1. MATCHING SUPPLY & DEMAND IN
SERVICE INDUSTRY , CRM & MGMT
STRATEGY
BY
DEVANAND MENON
PRATHAMESH PARAB

2. OBJECTIVE
• Explain:
• the underlying issue for capacity-constrained services
• the implications of capacity constraints
• the implications of different types of demand patterns on
matching supply and demand
• Lay out strategies for matching supply and demand
through:
• shifting demand to match capacity or
• flexing capacity to meet demand
• Demonstrate the benefits and risks of yield management
strategies
• Provide strategies for managing waiting lines

3. Fundamental Issue
the underlying issue for capacity-constrained
services
Lack of inventory


perishability (cannot store up)
simultaneous product and consumption (cannot be
transported from one place to another)

4. Managing Demand and Capacity
 No buffer for services from
demand.
 Demand volatile
 Goal: supply and demand
balanced at optimum
capacity
 Under utilizing when
demand is below optimum
capacity
 If demand is above
capacity then quality may
suffer

5. What is the Nature of Demand Relative to
Supply?
Extent to which
supply is
constrained
Peak demand
can usually be
met without a
major delay
Peak demand
regularly
exceeds
capacity
Wide
Narrow
1
2
Electricity
Natural gas
Telephone
Hospital maternity unit
Police and fire
emergencies
Insurance
Legal services
Banking
Laundry and dry cleaning
4
Accounting and tax
preparation
Passenger
transportation
Hotels and motels
Restaurants
3
Services similar to those
in 2 but which have
insufficient capacity for
their base level of
business

6. Understanding Capacity Constraints and
Demand Patterns
Capacity Constraints
Time, labor,
equipment and
facilities
Optimal versus
maximal use of
capacity
Demand Patterns
• Charting demand
patterns
• Predictable cycles
• Random demand
fluctuations
• Demand patterns
by market segment

7. Managing Demand
Shift demand from
high to low demand
periods.
Decrease demand
during peak demand
periods.
Stimulate demand
during low demand
periods.

8. Strategies for Shifting Demand
to Match Capacity
Demand Too High
Demand Too Low
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
•
•
•
•
•
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
customer

9. Shifting Demand
Advantages
Disadvantages
Business is not lost.
Customers may not
Service quality is not
want to shift.
Customers may not
have control over when
they use the service.
adversely affected.
Increased efficiency.

10. Reducing Demand
Advantages
Disadvantages
Service quality is
Lost revenue.
normally improved.
Increased efficiency.
Not a good strategy for
firms in the for-profit
sector.

11. Stimulating Demand
Advantages
Disadvantages
Increased
May not be
efficiency.
Increased income.
Increased
utilization of
facility.
profitable.
May cause some
current customers
to shift usage.

12. Tools for Managing Demand
Reservation
system.
Differential
pricing.

13. 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
•
•
•
•
Demand Too Low
Perform maintenance
renovations
Schedule vacations
Schedule employee
training
Lay off employees

14. Who are the customers in a hospital?
Patients
Family members
Referral Doctors
Suppliers
Employees
Who is the key customer in the hospital?

15. What is patient satisfaction?
Patient Satisfaction is “hospital services and its
perception by the patient” minus ”patient
expectations”
0 = Patient Satisfied
- = Patient Dissatisfied
+ = Patient Delighted
Patient satisfaction measures need to be
developed from the patients perspective
Patients are becoming better informed
Involve patients for making improvements
Patient satisfaction is not Static but Dynamic

16. Patient Expectations
Good Medical Care
Cleanliness
Good Nursing Care
Good Coordination
Less Waiting Time
Cooperation among
Excellent Hospitality
the Staff
Discipline
Communication &
Information
Transparency in
charges and
procedures
Personal Attention
Courteous Behavior
Affordable Charges

17. Challenges in Service Marketing
Giving a feel for the “product”
Managing Demand Fluctuations
Maintaining Quality
Cost Containment
Attitudinal block in using proven marketing
principles in service marketing

18. Factors that promote Demand Perspective
Services are available for longer or
convenient hours
Patients are provided information through
Brochures, Publicity, etc on services
available
Services are reliable and offered promptly
Required equipment are available
Patient friendly Systems & Procedures

19. Factors that promote Demand
- Accessibility Perspective
Good public transportation
Centrally located
Outreach Programs to reach out to the
Rural People

20. Factors that promote Demand
- Affordability Perspective
Standard pricing structure
Charges affordable by most of the people in
the Community
Transparency in Patient Fees – no hidden
charges
Simple procedure for getting
free/subsidized care

21. Factors that increase Demand
- Promotion Avenues
Structured approach with designated staff
Good Rapport with Community
Publicity through different media
Promotion at Outreach activities
Meetings/seminars for other doctors
Developing a referral network
Promotion through satisfied patients
Industrial tie-up for routine examination of
their employees

22. Factors that affect Demand
- Attitude Perspective
Reasons for Low Demand:
Sophisticated technology will automatically
trigger demand
Belief that patients, if need eye care, will
definitely come to us
Providing Service as per Providers’ Convenience
Systems & Procedures are not patient friendly
Gap between Patients’ Expectations &
Providers’ Perception
Lack of patient orientation

23. Factors that demand attitude :- perspective
Skilled Doctor & other staff
Standard Clinical Protocol
Good Administrative System & Procedures
Courtesy & Politeness
Proper Explanation
Clean environment and comforts meeting
or exceeding expectations
Systems to monitor clinical outcomes &
Patient satisfaction

24. Factors that promote Demand
- to the Rural areas & the poor
Reasons for Low
Demand:
 No one to Escort
 Fear of Surgery
 Ignorance
 No desire for surgery
 No time for Surgery
 No money for surgery
Promoting Demand:
 Counseling to build
confidence that Staff
will take care
 Health education
 Explain benefits
 Free Transport/Food
 Free/subsidized
Surgery

25. CRM AND STRATEGY
MANAGEMENT

27. What is CRM?
•
The approach of identifying, establishing,
maintaining, and enhancing lasting relationships
with customers.”
•
CRM “is a business strategy that aims to
understand, anticipate and manage the needs of
an organisation’s current and potential customers”.
(know,target,sell,service)
•
CRM is a shift from traditional marketing as it
focuses on the retention of customers in addition
to the acquisition of new customers

45. Customer
CRM
Relationship Management ICICI.pdf