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STRATEGIES TO DEAL WITH

PERISHABILITY
INTRODUCTION
Perishability reflects the challenge that services cannot be
saved, their unused capacity cannot be reserved, and they
cannot be inventoried.

The inability to create an inventory presents profound


difficulties for marketing services

The inability to create an inventory presents profound


difficulties for marketing services
Without the benefit of carrying an inventory, matching demand
and supply within most services firms is a major challenge.

MARKETING
CHALLENGES
In fact, because of the unpredictable nature of consumer demand
CAUSED BY for services, the only likely way that supply perfectly matches
demand is by accident!
PERISHABILITY

The lack of inventories and the need for the service provider to
provide the service lead to several possible demand and supply
scenarios.
THE MARKETERS FACE FOUR POSSIBLE SCENARIOS IN CONTEXT
OF DEMAND AND CAPACITY

Demand Exceeds Demand Exceeds Lower Demand than Demand and Supply
Supply of Service Optimal Supply of Optimal Supply at Optimal Levels
Available Service Available Levels

CONSUMER DEMAND SIMPLY THE CONSEQUENCES DURING TIMES WHEN THE OPTIMAL SCENARIO IS
OUTPACES WHAT THE FIRM ASSOCIATED WITH DEMAND DEMAND IS BELOW OPTIMAL TO HAVE DEMAND MATCH
CAN SUPPLY, WHICH RESULTS EXCEEDING OPTIMAL SUPPLY CAPACITY, RESOURCES ARE SUPPLY. THIS SCENARIO
IN LONG WAITING PERIODS MAY BE WORSE THAN WHEN UNDERUTILIZED (E.G., DESCRIBES THE SITUATION
AND, IN MANY CASES, DEMAND EXCEEDS MAXIMUM CASHIERS/ SALES STAFF ARE IN WHICH CUSTOMERS DO
UNHAPPY CUSTOMERS AVAILABLE CAPACITY. EX. STANDING AROUND) AND NOT WAIT IN LONG LINES
HOTEL WITH LESS TABLES OPERATING COSTS ARE AND EMPLOYEES ARE
AND STAFF ACCEPTS NEW NEEDLESSLY WASTED. UTILIZED TO THEIR OPTIMAL
CUSTOMERS CAPACITY.
DEMAND PATTERNS
To manage fluctuating demand in a service business, it is important to have a clear understanding
of demand patterns, why they vary, and the market segments that comprise demand at different
points in time.
First, the organization needs to chart the level of demand over relevant time periods.
Organizations that have good computerized customer information systems can do this very
accurately. The others may need to chart demand patterns more informally. Daily, weekly and
monthly demand levels should be tracked.

Predictable Cycles Random Demand Demand Patterns by


Fluctuations Market Segment
When organizations chart
down their demand patterns, Sometimes the patterns of demand If an organization has detailed records on

predictable cycles may be appear to be random—there is no customer transactions, it may be able to

detected. apparent predictable cycle. disaggregate demand by market segment,

Certain service firms have Day to-day changes in the weather may revealing patterns within patterns. Or the

predictable demand patterns. affect use of recreational, shopping, or analysis may reveal that demand from

entertainment facilities. Although the one segment is predictable while demand

weather cannot be predicted far in advance, from another segment is relatively

it may be possible to anticipate demand a random.

day or two ahead.


CAPACITY
CONSTRAINTS
TO DEVISE THE EFFECTIVE STRATEGIES FOR MANAGING DEMAND, UNDERSTANDING OF
CAPACITY CONSTRAINT IS ESSENTIAL. THE FOUR CAPACITY CONSTRAINTS ARE

TIME CONSTRAINTS LABOUR CONSTRAINTS


In case the demand at a certain time
Many service provider like doctors,
increases more than the peak or
hairstylists,etc., sell their time which is
decreases in the slack period, It will not
a constraint as He will be able to create
be possible for them to cope up with
more than twenty four hours in a day.
the demand of labour. 
Any time lost for them is their profit Over staffing and Under Staffing both
loss. affect demand management.
Chartered Legal Management Medical Tutorial Chartered Legal Management Medical
Accountant Advisory Consultancy Services Services Accountant Advisory Consultancy Services

FACILITIES
EQUIPMENT
At any situation when the demand
For certain service demand situations CONSTRAINTS
CONSTRAINTS exceeds capacity, the service provider
euipment may be a constraint.
get constrained.

Telecom Courier Utility


Gyms Airlines Trains Restaurants Movie halls Hospitals
services Services Services
STRATEGIES When an organisation has clear grasp of its capacity

FOR constraints & an understanding of demand patterns, it


is in a good position to develop strategies for matching

MATCHING supply and demand.

CAPACITY
Two general approaches
1) To smooth the demand fluctuations by shifting
demand to match existing supply .

& 2) To adjust capacity to match fluctuations in demand.

DEMAND
An organisation seeks to shift customers

SHIFTING
away from periods in which demand
exceeds capacity, perhaps by
convincing them to use the service

DEMAND TO during slow demand.

MATCH During periods of slow demand, the

CAPACITY
organisation seeks to attract more
customers to utilize its productive
capacity.

Frequently a firm uses combination of


approaches
VARY THE SERVICE OFFERING

This approach is to change the nature of the service


offering, depending upon the season of the year,
day of the week or time of the day.
Chartered accountamts during the year from April
to December do routine jobs of companies and from
December to March they concentrate on Tax
management.

COMMUNICATE WITH CUSTOMERS

Letting them know the times of peak demand so


they can choose to use the services at alternative
times and avoid crowding and delays.

Many service providers informs the customers


regarding their rush hours like closings, peak
seasons.
MODIFY TIMING & LOCATION OF
SERVICE DELIVERY
Some firms adjust their hours & days of service
delivery to more directly reflect customer
demand.
SBI bank has oped an evening branch in Indore for
the customer who are busy working during the
day.

DIFFERENTIATE ON PRICE
A common response during slow demand is to
discount the price of the service. To be effective
however, a price differentiation strategy depends
on understanding of customer price sensitivity &
demand curves.

Some Hotel offers discounts on tariff, Happy hours


etc. 
The fundamental idea here is to adjust,

ADJUSTING stretch & align capacity to match


customer demand.

CAPACITY
TO MEET During periods of peak demand the

DEMAND organisation seek to stretch or expand


its capacity as much as possible.

During periods of slow demand it tries


to shrink capacity so a snot to waste
resources.
STRETCH EXISTING
CAPACITY
The existing capacity is expanded temporarily to match
demand. No new resources are added; rather the people,
facilities, & equipment are asked to work harder & for
longer.
STRETCH TIME

A health clinic may stay open longer during flu season or


retailers are open longer hours during the festive season.
STRETCH LABOUR

In many service organisations, employees are asked to


work longer & harder during period of peak demand.
ALIGN CAPACITY
WITH DEMAND
FLUCTUATIONS
this basic strategy is sometimes called as a “chase
demand” strategy. By adjusting service resources
creatively, organisations can in effect the demand curves Demand Capacity
to match capacity with customer demand patterns.
USE PART-TIME
EMPLOYEES
In this situation the organisation’s labour resource is being
aligned with demand. Retailer’s hire part-time employees
during holiday rush, restaurants often ask employees to
work split shifts(work the lunch shift, leave for few hours,
& come back for dinner rush) during peak mealtime hours.
OUTSOURCING
firms that find they have a temporary peak in demand for
a service that they cannot perform themselves may
choose to outsource the entire service.
SCHEDULE
DOWNTIME DURING
PERIODS OF LOW
DEMAND
if people, equipment,& facilities are being used at
maximum capacity during peak periods, then it is
imperative to schedule repair, maintenance & renovation
during off-peak season.
CROSS- TRAIN
EMPLOYEES
if employees are crosstrained, they can shift among tasks,
filling in where they are most needed. It increases the
efficiency of the whole system & avoids underutilizing
employees in some areas while others are being
overtaxed.

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