What is demand shaping?
Demand shaping is an operational supply chain management (SCM) strategy where a company uses tactics such as price incentives, cost modifications and product substitutions to entice customers to purchase specific items. Demand shaping is designed to help the company influence demand of a certain product in order to match its planned supply.
For example, a company with a surplus of a certain product will increase marketing efforts for that product to make it more alluring to customers. Companies can also use demand shaping techniques to help meet product development projections.
Demand shaping tactics
Some of the key tactics common to demand shaping strategy include the following:
- new product launches to boost demand;
- price optimization; and
- sales promotions/deals.
Dynamic pricing is another common demand shaping tactic. Also called real-time pricing, dynamic pricing sets flexible cost for a product or service to allow a company to adjust prices quickly in response to market demands. Statistics garnered through demand planning, such as statistical forecasts, are also beneficial to a demand shaping strategy.
Demand shaping is different than demand management, which controls and tracks a company's purchasing operations. Demand management is focused on supplier relationships and instead of customer relations, and is used to determine external spending rather than individual product pricing.