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PERISHABILITY
INTRODUCTION
Perishability reflects the challenge that services cannot be
saved, their unused capacity cannot be reserved, and they
cannot be inventoried.
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.
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
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.
CAPACITY
Two general approaches
1) To smooth the demand fluctuations by shifting
demand to match existing supply .
DEMAND
An organisation seeks to shift customers
SHIFTING
away from periods in which demand
exceeds capacity, perhaps by
convincing them to use the service
CAPACITY
organisation seeks to attract more
customers to utilize its productive
capacity.
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.
CAPACITY
TO MEET During periods of peak demand the