Approaches to control or influence the demand of the services

The ITIL V3 definition of Demand Management describes activities that involves understanding and influencing customer’s demand for services and the provision of cost justifiable capacity to meet these demands via Capacity Management

Unlike physical goods, services cannot be stored in a warehouse to be sold or consumed later. Hence there is a strong need to balance between providing services “just in time” to match the demand of these services. Some spare capacity may be needed but providing too much excess service capacity would just goes to waste and it would be difficult to recover the cost of these excesses or justify for them in the first place.. However, providing insufficient capacity is also just as bad as it would often leads to poor service performance leading to customer dissatisfaction. Therefore, a balance between supply and demand is desired but not always achievable.

There will be situation where service capacity is limited or cannot be changed in a given period. Hence, the service provider would have to adopt approaches to control or influence the demand of the services. The following approaches can be considered.

The most frequently used method to use to the price mechanism. Service providers can choose to charge a higher or premium price during peak periods and be discounted during off-peak periods. Good examples of such differential pricing can be seen in the cinemas, travel industry or even in the electronic road-pricing scheme in Singapore. However, using price mechanism is only possible if the service provider is charging for services, especially on a pay per use basis. 

Another method would be to impose access control, restrictions or quotas. In the old days of the mainframe computing, we often set session limits to control the maximum number of concurrent user logins. I have seen shops or even theme parks imposing queue controls and entry restrictions to limit the number of customers in a given premises so that those who managed to enter can enjoy a pleasant  experience rather than to endure poor service.

A low cost and effective method that is sometimes overlooked would be through communication to the customers. Using persuasion and open communication to influence customers’ arrival rates can be effective when service providers are not charging for services. For example, a notice or letter to customers informing them of the peak periods and expected queuing times during peak and off-peak periods can shift the demand patterns.

Finally, management could be called upon to impose access control policies and guidelines on usage of services with limited capacity to ensure only those who need them critically are served first.