When demand for a product or service fluctuates, up or down, due to one or more external factors.
Irregular Demand Details
Many businesses, in many different spheres, experience irregular demand for their products or services. Irregular demand affects producers of such items as ice cream, seasonal greetings cards, garden furniture, and beachwear because these products are generally sold at specific times of the year. For instance, more people buy ice cream in the summer than in the winter; people generally only buy whole turkeys at Thanksgiving; Christmas only comes once a year, etc.
Companies that only produce goods that undergo irregular demand face a variety of problems:
- Cash flow: A high volume of seasonal sales, followed by a period of low sales, means that a business must manage its revenue carefully.
- Staffing: A company may need more workers when demand is high and fewer when demand is less. Companies that employ temporary workers may find that there is little time to train them.
- Capacity: A company will need sufficient productive capacity to meet high demand, but much of this capacity will be underused when demand is low.
- Dependence on conditions: An ice cream maker, for example, depends on good summer weather. If the weather is poor, sales will suffer.
Synchro marketing is an approach to marketing that aims to find ways to deal with irregular demand for goods or services by correcting the demand variation. A company could use synchro marketing in various ways. One possibility is to increase prices during the high demand period and attempt to persuade people to buy when prices are lower; another is to widen the product range to include items that have a more regular demand pattern; a third may be to find new markets. Irregular demand may affect smaller companies that lack the resources to widen their product range.
Real-World Example of Irregular Demand
Hallmark Cards, Incorporated is a privately owned company with its headquarters in Kansas City, Missouri. Hallmark, which had revenues of $5 billion in 2020, began life as a small bookstore in Norfolk, Nebraska. The Hall brothers founded the Norfolk Post Card Company in 1907, which operated out of their bookstore and successfully took advantage of the current craze for postcards. When fashions changed and the demand for postcards fell, the brothers started selling Christmas cards and moved to Kansas City as demand outgrew their bookstore's productive capacity.
Hallmark has always reacted quickly and effectively to irregular demand and changing tastes. Christmas cards are, of course, a prime example of products that suffer irregular demand, and Hallmark soon increased its range of greeting cards and branched out into related areas such as wrapping paper and seasonal ornaments. Hallmark marketed their seasonal ornaments as collectible items with limited availability to mitigate the effects of irregular demand for seasonal items. By 1999, some 11 million American households were collecting Hallmark ornaments.
Irregular demand causes great challenges to businesses. Hallmark is an example of how to deal with these difficulties. It did so with few resources, except imagination and adaptability, at the beginning of its history. The answer to irregular demand lies in constantly asking about where more marketing opportunities might lie.