Services Marketing

unit-4B,5 B MBA-3rd 2009-11

Managing service delivery Balancing demand and capacity

Topics
Service blueprinting Design and layout of service delivery Capacity and demand management.

Learning Objectives
To understand the role of design and lay out in service delivery To be familiarise with the process of blueprinting of a service process To understand the role of customer in the service delivery process To understand the relationship between Capacity and demand To understand the use of an effective reservation system

Issues in service delivery

Intangible
Performance not the object Process = experience = importance

Service Characteristics

Perishable
Demand and Capacity balance Promote specific periods when necessary Capacity cant be stored Inventory demand Use resources productively = increasing capacity

Inseparable
Design Customers involvement Into the delivery process Educate customers how it works Personal information = Important Managing customer behaviour

Service Blueprinting: Key Components

1. Define standards for front stage activities
2. Specify physical evidence 3. Identify principal customer actions 4. ------------line of interaction (customers and front stage personnel)-------5. Front stage actions by customer-contact personnel 6. ------------line of visibility (between front stage and backstage)------------7. Backstage actions by customer contact personnel 8. Support processes involving other service personnel 9. Support processes involving IT

Simplified Example: Blueprinting a Hotel Visit

Physical Evidence Stage

Hotel exterior, lobby, employees, key Make Customer reservation Actions Employee Actions Face-to-face Phone Contact Rep. records, confirms Valet Parks Car Enter data Register guest data

Elevator, corridor, room, bellhop Go to room

Arrive, valet park

Doorman greets, valet takes car

Check-in at reception
Receptionist verifies, gives key to room

Line of Interaction Front Line of Visibility Backstage

Make up Room

Developing a Blueprint Some Basic Advice

Identify key activities in creating and delivering the service (theatrical metaphor) Distinguish between front stage, what customers experience, and back stage Chart activities in sequence Show how interactions between customers and employees are supported by backstage activities and systems Establish service standards for each step Identify potential fail points Focus initially on big picture later, can drill down for more detail in specific areas

Service Firms as Teachers: Well-trained Customers Perform Better

Firms must teach customers roles as coproducers of service Customers need to know how to achieve best results Education can be provided through:
Brochures Advertising Posted instructions Machine-based instructions Websites, including FAQs Service providers Fellow customers

Employees must be well-trained to help advise, assist customers

The Problem of Customer Misbehavior Identifying and Managing Jaycustomers

What is a jaycustomer? A customer who behaves in a thoughtless or abusive fashion, causing problems for the firm itself, employees, other customers Why do jaycustomers matter? Can disrupt processes Affect service quality May spoil experience of other customers Can you give some examples of jaycustomers?

Six Types of Jaycustomer

Thief seeks to avoid paying for service Rule breaker ignores rules of social behaviour and/or procedures for safe, efficient use of service Belligerent angrily abuses service personnel (and sometimes other customers) physically and/or emotionally Family Feuders fight with other customers in their party Vandal deliberately damages physical facilities, furnishings, and equipment Deadbeat fails to pay bills on time

What should a firm do about them? Try to avoid attracting potential jaycustomers Institute preventive measures Control abusive behavior quickly Take legal action against abusers BUT firm must act in ways that dont alienate other customers

Balancing supply and demand

Relating Demand to Capacity: Four Key Concepts

Excess demand: too much demand relative to capacity at a given time Excess capacity: too much capacity relative to demand at a given time Maximum capacity: upper limit to a firms ability to meet demand at a given time Optimum capacity: point beyond which service quality declines as more customers are serviced

Variations in Demand Relative to Capacity

VOLUME DEMANDED Demand exceeds capacity (business is lost)
CAPACITY UTILIZED Maximum Available Capacity Optimum Capacity (Demand and Supply Well Balanced Demand exceeds optimum capacity (quality declines)

Excess capacity (wasted resources)

Low Utilization (May Send Bad Signals)

TIME CYCLE 1

TIME CYCLE 2
Lovelock and Wirtz (2004:260)

Defining Productive Capacity in Services

Physical facilities to contain customers Physical facilities to store or process goods Physical equipment to process people, possessions, or information Labour used for physical or mental work Public/private infrastructuree.g., highways, airports, electricity, internet bandwidth.

Crush chaos at Ikea store opening

(Edmonton, North London 2005)

The did not put in place the right infrastructure to deal with that.

People became agitated and eventually they started trying to charges the doors

One woman pushed her way forward screaming with excitement.

Capacity Management Strategies

Level capacity (fixed level at all times)

Stretch or shrink
offer inferior extra capacity at peaks (e.g. bus as alternative to train) vary seated space per customer (e.g. elbow room, leg room) extend/cut hours of service

Chase demand (adjust capacity to match demand)

schedule downtime in low demand periods use part-time employees rent or share extra facilities and equipment cross-train employees

Flexible Capacity (vary mix by segment)

Predictable Demand Patterns and Their Underlying Causes (Table 9-1)

Predictable Cycles of Demand Levels
day week month year other
Underlying Causes of Cyclical Variations employment billing or tax payments/refunds pay days school hours/holidays seasonal climate changes public/religious holidays natural cycles (e.g. coastal tides)

Alternative Demand Management Strategies

Take no action let customers sort it out Increase demand (when demand is too low) lower prices communication, including promotional incentives vary product features to increase desirability more convenient delivery times and places Reduce demand (When demand is too high) higher prices communication promoting alternative times Inventory demand by reservation system Inventory demand by formalized queuing

Alternative Queuing Configurations

(Fig. 9-4)

Single line, single server, single stage Single line, single servers at sequential stages Parallel lines to multiple servers

Designated lines to designated servers

Single line to multiple servers (snake)

Take a number (single or multiple servers)
28 30 31 26 32

29
25

21 20 24

27
23

Tailoring Queuing Systems to Market Segments: Criteria for Allocation to Designated Lines Urgency of job
emergencies vs. non-emergencies

Duration of service transaction

number of items to transact complexity of task

Payment of premium price

First class vs. economy

Importance of customer
frequent users/loyal customers vs. others

Ten Propositions on the Psychology of Waiting Lines

1. Unoccupied time feels longer
2. Preprocess/postprocess waiting feel longer than inprocess 3. Anxiety makes waiting seem longer 4. Uncertain waiting is longer than known, finite waiting 5. Unexplained waiting seems longer 6. Unfair waiting is longer than equitable waiting 7. Waiting alone feels longer than in groups 8. Physically uncomfortable waiting feels longer 9. Waiting seems longer to new or occasional users 10. People will wait longer for more valuable services

Sources: Maister; Davis & Heineke; Jones & Peppiatt

Benefits of Effective Reservations Systems

Controls and smoothes demand Pre-sells service Informs and educates customers in advance of arrival Customers avoid waiting in line for service (if service times are honoured, giving specific time) Data capture helps organizations prepare financial projections

Fast & user friendly For customer & staff

Strategies for non-shows & over-booking

Can answer customer questions

Well-designed reservation system

Provide alternative choices When 1st choice is unavailable Accommodate preference

Options for self-service

Setting Capacity Allocation Sales Targets for a Hotel by Segment and Time Period
Capacity (% rooms)
100%

Week 7
(Low Season)

Week 36
(High Season) Executive service guests

Out of commission for renovation Executive service guests Transient guests

50%

Weekend package
Transient guests

W/E package

Groups and conventions

Groups (no conventions)

Airline contracts Nights: M Tu W Th F S Sn Airline contracts

Time

Tu

Th

Sn

(Fig. 9-5)

Information Needed for Demand and Capacity Management Strategies

Historical data on demand level and composition, noting responses to marketing variables Demand forecasts by segment under specified conditions Fixed and variable cost data, profitability of incremental sales Site-by-site demand variations Customer attitudes towards queuing Customer evaluations of quality at different levels of capacity utilization