Marketing for ups and downs in demand
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 them busy.

Fortunately, service companies can use a variety of strategies to ensure they maximize capacity to meet demand. Here are some of them:

Add staff
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 annual deadline.

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.

Extend hours
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.

Smooth demand
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 matinees.

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.

Enforce limits
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.

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