Services strategies: The advanced sale of services

Abstract

This dissertation is a combination of three papers investigating the phenomenon of advanced selling in services. The first paper is a qualitative study of service firmsa?? use of excess capacity as a strategic tool, and proposes seven capacity strategies for service firms to sell in advance. The second paper shows, through a theoretical model, that with advanced sale, capacity utilization and profits are higher. However, firms would have to tolerate excess capacity. In the third paper, a conceptual framework for the pricing of services is developed. The study then formulates a theoretical model to study the phenomenon. The model showed that advanced prices are always lower than spot prices, due to the probability of non-consumption by advanced buyers. The model is then extended to investigate the impact of a refund offer and show that a refund may insure buyers against capacity unavailability and low valuation, without necessarily an increase in price.