Page 105 - DMGT522_SERVICES MANAGEMENT

Services Management

Notes 4.3.1 Altering Demand to Match Capacity (Supply)

A service firm should make efforts to understand the demand patterns and its capacity
constraints to effectively formulate strategies that can match demand and capacity. To match
its demand and capacity, there are two options for an organisation. It can either opt to shift the
demand to meet the capacity or to increase or decrease the capacity to match the demand
fluctuations.

When the demand for a particular service is higher than its capacity at a given point in time,
organisations adopt the demand shift strategy wherein they shift their customers to use their
services at a later period when the demand is low.

Example: The telephone tariffs are low in the early mornings and late nights to shift
some of the demand from the peak hours to these slots.
However, some customers may not be willing to shift and in these cases, an organisation will
lose business as it is unable to accommodate these customers.

Example: A crowded restaurant that is operating at its full capacity cannot accommodate
more people. These customers might go to another restaurant, which means lost business for
this restaurant.

An organisation tries harder to attract customers during periods of low demand, in order to
operate at its full capacity. Organizations opt for various methods to increase or shift demand in
order to meet their capacity. Some of these methods are discussed below:

A Variation in the Original Service Offer

Here, an organisation adopting this method, changes its service offering to suit the seasonal,
weekly, or daily demand fluctuations.

Example: Caterers who serve at marriages may choose to serve at birthday parties or
business gatherings during the non-marriage season.
Thus, the core benefits associated with a service can be altered to match the demand and the
organisation’s capacity to meet the same. However, organisations should weigh the pros and
cons before changing the original service offering, as it requires changing the marketing mix
elements like staffing, promotion and pricing.

Communicating with Customers

A service firm must inform the customers about the peak rush hours that will help them
understand the pattern and shift their business hours accordingly. Some customers may not be
interested in conducting their business during peak hours as the service delivery may get
delayed or the service might not meet the expected standards.

Example: Bankers are usually very busy during first few days of the month and on
Mondays because banks reopen after a day’s leave, so they can inform the customers about this,
some of them may prefer to carry out their transactions with the bank later in the month and on
other days than Monday.

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