1.

Introduction There are three

characteristics in a society that are needed to
generate demand for a service. These are
desire, affordability and willingness to
purchase. Every product, including services
will have a minimum demand, but the
minimum demand may not be adequate
enough to the marketer to achieve
organizational objectives. One of the primary
responsibilities of a marketing organization is
to manage demand to a desirable level.

 Demand situations Negative

demand: the market response to an
offer of a service firm can be
negative. People are aware of
features of the service and the
benefits offered, but the evaluation
of offer might lead them to take a
decision that is not is favor of a
service offer. Passenger refusing a
bus conductors call to board the bus

 No demand: this demand situation

exists either due to unawareness,
insufficient information about the
service due to consumers
indifference. Marketer should focus
on promotional campaign and
communicating the right reason for
preferring services offered by the
firm. Bus with no passenger in it.

 Latent demand: in any given environment it is

impossible to have a set of products that are
capable of offering total satisfaction to all the
needs and wants of a society. There exists the
gap between desirable and available. Latent gap
is nothing but the gap between desirability and
availability. Latent demand is a business
opportunity and services firm should orient
themselves to identify such opportunities and
exploit them at the right time. Passenger
travelling in an ordinary bus but dreaming of
luxury bus.

 Seasonal demand: some services will

find demand only during a particular
season in year. Seasonal demand
creates many problems to service
organisations. These include idling
the capacity, fixed cost and excess
expenditure on promotion

 Demand patterns Irregular demand Falling

demand Demand to the level of optimum
capacity Demand exceeding capacity
Demand below the optimum capacity
Excess demand 7. Strategies for
demandmanagement Strategies for shifting
demand to match service capacity(I)
Communicating busy day and timings(II)
Providing incentives during non peak hours(III)
Identifying regular customers and serving
them first(IV) Scheduling service segmentwise

 Strategies to increase the demand(I)

Aggressive promotion(II) Entry into
new segments(III) Offering price
incentives(IV) Change in service
timings(V) Providing service
convenience to the customer(VI)
Promote word of mouth
communication

 Flexing capacity to meet

lowdemand Performance
maintenance and renovations
Schedule vacations Schedule
employee training Lay off
employees

 Flexing capacity to meet

highdemand Stretch time, labor,
facilities and equipment Cross train
employees Hire part time
employees Overtime from
employees Rent or share
facilities Rent or share
equipment Sub contract

 Waiting line strategies Employing

operational logic Establishing a
reservation process Differentiate
waiting customer Making waiting
fun

Constraints on Capacity
Nature of the constraint

Type of service

Time

Legal
Consulting
Accounting
Medical

Labor

Law firm
Accounting firm
Consulting firm
Health clinic

Equipment

Delivery services
Telecommunication
Utilities
Health club
Hotels
Restaurants
Hospitals
Airlines
Schools
Theaters
Churches

Facilities

Waiting Issues

unoccupied time feels longer

preprocess waits feel longer
anxiety makes waits seem longer
uncertain waits seem longer than finite
waits
unexplained waits seem longer
unfair waits feel longer
longer waits are more acceptable for
valuable services
solo waits feel longer

Figure 14.6

Waiting Line Configurations

Figure 14.4

Strategies for Flexing Capacity

to Match Demand

Demand Too High

Flex Capacity

Stretch time, labor, facilities and

equipment.
Cross-train employees.
Hire part-time employees.
Request overtime work from employees.
Rent or share facilities.
Rent or share equipment.
Subcontract or outsource activities.
Outsource.

Demand Too Low

Perform maintenance,
renovations.
Schedule vacations.
Schedule employee
training.
Lay off employees.

Figure 14.3

Strategies for Shifting Demand

to Match Capacity

Demand Too High

Shift Demand

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 first.
Advertise peak usage times and
benefits of non-peak use.
Charge full price for the service--no
discounts.

Demand Too Low

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

UNDERSTANDING DEMAND
PATTERNS
Charting demand patterns: Those organisations
which have computerized customer information systems
can do the charting demand over relevant periods. If
seasonality is a suspected problem then graphing
should be done for data from the past year.

Predictable cycles: Variations in demand can be

caused by many factors. Some are predictable -while
some are not. Tourism services have peak periods at
certain holidays and at weekend days. Generally one or
more causes can be identified when there exist a
predictable pattern.

Managing Demand and Capacity

The Underlying Issue: Lack of

Inventory Capability
Understanding Capacity Constraints
Understanding Demand Patterns
Strategies for Matching Capacity and
Demand
Yield Management
Waiting Line Strategies