Managing Service Demand

Abstract

This article shows that although not-for-profit services may find that demand-shifting strategies are effective, these strategies usually offer no improvement in profits. These strategies are, therefore, ineffective for private service providers who seek to improve profits. It is better for these private service providers to eliminate excess demand during peak periods than to attempt to shift some of this demand to the off-peak period. For-profit service providers should, instead, focus on demand-stimulating strategies. The authors show that bundling strategies that manage demand by combining peak with off-peak service delivery can be very profitable. Increases in price during the peak period have a greater impact on profits than increases in demand during the off-peak period because, when operating at maximum capacity, the greatest profits are achieved.