A question was submitted to address-
“…how to assess and compensate for Supply & Demand in a small business?”
Supply and Demand is one of the necessary factors a business needs to aggressively monitor due to its direct correlation to the businesses ability to generate revenue. Supply & Demand is one of the 5 key components we look at when assessing the “Products Pillar” of any business. While the Laws of Supply & Demand would be considered economics and financial planning(most of which I place under the Operations Pillar), most of the control an organization has over it aligns with its products designs and features.
For example creating that “uniqueness” in your product line is one tactic you can Strategically Plan to increase the Demand for your product.
First some background – This question originated from a M.O.R.E Assessement © Our firm refers to the “4 Pillars of M.O.R.E.©” (Products, People, Operations, & Marketing) that all businesses need to generate revenue. Depending on the scale or scope of your business and industry the method to assess each of these can range widely, but the importance of each of these Pillars is a constant. When they work together, you generate more revenue. So, assessing and developing each of the “Pillars” is vital to develop your businesses ability to create revenue, so these 4 areas are always our starting point for assessments.
Assessing Supply & Demand for your Product
Many businesses utilize purchased Business Plan tools (templates, software) or SWOT/PEST analysis methods when determining existing competition and direction, which is an important part of assessing Supply & Demand. While these are good tools, they can become easily biased by whomever is completing them. I have read many SWOT analysis that simply don’t represent Threats or Opportunities with in a company well. Thus if a SWOT is the only format used, it can lead to poor or unwise strategy and false outcomes. I always recommend more than one set of eyes create/debate outcomes when using this type of assessment. I DO think they are valuable tools and our firm uses them, but in conjunction with other tools.
The process we tend to use frequently is referred to as a “Market Study”. A Market Study is an in-depth, qualitative analysis process which employs many tactics. Each “Study” is a relatively custom designed because every organization or brand is unique. Brand development differs in every organization based on resources, skills and leadership. When performing a Market Study, the process is gathering information from key representatives of every key constituency possible that may create, utilize or experience that business product. Perceptions are confirmed about the product/companies current and former character and user, and enough data is gathered to support future direction. Using an organizations vision and mission needs to be a focal point. A Market Study provides holistic data (internal & external) to help answer: What niche(s) could the organization occupy and what is distinctive about its positioning? Where as a SWOT is merely a component of a Market Study that is generally produced internally. While there may be overlap, it is not as thorough.
Surveys are used in most Market Study’s and are an excellent way to collect data on a variety of topics and also works well for supply and demand studies. A properly designed survey has the demographic data, customer preferences, and motivators data needed to help position your products correctly. C.S.Simons Consulting performed a Survey in 2015 to determine why people hire a consultant, which significantly improved how and who we speak to. Click on the Survey link to take our brief Survey!
Benchmarking is also a recommended step in a Market Study and involves competitive data and interviews to discover strategies or missed opportunities of similar businesses. Properly designed conversations will provide significant information you can use for Supply & Demand assessment. Generally both companies gain from the experience and can also lead to improvements in Cost Containment & Labor Optimization.
Territory is another key consideration when determining Supply & Demand. What is the radius for your product appeal ? (assuming a physical address). This changes radically by product or service and by industry, but the key is to understand buyers preferences and motivators as it relates to what you sell. How far will they go to find us? While it sounds obvious or easy, it may not be. The second part of that consideration is how many like “you” are there within this radius? Competition is good to an extent, but how do you determine over-saturation?
Many people want Bankers, Lawyers, or Accountants close to where they are located but won’t think twice about traveling for a specialty doctor or upscale retailer. Determining if you are a basic service or destination service in the mind of your customer is key to knowing the radius they will travel to give you their money. Of course, the farther they travel the higher the expectations and the more you risk if they are unsatisfied. But, most will easily justify spending more if you are a destination than if you are basic. (Law of Supply)
How to compensate /correct for Supply & Demand deficiencies?
If you don’t have….
Location, Location, Location,
Marketing, Execution, and Follow up
Marketing – Customers need to know either 1) your name or where you are AND 2) why they want/need you. Tactics and Campaigns will come and go, but to maintain customer Supply & Demand, Marketing professionals may be your best bet.
Execution – What ever the Marketers are saying you “do” or “sell”, you better make sure the people your customers encounter in your business or products they buy from you,… do it. If you say you have great customer service, you need to make sure they encounter Excellent service, if your marketing says your product will help them loose weight or look sexier, it better or else it will effect your Demand.
Follow up – No matter what you sell, if you have customers, you should ask how they liked the product. The number one thing you need to do once they have purchased something, is to get them (or their referrals) to come back and buy more! I recognize this can be more difficult depending on what you sell, but the fact remains that you need feedback to help determine if you are executing what your Marketing says you are. No feedback or not even asking for feedback can be very dangerous.
- Ever go to a local restaurant where the food was so-so(or worse) and no one ever came back to ask “how is everything?”. You leave less than impressed. Has your likely hood of recommending or returning gone down? Maybe. But what if you traveled an hour to go to this restaurant you “heard about” and had the same experience.
What is your likely hood of going out of your way next time to return?
There goes your Demand
Key times to RE-ASSESS your Supply & Demand
It’s important to note that Supply & Demand is just one of the 5 key factors our company looks at to assess the Product Pillar for revenue generation and therefore not the only consideration when assessing your products design and strategy. Reviewing the Supply and Demand for your organization/product can be done at any point of the business life-cycle.
Key times to do this are:
- At Start Up
- Any time your business encounters a major change like new leadership
- When planning Expansion/Relocation projects
- Opening new locations – know WHY they find you, don’t assume they will
- Considering new technology implementation
- Creating a Strategic Growth Plan
- If it has been more than a few since you looked at this you may want to because of the rate of speed technology changes.
Internet Marketing is radically different than it was 3 years ago, thus HOW people are finding you IS different. The internet has shifted buyers motivations in many industries, how has it effected yours? I always have a plan in my back pocket for a sudden change in sales (+/-) and I have many systems in place to tell me where or why people are finding me. This data is reviewed periodically and is the basis for changes in Business Strategy. I highly recommend this be given some thought by owners and operators. I don’t have to tell you how quickly things change and your customers needs and loyalties are changing just as quickly.
This is only the tip of the iceberg on this subject and how to use the information for product development and building your business. Feel free to contact me if you would like to discuss this further or if I can help guide you to some Marketing professionals I work with to help.