Page 277 - DMGT510_SERVICES_MARKETING

Services Marketing

Notes  Equipment: Service organizations that require equipment to carry out their operations
may face capacity constraints due to the limited equipment available with the service
provider.

Example: A dentist may not be able to provide appropriate services to a patient because
unavailability of modern machines

Facilities: Some service organizations face capacity constraints due to limited facilities

available with them.

Example: A restaurant may not be able to accommodate extra people due to
unavailability of tables or an airline might to able to provide tickets to passengers because of
unavailability of vacant seats.

14.3.1 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 organization. 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,
organizations 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 organization 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 organization 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 organization 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
organization’s capacity to meet the same. However, organizations 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.

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