Services Marketing Project – Matching Service Capacity to Fluctuating Demand

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1.0 EXECUTIVE SUMMARY

Unlike manufacturing operations, services processes are denied the luxury of

stockpiling service products before they can be consumed, nor do they have detailed

knowledge of actual upcoming demand. Thus, the characteristics of services negate

the opportunity to plan for the service performance, and require the service to prepare

for every eventuality, ordering materials arbitrarily, hiring staff, paying for variable

costs such as lighting and heating, and often storing materials to await final purchase.

The ability to accurately predict future individual purchases would amend these

drawbacks, reducing costs, increasing efficiency, increasing customer satisfaction and

ultimately, increasing customer loyalty. Thus, the move towards customer relationship

management (CRM) should result in an escalating pattern of increased loyalty, further

increasing customer participation, allowing better preparation for each customer,

which in turn, increases customer loyalty.

This paper looks at the issue of perishability, what it is and how it affects service

efficiency, and discusses ways to offset the difficulties faced by services marketers by

extending the demand time horizon to allow adequate planning and preparation. Thus,

forecasting techniques will be highlighted to shine a light on medium-to-long-term

demand patterns. Finally, the paper will undertake a detailed investigation into a

relatively new area of marketing, CRM, and ask the question whether CRM may offer

the service provider with an accurate and timely means for planning demand.

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2.0 RESEARCH METHODOLOGY

In compiling information for the group carried out secondary research. This secondary

research essentially involved searching through services textbooks to find relevant

information and through journal articles via databases such as Business Source

Premier and Emerald Fulltext.

3.0 LIMITATIONS

• As the research topic involves proposing a new framework for services

marketing, there was no previous path to traverse, thus, literature from

operations, marketing, and e-commerce were explored.

• The reviewers’ did not have adequate time in which to carry out empirical

work to support the proposals made in the paper however the group would

strongly recommend future empirical research to be carried out relating to this

new topic.

• Given the nature of the paper, space constraints limited the amount of detail

the researchers could devote to particular issues in the topic.

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4.0 NATURE OF SERVICE CAPACITY

Business-to-consumer services operate at the coalface of the supply chain, creating

services in real-time for a variety of different consumers. This gives rise to 5

characteristics pertaining to services, intangibility, inseparability, heterogeneity,

perishability, and a lack of ownership (Fisk, Grove & John, 2000; Zeithaml & Bitner,

2003; Palmer, 2001). All these characteristics are interconnected and derived from the

fact that a service is essentially a performance by the services provider and an

experience to the consumer (Fisk, Grove & John 2000). A performance is an

intangible action, often using tangible elements to provide some subjective benefit to

the consumer. Because of the intangible nature of services, a service is regarded as

perishable because they cannot be stored (Cowell, 1984; Fisk, Grove & John, 2000;

Lovelock & Wirtz, 2004; Palmer, 2001; Zeithaml & Bitner, 2003). This inability to

store service products, coupled with the position of service businesses in the supply

chain and the fluctuating demand that they experience, this causes difficulties in

matching capacity and is the main cause of inefficiency in service operations.

According to Zeithaml and Bitner (2003) in order to manage fluctuating demand in a

service business, it is essential to have a distinct comprehension of demand patterns,

why they change from time to time, and also the niche of the market in which demand

will peak at certain times. “Sharp fluctuations in demand are a bane in the lives of

many managers” (Lovelock & Wirtz, 2004). If service marketers are not able to

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anticipate the peaks and troughs in demand for services the concept of perishability

comes into play.

4.1 Perishability

As stated earlier, perishability means that services, in contrast to goods, “cannot be

saved, stored, resold or returned” (Zeithaml & Bitner, 2003, p.22). Generally services,

which process people and physical objects are subject to greater capacity restrictions

than information based services, services such as transportation, health care,

entertainment and maintenance all suffer from this perishability problem (Lovelock &

Wirtz, 2004). For example, an empty seat in a bus or cinema represents capacity lost

forever, as it cannot be resold at a later time. The perishability characteristic of

services suggests that services cannot be inventoried. Therefore activities of demand

predicting and planning capacity are challenging but critical.

However, perishability is a problem for both goods manufacturers and services. All

physical products not sold directly after production (i.e. from a specific customer

order) incur storage costs, depreciation, the risk of damage, pilferage, and

obsolescence. However, services do not create tangible products, and the potential to

use the physical and human resources do not perish, only the opportunity to utilise

them is lost. Thus, nothing perishes but time. Manufacturers have the ability to utilise

time more efficiently due to their ability to decouple production from consumption.

As illustrated in figure 1 below, J.D.Thompson introduced the idea of a technical core

where a firm can operate efficiently “if it operated as if the market [can] absorb [a]

single kind of product at a continuous rate and as if the inputs flowed continuously at

a steady rate and with specified quality”(Thompson, J.D. 1967, as cited in (Bateson,

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1999)pp. 81-82). Central to his argument is that uncertainty creates inefficiency. Thus,

a manufacturer can produce products irrespective of demand due to their ability to

store its produce (at least in the short-term), thus operations can “push” productivity at

a steady and efficient rate, optimising resources and utilising available time. The

differences between manufacturing and service operations are outlined below.

Figure 1: Potential for manufacturing efficiency due to decoupling activities compared to

service operations

Manufacturing
Retail
Inputs Manufacturing Core Constant Or Demand
Efficiency Output Storage Use by a
Constant use of time service provider
& Resources
Flow of activities “pushed” for optimum efficiency Flow of activities “pulled” by fluctuating demand

Services

Inputs Periodic
Services Resources Output
Demand
(Fixed & Flexible)

Flow of activities “pulled” by fluctuating demand

(Flannery, Perry and Faller 2004)

Thus manufacturing can match their potential performance with the opportunity to do

so, as the product can be absorbed by buffering, storing the material products until

required by the customer through a retail outlet, or alternatively, purchased and used

by a service provider when the end consumer demands it. For example, a

manufacturer of hair driers can and may produce 100 hair driers a day as these

products can be stored in a warehouse, along the distribution channel, or in a retail

outlet awaiting purchase. Taking this example further, consider some of these

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products as inputs to a hair salon, where a stylist can complete 20 hairstyles a day, but

may only be demanded to perform 12 styles because of the flexible nature of demand.

The services part of figure 1 above can be visualised as the servuction system (Eiglier &

Langeard, 1987) reproduced below (figure 2). In the model, the customer is present in the

servicescape where the service operation and customer consumption of the product occurs

simultaneously.

Figure 2: The Servuction System

Invisible Visible Customer

Inanimate A
Invisible
organisation & Environment
System Contact Customer
Personnel or
B
service provider

Bundle of service benefits

received by Customer A

Source: Langeard, E. & Eiglier, P. (1987)

Bateson (1999 pg. 83) describes the servuction system as “a operations nightmare,

since it is impossible to use inventories and impossible to decouple the system from

the market. Instead of measuring demand a at a continuous rate, the system is linked

directly to a market that frequently varies dramatically from day to day, hour to hour,

and even minute to minute”. Bateson states that the closest to the servuction system

comes to Thompson’s ideal is the invisible part of the service. These invisible systems

may include the marketing, financing, maintenance, human resources, and purchasing

functions needed to aid and administer the front-house staff in their actions. Many of

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these functions may be outsourced or require inputs from service and product

providers further down the supply chain, yet each adds to the service provided by the

company. However, even in the invisible part of the servuction system, Bateson

suggests that the customisation taking place may introduce uncertainty into the

system. Thus, the service provider must position its operations to either be flexible

enough to adjust to fluctuating demand and heterogeneous needs, standardised enough

to build on economies of scale and “production” efficiencies, or have prior warning of

customer needs and purchase times to allow resource planning and preparation. A

comparable analogy would be driving a car with no lights, dim lights, or having full

headlights on to anticipate and adjust to the terrain ahead. Thus the firm needs to

understand the nature of its demand by customers, either through accurately deducing

demand through forecasting techniques and by analysing past behaviours of their

customers through adequate information technology systems and data mining. Thus

the next topic will be directed at forecasting techniques.

4.2 Forecasting

In business, forecasting is usually associated with figures such as the annual sales

forecast. In the social sciences, however, forecasts may be produced in qualitative

form, thus, there are two general forms of forecasting, qualitative (verbal), and

quantitative (numerical) (Mercer, 1999). Qualitative forecasting techniques describe

the future with words but with an indication of the scale of the impact that proposed

future events will have (Mercer 1999). Among the sources for such forecasts are;

“sales force forecasts, customer contact – especially prevalent in services, jury

method, technological forecasting, scenarios, tree structures, networks, morphological

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analysis, [and] bayesian decision theory” (Mercer 1999, p. 315). These techniques are

often used in long-term strategic planning.

Quantitative techniques, however, are often employed for shorter, tactical planning.

The most important of these techniques are; “period actuals and percentage changes,

moving annual total, cumulative totals, Z charts, exponential smoothing, time-series

analyses, multiple regression analysis, [and] leading indicators” (Mercer 1999, p.

317). In general, most of these techniques allow for four components in any such

forecast (Mercer 1999):

Trend: This takes historical data and extrapolates the ongoing growth, or decline, of

the service by fitting a straight, or occasionally curved, line.

Trend

Volume

Time

Cycle: This takes into account any wavelike changes over the years, such as the four-

year cycle purportedly a feature of the national economy. The problem for forecasters

is determining whether this is a truly repeatable fluctuation or the start of a longer-

term boom or decline in the economy.

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Cycle

Volume

Time

Season: Many services, such as the hospitality service sector, are seasonal in nature

and this pattern is overlaid on the others. If the service is highly seasonal, such as

toyshops with their Christmas peak, this pattern may be the biggest factor in

determining future demand.

Seasonal
Volume

Time

4.3 Understanding Demand Patterns

Predictable cycles (Zeitaml & Bitner, 2003) are an element of understanding demand

patterns of consumers. Essentially it involves examining a graph which details

demand levels. From this graph one may be able to analyse if there is a predictable

cycle, be it daily (where demand variations occur by the hour), weekly (by the day),

monthly (or by the day/week). If there is a predictable table one may then be able to

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understand the underlying cause. If one takes the example of attendances at a soccer

match, the results and performance of the team will in all likelihood be linked to

demand for tickets. Should the team reach the cup final then demand for tickets will

be high, however if the team are languishing in mid table then demand will be a lot

less. Of course predicting demand for the service may not be as simple as the above

example, however, generally high peaks or low troughs in demand may be linked to

such variables as the company’s performance or reputation.

4.4 Fluctuations In Demand Threaten Service Productivity

Lovelock & Wirtz (2004), outline four scenarios, which fixed capacity service providers, may

be faced with, illustrating the problems associated with the supply and demand of services.

a) Firstly service marketers may face excess demand, where the level of demand is greater

than the maximum obtainable capacity, the implication of this occurrence is that some

customers do not receive the service and potential revenue is gone.

b) The second scenario is that demand exceeds optimum capacity. Here everybody receives

the service, but conditions are cramped for the patrons. Customers here are likely to be

dissatisfied and perceive a lack of quality with this service.

c) Excess capacity occurs when demand is below optimum capacity, and both human

resources and physical facilities are not used to their maximum potential resulting in low

productivity. The low use may give customers a negative perception of the service, as few

people are using the service it may be seen as inefficient, expensive, unnecessary, or even

lacking in quality.

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d) Finally demand and supply may also be well balanced. This is the ideal scenario for service

businesses. Staff members are kept active without being overburdened and consumers can

receive satisfactory service without discomfort or time delay.

Ultimately, the best information on future customer purchasing decisions can only be

obtained by getting the customer to notify the service of their intention to purchase,

when they will be using the service, and what exactly they require from the service.

New developments in customer relationship management (CRM) may pave the way

for such a goal.

5.0 CUSTOMER RELATIONSHIP MANAGEMENT

5.1 What Is Customer Relationship Management

With the numerous communications innovations and the increased use of the Internet

Customer Relationship Management (CRM) has grown in importance in the past

number of years. However like much else that became popular during the dotcom era

there is debate as to whether CRM is a just a mere buzzword or whether it is a

fundamentally new way of conducting business (Kutorov, 2003).

Companies are moving closer to their customers, going to greater efforts to find new

ways to create value for their customers, and transforming the customer relationship

into one of solution finding and partnering rather than one of selling and ordering

(Park & Kim, 2003). Gronroos (1990) defines relationship marketing in terms of

establishing, maintaining, enhancing, and commercialising relationships that fulfil the

objectives of both the buyer and the seller. The emphasis in CRM is on the customer

relationship is as opposed to the transactional exchange. Ovum, an independent

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research company (as cited by Adebanjo 2003 pg. 570) defines Customer

Relationship Marketing (CRM) as “A management approach that enables

organisations to identify, attract and increase retention of profitable customers, by

managing relationships with them”. This is the definition of CRM to be used in this

paper.

5.2 CRM and Services Marketing

Despite the recent increase in popularity of CRM services organisations have

recognised the importance of establishing relationships for many years. Many service

organisations such as doctors, corner grocery stores and local post offices have

traditionally built up relationships with a number of loyal customers. However,

through CRM services organisations with large amounts of customers can now build

up detailed profiles on their customers and establish and maintain relationships with

them. Such large service organisations have numerous employees and it may be

unlikely that a customer will be served by the same front of house staff member on

separate visits. There are also likely to be many customer touch points (e.g. call

centres, the Website, e-mails and tellers) over a number of geographic locations

(Lovelock & Wirtz, 2004).

The purchase of a service, by its nature, has a higher degree of interaction than the

purchase of a product. This is due to the simultaneous production and consumption of

a service. Often a customer has to interact with the service provider for to benefit

from the service. This is particularly true with people processing services. This high

level of contact with the customer should give service organisations a distinct

advantage when engaging in CRM. It is far more difficult for a company producing

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salt to engage in affective CRM than it is for an accounting firm. Also, different

services offer varying opportunities for implementation of CRM.

5.3 Why Service Organisations are Using CRM

The main reason marketers enter into relationships with their customers is to boost

profitability. Chattopadhyay (2001 pg. 136) states that, “nurturing and sustaining

relationships with customers ensures the feasibility and growth of company.”

Successful CRM practices have led to increased competitiveness for many services

organisations with greater revenues, higher profits and lower operational costs.

Effective and efficient CRM leads to increased customer satisfaction and higher

retention rates. Companies can gain answers to question through CRM such as ‘What

services are important to their customers,’ ‘Why do customers use their services’ and

‘How should they communicate to their customers’ (Reichheld, 1996).

CRM is a complicated process that gathers data from any interaction with a customer

creating a single detailed picture of the customer while identifying the customers most

important to the firm and predicting their buying behaviour. CRM software

technology allows firms to track and study customers’ behaviour making their best

customers easily identifiable. Marketing efforts and special offers can then be focused

on these customers rewarding them for their loyalty. The firm can also increase their

interaction with these customers through increased communications. This enables the

company to respond to their customers evolving needs, thus increasing satisfaction

and retention rates (Chen & Popovich, 2003).

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The benefits of CRM are not all received by the company. Through CRM the

customers benefits from customisation, simplicity and convenience. They can also be

rewarded for their loyalty to a company. Customers are increasingly enticed through

discounts, special offers, and additional services. Another benefit is that at each

transaction a customer’s details and preferences are saved and are immediately

available the next time that customer receives the service.

5.4 CRM Technology

5.4.1 Data Warehouse Technology

Data warehouse technology is a tool commonly used in CRM. It gives the decision-

makers within the organisation immediate access to huge amounts of information

collected on the customer. This is achieved by combining the databases and operating

systems of each functional area are combined. Data warehouses can identify key

customers and important customer trends that would not otherwise be identified

(Chen & Popovich, 2003; Zeng, Chiang & Yen, 2003). It is far easier to build up a

data warehouse in services organisations due to the high level of contact with the

customer. A data warehouse will enable service organisation to better predict demand

patterns.

Some of the benefits of data warehousing were outlined by (Chen & Popovich, 2003):

• “Accurate and faster access to information to facilitate responses to customer

questions.”

• “Data quality and filtering to eliminate to bad and duplicate data.”

• “Extract, manipulate and drill-down data quickly from probability analysis,

customer profiling, and retention modelling.”

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• “Calculate total present value and estimate future value of each and every

customer.”

5.4.2 Enterprise Resource Planning Systems and Operations Management

Enterprise Resource Planning (ERP) ties each function within a company together

including order management, manufacturing, human resources, financial systems and

distribution with customers and suppliers to create an overall system where data is

shared (Chen & Small, 1996). Operations management on the other hand is defined as

“management of the conversion process which transforms inputs such as raw

material and labor into outputs in the form of finished goods and services”.

(Donnellen 2004)

ERP and operations management are not normally associated with manufacturing.

However increasingly services organisations are turning to these methods to create

better value for the customer. This is done through reducing product costs to

customers, making products more readily available, by providing faster service, by

providing customers with additional relevant information and by customising the

product to the customer’s specific needs (Chen & Popovich, 2003). Examples of these

systems being used in services organisations include the batch cooking practices in

McDonalds, Just-in-Time Systems in Nortel, and automatic inventory replenishment

at Wal-mart (Donnellen 2004).

5.4.3 The Impact of the Internet

The growth of the Internet has perhaps been the biggest single factor in the increased

popularity of CRM. Customers can now order online. Services like banking can now

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take place 24 hours a day without the customer having to enter the physical

environment. Services can now be offered in ways that have traditionally been

impossible. Greater opportunities exist through CRM and the Internet to engage in

one-to-one marketing and permission marketing. Customers can benefit from greater

information and increased convenience. The Internet also represents an easy

convenient way for companies to collect data on their customers.

The diagram below (Figure 3) shows how information received from the various

customer touch points can be channelled through CRM technology and data

warehousing to assist back office and front office functions. This information will be

used to provide a more superior and more efficient service for the customer.

Figure 3: Assisting Service Functions Through CRM Technologies

Front Office Functions Back Office Functions

Customer Touch Points

Marketing Receivables and Payables

Traditional Touch Points Management
Order Management
Retail Store Front Sales Management
Services Department Sales Planning
Pricing
After Sales Service
Profitability Analysis
Production Planning
Inventory Management
Shipping
Payroll
Personnel Planning

Electronic Touch Points

Website/Internet
E-Mail CRM
Customer call centre
Data Warehousing
Technology
Voice Response Systems
Kiosks

Adapted from (Chen & Popovich, 2003)

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5.5 Ways to deal with Unpredictable Demand through CRM

The ultimate aim of CRM should be to have the customer as a partner who assists in

creating service efficiencies. By educating the customer it may become possible to

teach them to provide much of the service for themselves prior to entering the service

location. For example, much of a teller’s time in a bank is taken up filling in forms

and documents that a customer should be capable of completing. Tickets for a train

could be pre-purchased by the customer before entering a train station thus reducing

interaction needed with service personnel. If the actual service process is minimised

the service can become more efficient. A further aim of CRM is for the customer to

provide ongoing feedback of their needs prior to the service encounter thus facilitating

capacity planning.

Figure 4 illustrates two different types of service encounters. Operation A is similar to

the servuction system. Most of the service process occurs in the front of house

situation. Much interaction occurs between the customer and the service provider as

well as between different customers. The service experience is more variable less

predictable. Customer experience of the service is significant. New or inexperienced

customers can lead to service inefficiencies. Most of the value of the service is added

in the front office. There is normally a relatively small back office. The large amount

of interactions that occurs in the front office along with high levels of unpredictability

often leads to problems of excess demand. However, Operation A most often occurs

in people processing services.

In Operation B only a minimal amount of front of house interaction occurs. Customer

experience and behaviour have very little impact on the service. Most of the value is

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added in the back office, where many of the processes can be operationalised. Often

only a very small front office exists. This can lead to increased efficiencies, as the

service is less likely to be affected by customer behaviour. This reduces problems of

varying demand. The challenge exists for many service operations to operationalise

many of their processes.

Figure 4: Front Office Vs. Back Office Focus

Operation B
Operation A

Service Service Operation

Operation

Service Service
Process Process

Service Product
Service Product

Source: Clark & Johnson (2001)

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6.0 SOLUTIONS TO THE PERISHABILITY PROBLEM

(Hoffman & Bateson, 1997) outline possible solutions to the perishablility problem

which service marketers are often dealt with. The first set of strategies relates to 1)

controlling demand for services, while the next examines 2) controlling the supply of

services.

1) CONTROLLING DEMAND FOR SERVICES

Creative pricing is frequently used by service industries to aid in levelling demand

fluctuations according to Hoffman and Bateson (1997). For example cinemas have for years

offered reductions on matinee shows in a bid to curb demand for later shows while also

profiting on attracting consumers to a day show while would probably have a low attendance

rate. Also by diverting some of the excess volume of customers to different time periods,

companies will be able to provide a better service during the traditional peak times. For

example in the cinema scenario, the queues for the shop will not be as long as less people will

be in the cinema. Kaspar, Van Helsingen and de Vries Jr. (2000) give the example of the

tourist industry who often attempt to attract customers in off peak periods like Spring and

Autumn by offering lower prices during these times, than in the peak Summer months.

A reservation system is another popular method of smoothing demand for a service.

Essentially it means that consumers can book a segment of a firm’s service for a

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certain time period. Many service firms of a distinctly heterogeneous nature operate

such a policy including doctors, theatres and even tanning salons. However limitations

are also associated with this mechanism as outlined by Hoffman and Bateson (1997).

The first disadvantage relates to cost, an individual must operate the reservation

system, usually by answering a telephone, which adds to the expense of the overall

operation. However the Internet may be reducing the cost of this demand controlling

strategy as individuals and companies alike are able to used sophisticated software

devices to establish booking systems on-line. Another disadvantage of reservation

systems is that customers may not always show up on time or show up late. This may

then lead to services being unutilised and result in lost profits for service providers.

6.1 Demarketing

A third form of controlling demand for services is through a process called

demarketing. Two of the most popular forms of demarketing are general demarketing,

necessary when a company wants to reduce the requested level of demand, and

selective demarketing, which occurs when a company wishes to move away from a

certain niche of customers.

General demarketing can occur when temporary shortages occur due to an excess of

demand or shortage in supply. Christmas is one time of year when this scenario is

most likely to arise. There are many methods which marketing management can take

to reduce the demand for their offering. “This is largely accomplished by using the

classic marketing instruments in reverse” (Kotler & Levy, 1971, p.76). For service

marketers, the most feasible options are to limit advertising and sales promotion

expenditure or raise the price of the service.

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Relating to chronic over popularity, general demarketing may be pursued in order to

maintain the quality of the product or service. If a disco attracts a high number of

club goers each week, so much so that valued customers are becoming dissatisfied,

demarketing may be undertaken. Methods, which could be undertaken, would be to

increase the price of admission or implement a stricter dress code. Product elimination

arises when a market entity wishes to remove a product or service that some

consumers still find desirable. Management must be careful to keep their loyal

customers happy, so keeping a limited amount in supply may be necessary.

Selective demarketing raises issues relating to social, legal and political implications.

Selective demarketing is often carried out when a company feels the new clients

whom it attracts are lowering the perceived quality of the offering. A basic form of

demarketing may occur if a well-established hotel starts to attract unwanted clientele

such as Hells Angels bikers. Loyal customers may well become unhappy with the

tarnished image they perceive the hotel as now possessing, the hotel may make rooms

unavailable to these bikers or forbid motorbikes to be parked on the premises. The

above move may well have many discriminatory implications

Another demand management strategy that may be used includes advertising and

promotion. According to (Johnston & Clark, 2001) a business such as a bookshop

may well stimulate demand for its products by organising appearance by authors to

sign copies of their books. However a flaw of this method as pointed out by Johnston

and Clark (2001), is that advertising may decrease the probability of any forecasting

model, which a business operates.

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6.2 CONTROLLING THE SUPPLY OF SERVICES

Supply strategies used to potentially solve perishability (or lack of efficiency) include

part-time employee utilisation, increased employee participation and capacity sharing.

Part-time employee utilisation involves using additional staff to assist in times of peak

demand periods. This is particularly common during particular times of year, for

example many department stores and bars may take on additional staff during busier

periods such as Christmas and summer. Advantages of employing part-time staff at

these peak periods as stated by Hoffman and Bateson (1997) including lower labour

cost and a flexible workforce that can be employed when the need arises. However

part-time staff may lack the necessary skills to satisfy customers during moments of

truth.

A strategy that is becoming increasingly popular in managing demand is increased

customer participation. The logic behind this idea is to replace the work done by

employees of the business with work done by the customer. This strategy is becoming

more and more common in everyday services. One can look at the increasingly

popular at the example of a restaurant and how it has changed into a customer

participation service. In scenario one looks at the popular new method of carvery

lunches now operated by many restaurants. Here one queues for food and drinks

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before going to the cash register and paying for the food, then the customer finds a

seat before consuming the product.

This differs greatly from scenario two and the traditional restaurant experience, where

a host/hostess finds a seat for the customer and then a waiter/waitress brings the

customer their food and beverages before giving them the bill. In the second scenario,

the consumer does not play an active role in service delivery and the service provider

has to do a lot more than in the first scenario. Also it is likely that in the first scenario

the consumer will not spend, as much time in the restaurant as in the second scenario.

Therefore in scenario one, the restaurant will be able to increase the potential number

of customers the restaurant can facilitate than in scenario two. Another prime example

of this strategy is ATM machines, which have helped to drastically cut down on the

in-branch transactions involving employees.

Capacity sharing is another method of increasing the supply of services. Here a

service business forms a type of service co-op with other service businesses, this

methods main advantage is cost cutting, the service provider by sharing the cost may

be able to offer this service which it may not be otherwise able to perform, due to high

fixed costs of equipment or premises. For example a bar and restaurant owner may

decide to operate in the one building in order to save on the high costs of rent and

light and heat. This can leave service providers with funds to spend on other areas

such as raw materials or additional staff.

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7.0 CONCLUSION

With technology for consumer analysis becoming more and more advance there is

greater ability for service marketers to build customer relations. In creating greater

rapport with the consumer, marketers may now be able to anticipate their needs and

wants, either by deduction through individual past trends, or by encouraging the

customer to notify the service in advance of their intent to purchase. By utilising the

technology and the wealth of individual information available, the service provider

can accurately match the individual’s needs by preparing to have the right materials

and staff, at the right time and place.

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