Customer Waiting Line Rev

Managing Customer Waiting Lines and Reservations

Lovelock and Wright Principles of Service Marketing and Management 2/E

Slide ©2002 by Lovelock Associates

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Avoiding Burdensome Waits for Customers • Add extra capacity (if not too costly) • Rethink design of queuing system • Redesign processes to shorten transaction time • Manage customer behavior and perceptions of wait • Install a reservations system

Lovelock and Wright Principles of Service Marketing and Management 2/E

Slide ©2002 by Lovelock Associates

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Elements of a Queuing System • Customer population (what are needs and expectations?) • Arrival process (rate of arrivals over time) • Balking (decision not to join the line) • Customer selection policies (whom to serve next) • Service process (physical design, roles, flexibility)

Lovelock and Wright Principles of Service Marketing and Management 2/E

Slide ©2002 by Lovelock Associates

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Alternative Queuing Configurations Single line, single server, single stage Single line, single servers at sequential stages Parallel lines to multiple servers Designated lines to designated servers Single line to multiple servers (“snake”) “Take a number” (single or multiple servers)

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Lovelock and Wright Principles of Service Marketing and Management 2/E

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Slide ©2002 by Lovelock Associates

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Ten Propositions on the Psychology of Waiting Lines 1. Unoccupied time feels longer 2. Preprocess/postprocess waiting feels longer than in-process 3. Anxiety makes waiting seem longer 4. Uncertain waiting is longer than known, finite waiting 5. Unexplained waiting seems longer 6. Unfair waiting is longer than equitable waiting 7. People will wait longer for more valuable services 8. Waiting alone feels longer than in groups 9. Physically uncomfortable waiting feels longer 10. Waiting seems longer to new or occasional users Sources: Maister; Davis & Heineke; Jones & Peppiatt Lovelock and Wright Principles of Service Marketing and Management 2/E

Slide ©2002 by Lovelock Associates

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Benefits of a Reservations System • Controls and smoothes demand • Pre-sells service • Informs and educates customers in advance of arrival • Customers avoid waiting in line for service (if service times are honored) • Data capture helps organizations prepare financial projections Lovelock and Wright Principles of Service Marketing and Management 2/E

Slide ©2002 by Lovelock Associates

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Characteristics of Well-designed Reservations Systems • Fast and easy for customers and staff • Can answer customers’ questions • Offers options for self service (e.g. Web) • Accommodates preferences (e.g., room with view) • Deflects demand from unavailable first choices to alternative times and locations • Includes strategies for no-shows and overbooking – required deposits discourage no-shows – unpaid bookings canceled after designated time – compensation for victims of over-booking

Lovelock and Wright Principles of Service Marketing and Management 2/E

Slide ©2002 by Lovelock Associates

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Using Reservations Systems to Manage Yield • Yield is average revenue received per unit of capacity • Goal is to maximize yield to increase profitability • Must consider opportunity cost of serving one customer/segment when another might pay more • Decision to accept/reject a reservation should reflect:

– probability of later obtaining a higher rate for same time slot – need to maintain desirable relationships

• Mathematical modeling is most useful in situations with: – – – –

low variable costs fluctuating demand levels markets segmented by extent of price sensitivity services sold well in advance of usage

Lovelock and Wright Principles of Service Marketing and Management 2/E

Slide ©2002 by Lovelock Associates

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Setting Capacity Allocation Sales Targets over Time for a Hotel Week 7

Capacity (% rooms) 100%

Week 36

(Low Season)

(High Season)

Out of commission for renovation

Executive service guests

Executive service guests Transient guests 50%

Weekend package Transient guests

W/E package

Groups and conventions Groups (no conventions) Airline contracts Nights:M

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Time

Lovelock and Wright Principles of Service Marketing and Management 2/E

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Slide ©2002 by Lovelock Associates

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