Page 75 - DMGT522_SERVICES MANAGEMENT

Services Management

Notes organisations pursue this method only to cut down the losses due to perishability, and in order
to avoid clientele right down the line.

The Airline Industry

The Airline Industry is liable to suffer huge losses because of perishability as explained before.
A British Airways flight is supposed to take off at, say 4‘O clock in the afternoon, but if its entire
seats have not been sold, then the airline loses revenue. So, what British Airways does is what
most airlines do, viz. market for customers more than the capacity of the seats. But they also
make the customers agree and sign clauses of reporting much before takeoff time. The customer
is aware of all these clauses and the condition that if he does not report before the check-in time,
the next passenger in line would be offered the seat.
This avoids losses through perishability but is open to charges of customer dissatisfaction. But
that is where it tries to cover up by making the customers agree to all the clauses. Sometimes,
factors beyond their control, like terrorism and extra-careful security checks, make them increase
reporting time and passengers are made to agree to such clauses.
Tour packages: Rarely do tour packages have less than full customers. This greatly affects their
profits and consequently their pricing. For a particular itinerary, they calculate all the direct
costs emanating from travel, boarding, food, sightseeing, guided tour costs, channel partners’
costs, if any, etc. add their profits and then arrive at the price. The exhaustive costing is only for
one group and the breakeven point is too sensitive to be left for any cancellation. They invariably
resort to over-marketing and if by a small probability the cancellations are nil, then the extra
passengers are put into the next tour.
Education: A Business School can either admit more students than it can accommodate in a class
to beat perishability or create exit barriers like forfeiture of admission/semester fees on late
cancellations.

Managing Demand

With no scope for delayed sales or stocking of inventory, it is all the more imperative for a
service marketer to manage demand. Accurate demand management would aid estimation and
forecasting which would in turn help avoid perishability. At the risk of sounding pompous, one
can safely say that marketing is all about demand identification, measurement and management.

Nine different types of demand have been identified. The service marketer has to understand
and adopt them in his marketing to avoid perishability. They are:
1. Rising Demand: This occurs when the service offer is in the growth stage of the product life
cycle, customers are aware of the service category and service brand, and the rate of
adoption is increasing in geometric progression with more first-time buyers trying the
service offer and customers making repeat purchases. The service marketer not only
should recognise this trend but also measure the rate of rise of demand. This information
would enable him to cater to the rising demand by appropriately increasing capacity of
service – facilities, service personnel, etc. – and avoid lost opportunities. But the marketer
should also be warned that success begets imitators and toward off the competition it
would require expenditures in promotions and discounts. This would severely hit the
service marketer’s bottom line and he should be prepared for the next service product
development.
Cell phone service: The marketer should not only recognize that there is a rising demand
for cell phones, across all sections, especially youth, but also the rate of growth of demand
(Chandigarh became the first town where cell phone users are more than land-line users).

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