8/22/2024
Chapter 3
Services marketing planning and strategy
Balancing demand and capacity
Marketing Faculty, NEU.
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Objectives Outline (1 of 2)
3.1 Understand how customer, competitor, and company
analyses (i.e., the 3 Cs) help to develop a customer-
driven services marketing strategy.
3.2 Know the key elements of a positioning strategy (i.e.,
segmentation, targeting, and positioning; STP) and
explain why they are so crucial for service firms.
3.3 Understand how to use positioning maps to analyze and
develop competitive strategy.
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Objectives Outline (1 of 2)
3.1 Understand how customer, competitor, and company
analyses (i.e., the 3 Cs) help to develop a customer-
driven services marketing strategy.
3.2 Know the key elements of a positioning strategy (i.e.,
segmentation, targeting, and positioning; STP) and
explain why they are so crucial for service firms.
3.3 Understand how to use positioning maps to analyze and
develop competitive strategy.
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Objectives Outline (2 of 2)
3.4 Know the difference demand- supply situation that fixed
capacity firms may face.
3.5 Be family with the basic ways to manage capacity.
3.6 Recognize that demand patterns vary by segment, so
that segment – specific variations in demand can be
predicted.
3.7 Know how to use waiting lines and queuing system to
inventory demand
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Objective Outline 3.1
• Understand how customer, competitor, and company
analyses (i.e., the 3 Cs) help to develop a customer-driven
services marketing strategy and planning.
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Developing a
Service marketing planning
- Size Define, Analyze
MARKET - Composition
ANALYSIS Market Segments
- Location
- Trends
Select
Target Segments
To Serve
INTERNAL - Resources
Marketing
- Reputation Articulate
ANALYSIS Desired Position Action
- Constraints
in Market Plan
- Values
Select Benefits
to Emphasize
to Customers
- Strengths
COMPETITIVE - Weaknesses Analyze
ANALYSIS - Current Possibilities for
Positioning Differentiation
Source: Adapted from Michael R. Pearce
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Segmentation, Targeting, and
Positioning
• Segmentation:
– Dividing population of possible customers into groups
with common service-related characteristics
– Similar needs within same segment, different needs
between segments
• Targeting:
– Choose one/more segments to
focus on
• Positioning:
– Unique place in the minds of customers
– Differentiation forms first step to creating unique
positioning
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Basic Focus Strategies for Services
BREADTH OF SERVICE OFFERINGS
Narrow Wide
Unfocused
Service (Everything
Many Focused for everyone)
NUMBER
OF MARKETS
SERVED
Fully Focused
Market
(Service and
Focused
Few market focused)
Source: Robert Johnston
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Positioning after New Hotel Construction:
Price vs. Service Level
Expensive
Mandarin
New Grand Heritage
Marriott
Continental
Action?
Regency PALACE
Shangri-La
High No action? Moderate
Service Service
Atlantic
Sheraton
Italia
Castle
Alexander IV
Less Expensive Airport Plaza
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Positioning after New Hotel Construction:
Location vs. Physical Luxury
High Luxury
Mandarin
New Grand
Continental Heritage
Marriott Regency
Sheraton Shangri-La
Action?
PALACE
Financial No action? Shopping District Inner
District and Convention Centre Suburbs
Castle Italia
Alexander IV
Atlantic
Airport Plaza
Moderate Luxury
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Matching Marketing Concept with Operations
Concept
Corporate Objectives
and Resources
Marketing Assets Operating Assets
(Customer Base, Mkt. Knowledge, (Facilities/Equipment, IT Systems,
Implementation Skills, Brand Reput.) People, Op. Skills, Cost Structure)
Service Marketing Concept
Service Operations Concept
•Benefits to customer from core/
•Nature of processes
supplementary elements, style,
•Geographic scope of ops
service level, accessibility
•Scheduling
•User costs/outlays incurred •Facilities design/layout
•Price/other monetary costs •HR (numbers, skills)
•Time •Leverage (partners, self-service)
•Mental and physical effort •Task allocation: front/backstage
•Neg. sensory experiences Service Delivery staff; customers as co-producers
Process
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Balancing Demand
and Capacity
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Variations in Demand Relative to Capacity
VOLUME DEMANDED
Demand exceeds capacity
(business is lost)
CAPACITY UTILIZED
Maximum Available Demand exceeds
Capacity optimum capacity
(quality declines)
Optimum Capacity
(Demand and Supply
Well Balanced)
Excess
Low Utilization (wasted
capacity
(May Send Bad Signals) resources)
TIME CYCLE 1 TIME CYCLE 2
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HOW TO BALANCE DEMAND AND CAPACITY?
1. Capacity 2. Demand
Management Management
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Productive capacity in a service
context
• Defining Productive Capacity in Services: the resources
or assets that a firm can employ to create goods and
services.
• Productive capacity can take several forms in services:
– Physical facilities designed to contain customers
– Physical facilities designed for storing or processing
goods
– Physical equipment used to process people,
possessions, or information
– Labor used for physical or mental work
– Public/private infrastructure—e.g., highways, airports,
electricity
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Alternative Capacity Management Strategies
• Level capacity (fixed level at all times)
• Stretch and shrink
– offer inferior extra capacity at peaks (e.g. bus/metro standees)
– vary seated space per customer (e.g. elbow room, leg room)
– extend/cut hours of service
• Chase demand (adjust capacity to match demand)
– schedule downtime in low demand periods
– use part-time employees
– rent or share extra facilities and equipment
– cross-train employees
• Flexible Capacity (vary mix by segment)
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The problem of fluctuating demand
Understanding patterns of demand
Analyzing the drivers of demand
Dividing up demand by marketing segment
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Questions about the patterns of demand and
their underlying causes
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Alternative Demand Management Strategies
• Take no action
– let customers sort it out
• Reduce demand
– higher prices
– communication promoting alternative times
• Increase demand
– lower prices
– communication, including promotional incentives
– vary product features to increase desirability
– more convenient delivery times and places
• Inventory demand by reservation system
• Inventory demand by formalized queueing
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MARKETING STRATEGIES CAN RESHAPE
SOME DEMAND PATTERNS
Eg: Use price and other costs to manage demand
Hotel Room Demand Curves by
Price per Segment and by Season
Room Night
Bl Bh
Th Bh = business travelers in high season
Bl = business travelers in low season
Tl Th = tourist in high season
Tl = tourist in low season
Th
Bh
Bl Tl
Quantity of Rooms Demanded at Each Price
by Travelers in Each Segment in Each Season Note: hypothetical example
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Setting Capacity Allocation Sales Targets for
a Hotel by Segment and Time Period
Week 7 Week 36
Capacity (% rooms) (Low Season) (High Season)
100%
Out of commission for renovation Executive service guests
Executive service
guests
Transient guests
Weekend
package
50% W/E
package
Transient guests
Groups and conventions
Groups (no conventions)
Airline contracts Airline contracts
Nights: M Tu W Th F S Sn M Tu W Th F S Sn
Time
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