Here’s what James said about the term:
No amount of marketing can “create” demand. Either customers need a product or they don’t. If they do, then the demand is already there. If they don’t, then demand doesn’t exist. The most marketing can do is help connect the demand with the product.
Is he right? After a couple of minutes, I realized that while James can be quite insightful he’s missing the boat here. Don’t get me wrong, people often misuse the term, but demand can be created.
- Who demanded an iPod, iPad or iCloud before Apple created the demand for it?
- Who demanded their letter “absolutely, positively be there overnight,” before FedEx showed it was a reasonable request.
Now, if James were sitting here I’m sure he’d say something along the lines of, “The demand existed before any of those companies created their products, they just fulfilled it with those products.” If that were the viewpoint, I’d respond that it’s an overly narrow definition, and one that would restrict the growth possibilities of the person holding that view.
It is absolutely true that some industries and products have more (or less) potential than others to create demand. For example, there’s nothing an airline or apartment building could do to create the underlying demand that leads someone to need their service. There is, however, a tremendous amount these companies can do to increase the desire (demand) for their service.
Structural vs. Discretionary Demand
An important distinction that every business must make is the determination of whether the underlying demand for their offerings is structural or discretionary. Airlines rely on structural demand. As James noted people either need to travel by air or they don’t. The cruise industry relies on discretionary demand. My client that is involved in the freight forwarding business relies on structural demand. My business relies on discretionary demand.
There are three growth archetypes to follow based upon your demand structure.
If you’re in a discretionary demand business, your focus needs to be on growing the market. This means that you need to increase the awareness of the problem that you solve, and/or the best way for solving the problem.
When I was 12 years-old I got some of the greatest sales advice I’ve ever received (plus a $50 bill, which was a lot for a 12 year old in 1980). I was talking to Monroe Fry, the Carnival Cruise Line representative at the travel show my mom was putting on. Monroe told me that his job was not to sell Carnival, but instead to sell cruising. At the time only about 5% of people who fit the profile for cruising had done so, and Monroe knew his job was to grow the pie.
At Imagine, I focus on growing the need to the approach and mindset we employ. I’m excited as I go to more and more events where people are evangelizing the approach I’ve been preaching for 20 years. As more people realize they need to create value, stand out, resonate and be relevant the job of growing my company becomes easier.
If you’re in a structural demand business, your focus needs to be on clearly identifying who most needs what you do and the trigger events that create the need. Where the discretionary demand archetype focuses on teaching the problem, you need to focus on teaching people how to identify and understand what the best solution is. Remember that solution does not mean you, or your offerings.
You need to differentiate yourself by highlighting how your approach to solving the problem is different – and better and safer – than your competitors. The good news is that your market is much more clearly defined. Your challenge is that it’s a lot easier to be commoditized.
A major problem for businesses relying on structural demand is that the demand period may be so small that they have little influence over the process. Commercial real estate often deals with this problem. The time from a trigger event (We need new space!!) to the time the vendor selection process begins can be so short there is no real time to influence and reframe the conversation.
If this is the place where you find yourself, you’ve got two choices:
- You must maintain a volume and velocity of communication that you are always there and on their mind when the trigger event occurs (which is why real estate agents always used to send out your favorite sports team’s schedule on a magnet), or
- You must find a way to extend your core proposition to position a part of your business in the world of discretionary demand.
Going back to commercial real estate as the example, you can look at the underlying problems that are affected by good (or bad) facility decisions, and develop an approach that allows people to address their needs even when they haven’t determined they need new space. In this case, you in essence become an advisory company and your job becomes selling the need for a new approach.
The challenge with this approach is that it involves creating markets and means that you must be more creative. The upside is that it can create greater predictability and clearly separates you from your competition. An additional benefit is that the approach costs much less than the alternative, because it allows you to create valuable relationships, rather than having to constantly shout louder and faster than your competitors.
So, can you create demand? Absolutely.