Generating demand is easy. Sustaining it is difficult. Many businesses want to grow, so they reinvest the profits into marketing and advertising. But marketing a product or service generates demand, and the business scales up to meet that demand.
However, when a business is scaling up to meet the demand, it also needs to increase production, after-sales service, and support and adjust all the other variables that are needed to sustain the new demand.
How about generating new demand, but not creating the supply for it? How about restricting the supply, but keeping the demand hot?
It would look foolish to most when someone is generating more demand through marketing but refuses to create the supply for it. It would be foolish IF the demand cannot be sustained and translated into future demand.
Before the era of digital marketing, content marketing, and seamless online communications, TV ads and print ads were very good means of generating demand. But companies were forced to meet that demand as soon as possible because the generated demand won’t sustain itself for too long.
People’s memories are short and after a period of running marketing campaigns, people would forget about the product or service that was advertised and the additional marketing dollars spent would get wasted. The only way to make sure that there is an ROI on the additional marketing dollars spent is to create and deliver the advertised product.
But creating and delivering to meet more demand also brings in operational challenges, and the time and energy invested in scaling up operations usually is taken away from the time that can be invested to make the product better, understand the customers better and serve them better. Innovation takes a hit when you are trying to match supply with demand.
A lot of people fear not scaling because they think “Go big, or go home.”
But what if going big actually sends you home?
In the pursuit of going big, people often forget the core factors that have even led them to a stage where going big can even be an option.
Is there a better way to approach this?
How about generating demand, sustaining it, and then “using” the demand “on-demand” when you want to grow and scale when you are ready and capable for growth?
Look at this chart:
The red line represents the total demand that is available in the market.
The green line represents the companies trying to catch up with the demand. When the demand increases, you cannot increase supply immediately. You will have to increase your input of materials, work on the logistics, hire more people, set up the supply chain, and so on.
But by the time you increase the supply to match the increased demand, the market demand might start falling and you will be stuck with excess inventory/supply that you cannot sell. Market demand can fall due to macroeconomic reasons like monetary tightening or a general deflation due to reduced consumer spending.
This will lead to scaling down efforts, again, trying to scale back on marketing spending, operations, and other costs. It takes up a lot of energy and time (away from innovation).
Imagine the difference between driving a car and going on a train. A car has to accelerate and decelerate and keep taking turns and the time to destination is not too accurate because of the varying speed of the car and the traffic conditions.
However, imagine a train, that can slowly increase speed but can carry much higher loads has a much more accurate time of arrival, and won’t be stopped for trivial reasons.
As an entrepreneur, you need to focus on building a train and making sure you are slowly increasing the speed but remaining constant once the speed is reached. You can make much more impact with your business if you have better predictability and stability of growth.
The only way to achieve steady growth is to make sure that you have higher demand than supply all the time.
How to Generate Demand and Sustain It?
Until recently, there was no way to generate demand and sustain it. As mentioned previously, there was no way before the digital marketing era to build a subscriber base through ads.
Companies advertised on TV, radio, in newspapers, and in magazines. Consumer memory is short-lived and if the new demand is not matched with the supply immediately, then the newly generated demand usually goes to waste.
However, with digital marketing, the demand can be sustained. As described previously in the article on Market Makers, advertise content and then use content to get attention to your products. Do not try to advertise the products themselves.
In the digital age, every company is a media company. If not, they have to depend on media companies to generate the demand. Consumers pay attention before they pay money. Consumers pay attention to content that can solve their problems (first to learn) and then they pay money for products and services that can solve their problems.
When you invest in demand generation, get the eyeballs first and then go for their wallets. Get people subscribed to a content channel that can deliver consistent value over a period of time. This helps build trust like no other channel. The brand also becomes a household brand name in the minds of the consumer because of the repetition.
What do brands do when they want to generate demand? They run marketing campaigns. Where are the campaigns usually run? On media channels. What if brands build their own media channel? The audience can be engaged and sustained with just content. Delivery of content is effortless, cheap, and can be sent across oceans in a fraction of a second.
Instead of driving up transactions, you are driving up attention. The attention that you generate can always be converted into transactions, on-demand, through your media channel.
Let’s say you make $100,000 in revenue and $30,000 in profits (after your salary). What will you do with the profits? Take it home? After you take it home, what will you do with it? Invest it somewhere else? Pay taxes on the money you take home, and then pay taxes again on the capital appreciation of the invested assets? Probably not a good idea.
The best place for that $30,000 is back into the business that you are running. Usually, the fastest way to deploy that $30,000 is into advertising and marketing. However, what if you do not have the required infrastructure to meet the new demand that is generated?
What if you cannot scale up the delivery of your products and services? That’s when the $30,000 can possibly go waste. So many business owners are not comfortable with scaling immediately (and the people who do end up burning out trying to meet the new demand).
However, the $30,000 can be invested in generated subscribers for your content channel. The simplest and most efficient form of content channel is an email newsletter. Another way to build your channel is to build a community of like-minded people. The community will create value on its own through interactions among the members of the community (as long as it is moderated well).
All excess profits can be safely stored in subscribers for the content. As long as good quality content is delivered consistently and the community is managed well, the “demand” that is generated can be sustained. As long as people are engaged, you have a way to convert that attention into revenue.
In fact, having a buffer of time from the moment someone comes across your brand to the time you make an offer to them only makes the transaction smoother. Engagement and attention convert into trust and higher trust means that you will be getting the right customers at lower friction. There is no need for a “hard sell” to convert prospects into paying customers.
And whenever new demand needs to be created for products and services, when the time is right, the content channel can be leveraged. Send an email to your list about the new product that you are launching and make sure that the supply is limited so that you sell out in one campaign. It is a good problem to have more demand than what you can supply.
If the limited supply generated profits, reinvest it back into growing your content channel and when the time is right, increase your supply. If you do it this way, you might never need to scale down operations because you are always sold out, even for the near future.
When people need your products and services more than you need them, that’s when you become an Alpha.
That’s why our premium mastermind for business owners is called Alpha Club. In this mastermind, we discuss not just building great products and services, but also generating demand for it in such a way that demand always outstrips supply.
Imagine a business where there are always people waiting at the gate. You open and let people in, based on how much you can handle. You increase the capacity to handle more customers when you want to, when you are ready, at your own pace. That’s what being an Alpha in business means.
The additional peace of mind that comes from being oversubscribed will help you focus better on your products and services than trying to chase for new customers to create the demand for the excess supply you have created.
Supply is generated because of the demand. Demand should never be generated for the sake of selling out the supply. When you need the customers more than they need you, you become a beta. You don’t want to get there.