receive high quality service, but if quality depends on the presence of other customers, customers may be disappointed.

Front 9

Examples of capacity constraints:

Back 9

Time, labor, equipment and facilities. Optimal vs max use of capacity.

Front 10

4 examples of demand patterns:

Back 10

1. Charting demand patterns

2. Predictable cycles

3. Random demand fluctuations

4. Demand patterns by market segment

Front 11

5 ways to reduce demand during peak times:

Back 11

1. Communicate busy days and times to customers

2. Modify timing and location service delivery

3. offer incentives for non peak usage

4. Set priorities by taking care of loyal and high need customers first

5. Charge full price, no discounts

Front 12

4 ways to increase demand to match capacity:

Back 12

1. Educate customers about peak times and benefits of non peak use

2. Vary how the facility is used

3. Vary the service offering

4. Differentiate on price

Front 13

5 ways to increase capacity temporarily:

Back 13

1. Stretch people, facilities, and equipment temporarily

2. Use part time employees

3. Cross train employees

4. Outsource activities

5. Rent or share facilities and equipment

Front 14

4 ways to adjust the use of resources:

Back 14

1. Schedule downtime during periods of low demand

2. Perform maintenance and renovations

3. Schedule vacations and employee training strategically

4. Modify or move facilities and equipment

Front 15

Yield management

Back 15

The process of allocating the right type of capacity to the right kind of customer at the right price so as to max revenue or yield.

Front 16

Yield equation

Back 16

actual revenue/potential revenue

Front 17

Actual revenue equation

Back 17

actual capacity x average actual prices

Front 18

Potential revenue equation

Back 18

total capacity x max price

Front 19

Yield management is most effective when: (2)

Back 19

1. Different segments make reservations at different times

2. Customers who arrive/reserve early are more price sensitive than those who arrive/reserve late

Front 20

5 challenges and risks in using yield management:

Back 20

1. Loss of competitive focus

2. Customer alienation

3. Overbooking

4. Incompatible incentive and reward systems

5. Inappropriate organization of the yield management function

Front 21

What should one do in waiting line strategies?

Back 21

Employ operational logic to reduce wait. Set a reservation process. Make waiting more pleasurable

Front 22

4 ways to differentiate waiting customers:

Back 22

1. Importance of the customer

2. Urgency of the job

3. Duration of the service transaction

4. Payment of a premium price

Front 23

Issues to consider in making waiting more pleasurable:

Back 23

It feels longer, anxiety, solo waits longer than groups, the more valuable the service the longer the customer will wait.