Marketing for ups and downs
Written by Shirley Lichti for The Record,
May 15, 2002
Balancing the ups and downs of demand and
capacity can be quite a challenge for services-based organizations.
Unlike products, services can't be stockpiled
in inventory. For a service company, excess demand results in having
to turn customers away in peak periods, while excess capacity means
paying salaries to staff members who don't have enough work to keep
Fortunately, service companies can use a
variety of strategies to ensure they maximize capacity to meet demand.
Here are some of them:
Some companies know what causes fluctuations in demand and are able
to predict peaks and valleys in their business. Airlines, for example,
anticipate spikes in demand in the Christmas holiday season when
many people travel. And tax preparation firms know that April will
be a busy time as individuals file their tax returns before the
In some cases companies can add staff to
handle peak times. The post office, for example, brings in part-time
employees during Christmas. But for other companies, adding staff
is not a viable option.
Every spring, Jolanta's European Skin Care Studio in Waterloo experiences
high demand from clients wanting such services as pedicures and
leg waxing. The increase causes a big problem, says owner Jolanta
Romel-Jarski, because the studio has a fixed amount of space, leaving
her nowhere to put additional employees.
The only solution is to extend the studio's
hours and to hire an extra person to serve clients during these
hours. Romel-Jarski also runs a waiting list in case of cancellations
and regularly checks messages after hours on nights and weekends
to ensure that space is always used to capacity.
Another strategy for managing fluctuations in demand is to try to
smooth out peaks and valleys. Kristen Hopley, Branch Manager at
Waterloo's McWilliams Moving and Storage says customers are encouraged
where possible to choose moving dates other than month-end. This
allows the company to ensure its trucks, drivers and packers can
work productively throughout the month.
To help dissuade month-end moves, Hopley
says McWilliams charges a premium, using higher prices as part of
the strategy to reduce demand. While this doesn't always work -
sometimes people have no choice about closing and moving dates -
at least the company is able to ensure that peak periods are profitable.
Other organizations use price incentives
to smooth demand by lowering prices at non-peak times. Movie theatres,
for example, offer reduced rates on Tuesday nights and for afternoon
Making the best use of capacity, can be
very tricky when you offer live entertainment. Steve Roth, owner
of the Waterloo Stage Theatre, says he tries to schedule plays the
audience will enjoy and makes them as accessible as possible by
offering multiple performances over a four week period.
A theatre has to work hard to develop a solid
subscriber base. So, as much as Roth might like to run lesser known
works by up and coming artists, he has to choose crowd pleasers
- such as the upcoming Two Pianos Four Hands - in order to generate
a full house.
The theatre typically runs five shows a year
with a three-week break in between shows. Next season, Roth plans
to add an additional play and squeeze the down time to 10 days in
order to use his facilities to better capacity.
For some companies, operating at maximum capacity is a good thing.
Having a full house for live theatre or sports events may create
an environment where actors and players are motivated to give their
best performances, offering a more exciting experience for attendees.
But a full house at a theme park may result in deterioration of
service and long lineups.
Tam Schneider, assistant general manager
at SportsWorld, says the Kitchener sports and water park puts limits
on the number of people allowed to enter the site. "We want to ensure
that everyone gets the best experience possible because that's what
brings them back again in the future."
Since no one enjoys waiting in line, Schneider
says the park is continually adding to its activity base, allowing
customers lots of options to choose from. And for those times when
waiting is unavoidable, SportsWorld tries to make the delay a little
more pleasant by providing free entertainment such as live bands
and travelling face-painting crews.
Some companies are unable to predict when
demand will be high. But for many organizations, it's as simple
as tracking prior transactions to analyze demand patterns. For example,
public transit or taxi companies use past history to project staffing
levels and the number of vehicles needed during peak periods.
Since no organization always gets it right,
you may still end up with excess capacity. If this happens, consider
offering discounted rates to loyal customers to reward past patronage,
or free trials to carefully selected prospects to entice them to
try your service.