Influencing the demand behavior of customers (external demand management) means influencing when and how customers place their orders for your products or services. These customers could be end consumers, individuals, other companies, internal departments, or anyone else who is the recipient of the output of a business’s operations.

In this article, we’ll look at some demand planning tools / management methods for influencing order behavior to manage and smooth demand.

How to change customer buying behavior to smooth demand

1. Price

The first way a business can influence demand is through price. By actively varying price, an organization can control the demand placed on their operations, making it as stable as possible. 

Airlines and hotels implement this in their demand planning all the time by continuously adjusting their prices. They offer discounts for booking your flight or room far in advance, and make it very expensive to book at the last minute. 

By doing this, airports and hotels ensure that they always maintain maximum occupancy (extra important because their capacity is obviously fixed). Restaurants also often do this by offering a cheaper daytime menu (typically a quiet period) before prices increase for the busier evening menu.

2. Promotions

Promotions come in many forms but most typically a reduced price again. They can be used for a variety of purposes and are a key tool of the marketing / sales dept. To drum-up extra demand. However, (all things being equal) this causes a (deliberate) surge in demand which is typically very disruptive and expensive for the operations side of the business to accommodate.

Promotions are a tool often used by a marketing team to boost customer orders and revenue. It’s part of the job of operations managers to engage with the organization’s marketing and sales departments to explain the impact that promotions have on the operations team, and to work with them so they understand the operational capabilities of the business.

3. Reservations

Using a reservation system is another method of reducing demand variability and demand uncertainty. Allowing customers to book slots allows a business to smooth demand to better reflect the (typically flat) operational capacity. Demand planning in this way can also boost customer satisfaction as there are no unexpectedly long waiting times for products or services.

4. Order sizes

Large customer orders are often a problem for the operations team, and most of the time customers don’t want to make giant orders either. Businesses can actively smooth demand by incentivizing customers to make more frequent, smaller orders instead of less frequent, larger deliveries.

Unless output maximization is the only goal of the business (and slow lead times and large amounts of inventory to hold are no problem), it is operationally preferable to process more frequent, smaller customer orders. This type of supply chain demand planning helps to reduce demand variation and increase predictability and stability in the operations.

These are 4 demand smoothing methods that organizations/businesses use to smooth demand: price, promotions, reservations, and order sizes. These external demand management methods can influence how customers order products or services, resulting in much smoother, more predictable demand.