STRATEGIES TO DEAL WITH

PERISHABILITY
INTRODUCTION
Perishability reflects the challenge that services cannot be saved, their
unused capacity cannot be reserved, and they cannot be inventoried.

The inability to create an inventory presents profound difficulties for

marketing services

The inability to create an inventory presents profound difficulties for

marketing services
 Without the benefit of carrying an inventory, matching demand and supply
within most services firms is a major challenge.

MARKETING
CHALLENGES
In fact, because of the unpredictable nature of consumer demand for
CAUSED BY services, the only likely way that supply perfectly matches demand is by
accident!
PERISHABILITY

The lack of inventories and the need for the service provider to provide the
service lead to several possible demand and supply scenarios.
 THE MARKETERS FACE FOUR POSSIBLE
SCENARIOS IN CONTEXT OF DEMAND AND
CAPACITY

Demand Demand Lower Demand Demand and

Exceeds Supply Exceeds than Optimal Supply at
of Service Optimal Supply Supply Levels Optimal Levels
Available of Service
Available

CONSUMER DEMAND SIMPLY THE CONSEQUENCES DURING TIMES WHEN THE OPTIMAL SCENARIO IS
OUTPACES WHAT THE FIRM ASSOCIATED WITH DEMAND DEMAND IS BELOW OPTIMAL TO HAVE DEMAND MATCH
CAN SUPPLY, WHICH RESULTS EXCEEDING OPTIMAL SUPPLY CAPACITY, RESOURCES ARE SUPPLY. THIS SCENARIO
IN LONG WAITING PERIODS MAY BE WORSE THAN WHEN UNDERUTILIZED (E.G., DESCRIBES THE SITUATION IN
AND, IN MANY CASES, DEMAND EXCEEDS MAXIMUM CASHIERS/ SALES STAFF ARE WHICH CUSTOMERS DO NOT
UNHAPPY CUSTOMERS AVAILABLE CAPACITY. EX. STANDING AROUND) AND WAIT IN LONG LINES AND
HOTEL WITH LESS TABLES OPERATING COSTS ARE EMPLOYEES ARE UTILIZED TO
AND STAFF ACCEPTS NEW NEEDLESSLY WASTED. THEIR OPTIMAL CAPACITY.
CUSTOMERS
DEMAND PATTERNS
To manage fluctuating demand in a service business, it is important to have a clear understanding
of demand patterns, why they vary, and the market segments that comprise demand at different
points in time.
First, the organization needs to chart the level of demand over relevant time periods. Organizations
that have good computerized customer information systems can do this very accurately. The others
may need to chart demand patterns more informally. Daily, weekly and monthly demand levels
should be tracked.

Predictable Cycles Random Demand Demand Patterns by

Fluctuations Market Segment
When organizations chart
down their demand patterns, Sometimes the patterns of demand If an organization has detailed records on

predictable cycles may be appear to be random—there is no customer transactions, it may be able to

detected. apparent predictable cycle. disaggregate demand by market segment,

Certain service firms have Day to-day changes in the weather may revealing patterns within patterns. Or the

predictable demand patterns. affect use of recreational, shopping, or analysis may reveal that demand from one

entertainment facilities. Although the segment is predictable while demand

weather cannot be predicted far in advance, from another segment is relatively

it may be possible to anticipate demand a random.

day or two ahead.

 CAPACITY CONSTRAINTS
TO DEVISE THE EFFECTIVE STRATEGIES FOR MANAGING DEMAND, UNDERSTANDING OF
CAPACITY CONSTRAINT IS ESSENTIAL.THE FOUR CAPACITY CONSTRAINTS ARE

TIME CONSTRAINTS LABOUR CONSTRAINTS

In case the demand at a certain time
Many service provider like doctors,
increases more than the peak or
hairstylists,etc., sell their time which is a
decreases in the slack period, It will not
constraint as He will be able to create
be possible for them to cope up with
more than twenty four hours in a day.
the demand of labour.
Any time lost for them is their profit Over staffing and Under Staffing both
loss. affect demand management.
Chartered Legal Management Medical Tutorial Chartered Legal Management Medical

Accountant Advisory Consultancy Services Services Accountant Advisory Consultancy Services

EQUIPMENT CONSTRAINTS FACILITIES CONSTRAINTS

At any situation when the demand
For certain service demand situations
exceeds capacity, the service provider
euipment may be a constraint.
get constrained.

Telecom Courier Utility

Gyms Airlines Trains Restaurants Movie halls Hospitals
services Services Services
STRATEGIES FOR
MATCHING
When an organisation has clear grasp of its capacity
constraints & an understanding of demand patterns, it is

CAPACITY
in a good position to develop strategies for matching
supply and demand.

& Two general approaches

DEMAND
1) To smooth the demand fluctuations by shifting
demand to match existing supply .

2) To adjust capacity to match fluctuations in demand.

 An organisation seeks to shift customers

SHIFTING
away from periods in which demand
exceeds capacity, perhaps by convincing

DEMAND TO them to use the service during slow

demand.

MATCH
CAPACITY
During periods of slow demand, the
organisation seeks to attract more
customers to utilize its productive
capacity.

Frequently a firm uses combination of

approaches
 VARY THE SERVICE OFFERING

This approach is to change the nature of the service

offering, depending upon the season of the year, day
of the week or time of the day.
Chartered accountamts during the year from April to
December do routine jobs of companies and from
December to March they concentrate on Tax
management.

COMMUNICATE WITH CUSTOMERS

Letting them know the times of peak demand so

they can choose to use the services at alternative
times and avoid crowding and delays.

Many service providers informs the customers

regarding their rush hours like closings, peak
seasons.
 MODIFY TIMING & LOCATION OF SERVICE DELIVERY

Some firms adjust their hours & days of service

delivery to more directly reflect customer demand.

SBI bank has oped an evening branch in Indore for

the customer who are busy working during the
day.

DIFFERENTIATE ON PRICE
A common response during slow demand is to
discount the price of the service. To be effective
however, a price differentiation strategy depends
on understanding of customer price sensitivity &
demand curves.

Some Hotel offers discounts on tariff, Happy hours

etc.
ADJUSTING
The fundamental idea here is to adjust,
stretch & align capacity to match

CAPACITY TO
customer demand.

MEET DEMAND
During periods of peak demand the
organisation seek to stretch or expand
its capacity as much as possible.

During periods of slow demand it tries to

shrink capacity so a snot to waste
resources.
STRETCH EXISTING
CAPACITY
The existing capacity is expanded temporarily to match
demand. No new resources are added; rather the people,
facilities, & equipment are asked to work harder & for
longer.
STRETCH TIME

A health clinic may stay open longer during flu season or

retailers are open longer hours during the festive season.
STRETCH LABOUR

In many service organisations, employees are asked to

work longer & harder during period of peak demand.
ALIGN CAPACITY WITH
DEMAND FLUCTUATIONS

this basic strategy is sometimes called as a “chase demand”

strategy. By adjusting service resources creatively,
organisations can in effect the demand curves to match Deman Capacit
capacity with customer demand patterns. d y
USE PART-TIME
EMPLOYEES

In this situation the organisation’s labour resource is being

aligned with demand. Retailer’s hire part-time employees
during holiday rush, restaurants often ask employees to
work split shifts(work the lunch shift, leave for few hours, &
come back for dinner rush) during peak mealtime hours.
OUTSOURCING
firms that find they have a temporary peak in demand for a
service that they cannot perform themselves may choose
to outsource the entire service.
SCHEDULE DOWNTIME
DURING PERIODS OF LOW
DEMAND
if people, equipment,& facilities are being used at
maximum capacity during peak periods, then it is
imperative to schedule repair, maintenance & renovation
during off-peak season.
CROSS- TRAIN EMPLOYEES

if employees are crosstrained, they can shift among tasks,

filling in where they are most needed. It increases the
efficiency of the whole system & avoids underutilizing
employees in some areas while others are being overtaxed.