This slide is about the demand and supply management in service marketing .

1. Demand and Supply Management
for Services

2.  When businesses are considering the price of their products and
services, they will sometimes go and look at Supply and Demand.
 Supply looks at the price setting point, from the view of the business.
 Demand looks at the same process, but from the
consumer/customer’s views.
Demand and Supply

3. Demand
 Definition – Demand means the various quantities of goods
that would be purchased per time period at different prices
in a given market.

4.  Demand curve is the graph depicting the relationship
between the price of a certain Commodity and the amount of
it that consumers are willing and able to purchase at that given
price.
Demand Curve

5. Demand curve
The demand Curve is usually downward sloping, since
consumers will want to buy more as price decreases.

6. Demand situation
1 Negative Demand
The market is in a state of negative demand if; a major part of
the market dislikes the product and may even pay a price to
avoid it.
2 . No Demands
Target consumers may be uninterested in the
product
3 Latent Demand:
Many consumers may share a strong need that cannot
be satisfied by any existing products.

7. 4 Irregular Demand
Organizations face demand that varies on a seasonal, daily or
even hourly basis, causing problems of idle capacity or
overcrowded capacity.
5 Full Demand
Organizations face full demand when they are
pleased with there volume of business.
6 Overfull Demands
Some organizations face a demand level
that is higher then they can or want to handle.
7 Unwholesome Demand
Unwholesome products will attract organized
effort to discourage their consumption

8. Demand Patterns
 Irregular demand
 Falling demand
 Demand to the level of optimum capacity
 Demand exceeds optimum capacity
 Demand below the optimum capacity
 Excess demand

9. Strategies for Demand Management
 Strategies for shifting demand to match service capacity.
Communicating busy days and timings.
Providing incentives during non -peak periods.
Identifying regular customers and serving them first.
Scheduling services segment wise

10. Strategies for Demand Management
 Strategies to increase the demand
Aggressive promotion
Entry into new segments
Offering price incentives
Change in service timings
Promote word-of mouth communication
Providing service conveniences to the customer

11.  Demand Too High flex capacity Demand Too
Low
• 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.
• Outsource.
• Perform
maintenance,
renovations.
• Schedule vacations.
• Schedule employee
training.
• Lay off employees

12. Waiting issues:
unoccupied time feels longer
preprocess waits feel longer
anxiety makes waits seem longer
uncertain waits seem longer than finite waits
unexplained waits seem longer
unfair waits feel longer
Longer waits are more acceptable
for“valuable”services
solo waits feel longer
Management of Demand in Waiting

13. Waiting Strategies
 Employ operational logic to reduce wait
 Establish a reservation process
 Differentiate waiting customers
 Make waiting fun, or at least tolerable

14.  Definition – Supply is the amount of goods that producers are
willing to supply or sell at a given price.
Supply
Managing supply means managing capacity.
Capacity is the extent of the ability of a system to deliver the
service it was designed to deliver.
Capacity is defined as the maximum rate of output.

15. 0
0.5
1
1.5
2
2.5
3
3.5
4
0 10 20 30 40 50 60 70 80 90
Supply Curve
Price ($)
Quantity Supplied

16. Constraints on capacity
Nature of the constraint Type of service
Time
Legal
Consulting
Accounting
Medical
Labor Law firm
Accounting firm
Consulting firm
Health clinic
Equipment Delivery services
Telecommunication
Utilities
Health club
Facilities Hotels
Restaurants
Hospitals
Airlines
Schools
Theaters
Churches

17. Tailoring the level of Capacity
 Elastic strategies:
“simple” restaurant menu
during peak times, less
leg space and extra seats
in an airplane, etc.
 Chase demand:
hire part-time people and rent
more equipment at peak times; or
scheduling employee vacations,
sending people to training
programs, renting out equipment.

18. Managing supply
Two measures of capacity utilization:
 percentage of the total time that facilities and
equipment are in revenue operation;
 percentage of the physical space (seats, cubic
freight capacity) utilized during operations.

19. Managing supply
Increasing customer participation
Renting Equipment
Automation
Extending Service Hours
Better SchedulingTools and Practises
Expanding / Renovating Facilities

20.  Equilibrium is when the Demand and Supply are equal.
Equilibrium

21. Equilibrium
0
0.5
1
1.5
2
2.5
3
3.5
4
0 10 20 30 40 50 60 70 80 90
Price ($)
Quantity Demanded
Equilibrium is when both Supply and Demand curves intersect.The equilibrium is in
the middle, which is the amount that the sellers and/or buyers are happy to pay/sell for
the selected products.
Therefore, in this case
the amount demanded
at the price of approx.
$2.20, would be
approximately 48,
because this is the
equilibrium point.
Equilibrium

22.  When supply and demand are equal (i.e. when the supply function and
demand function intersect) the economy is said to be at equilibrium.At
this point, the allocation of goods or services is at its most efficient because the
amount of goods or services being supplied is exactly the same as the amount of
goods or services being demanded.Thus, everyone (individuals, firms, or
countries) is satisfied with the current economic condition.At the given price,
suppliers are selling all the goods or services that they have produced and
consumers are getting all the goods or services that they are demanding.

23. Managing supply
 Increasing customer participation
 Renting Equipment
 Expanding / Renovating Facilities
 Automation
 Extending Service Hours
 Better SchedulingTools and Practices