page_title: Services marketing
section_title: Matching supply and demand
hierarchical_section_title: Services marketing / Framework / Matching supply and demand
caption_attribution_description: English: In this McDonald's restaurant in Japan, you are asked to pour your unfinished drink into the metal basin and separate out plastic trash.
context_page_description: Services marketing is a specialised branch of marketing. Services marketing emerged as a separate field of study in the early 1980s, following the recognition that the unique characteristics of services required different strategies compared with the marketing of physical goods.
  Services marketing typically refers to both business to consumer and business-to-business services, and includes marketing of services such as telecommunications services, financial services, all types of hospitality, tourism leisure and entertainment services, car rental services, health care services and professional services and trade services. Service marketers often use an expanded marketing mix which consists of the seven Ps: product, price, place, promotion, people, physical evidence and process. A contemporary approach, known as service-dominant logic, argues that the demarcation between products and services that persisted throughout the 20th century was artificial and has obscured that everyone sells service. The S-D logic approach is changing the way that marketers understand value-creation and is changing concepts of the consumer's role in service delivery processes.
context_section_description: Service operations are often characterised by far more uncertainty with respect to the flow of demand. Service firms are often said to be capacity constrained.  This refers to the finite carrying capacity for most service operators and the lack of inventory which serves as a buffer against unexpected or peak demand.
  There are two components to capacity (i.e., supply) in service operations:
  Number of employees:  In medium and high contact systems, capacity is constrained by the number of contact staff available to provide service.
  Size of service environment: Service environments have fixed space. A restaurant has a given number of tables, a hotel has a limited number of rooms, buses and trains are licensed to carry a specified number of passengers.
  The factors contributing to uneven demand are more complex and difficult to predict. The components of demand may be seen as comprising long term demand patterns (trends), short term seasonal fluctuations and irregular effects.
  Long-term demand patterns: Most industries exhibit underlying trends in demand over longer time frames.  A trend is the long term direction in a time-series. Are sales growing, declining or stable? Often the trend in sales is related to the stage of the product life cycle. For example, industries in growth stages exhibit rapid increases in sales while industries in maturity may find that sales figures reach a plateau. Long-term demand patterns are stable and relatively easy to predict.
  Seasonal Factors: Seasonal components are systematic, calendar-related movements in sales.  Seasonal factors are recurring and relatively easy to predict. Seasonal factors might include peak and off peak seasons for a tourist resort. For a restaurant, however, peak seasons might coincide with main meal periods on a daily basis.  Other seasonal factors include trading day trading day effects and holiday periods.
  Irregular Fluctuations:  Irregular fluctuations are unsystematic, short term fluctuations. Irregular effects are highly unpredictable. e.g. inclement weather closes an airport, forcing local hotels to accommodate thousands of guests with minimal advance warning; an unexpected thunder storm leads to a surge in demand for umbrellas.
  When demand is low, capacity may be under-utilised while excess demand places enormous pressures on the service system. Service managers need to develop strategies for managing demand and supply under different conditions. Strategies for managing capacity involve careful consideration of both demand-side considerations and supply-side considerations.
  On the capacity side:
  Add to capacity – hire additional staff (e.g. casuals or temporary staff for peak periods); add to space (e.g. extra floor space in retail, hospitality or increased fleet size in transport services) Increasing capacity may require service re-design and presents a longer term solution to capacity problems.
  Reconfigure interior space – with careful reconfiguration of interiors, it may be possible to accommodate a larger number of customers e.g. airline s to add to number of seats by reducing leg room.
  Use Customers to Boost Productivity – Customers labour can be harnessed to reduce pressures on the system e.g. self-service, e-ticketing.
  Transact business at arm's length – Use the internet or virtual delivery systems to transact business.
   Ask Customers to use Third Parties – Where possible, have customers use agents or brokers to minimise the number of individual contacts and reduce pressure on the service system.
   Share capacity – it may be possible to share capacity with other businesses e.g. airlines build strategic alliances with other operators so that excess demand can be booked or referred to a known ally (and does not involve  passengers losing frequent flyer points).
  On the demand side:
  Locate and target market segments with different demand patterns – e.g. a ski resort could develop fishing and sight-seeing packages for bushwalkers and anglers to build demand during traditional off peak seasons.
  Develop innovative products for off peak periods – e.g. an airline c
caption: Using customers' labour to clean tables and dispose of rubbish, as in this McDonald's restaurant, reduces pressures on the operating system by freeing up employees to focus on core service activities.
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