Some business disciplines are relevant only to specific industries; many others, however, transcend different sectors. There is a key manufacturing discipline, known as capacity management, which is as important in retail planning as it is in factory management.
Capacity management monitors and measures changing levels of demand, making it possible to align manufacturing levels with production capacity. In retailing, the principle is equally important in understanding and predicting changing levels of consumer demand. World class businesses use this method to identify when sales will fall below capacity, then form attractive promotion concepts to increase those sales volumes during low forecast periods.
A clear example of this type of promotion planning is in the car sector. Car retailers recognise that April new registration plates create high demand and sales; equally, they recognise that there will be an extremely low level of demand in March. Attractive value promotions are therefore designed to increase the low sales volumes forecast in March.
Other examples include restaurants, where Mondays are recognised as low demand trading days, therefore attractive value promotion concepts are formed to increase sales volumes. Similarly, pubs use ‘happy hours’ as a response to low demand times, which often fall late afternoon. In the business hotels sector, lower rates are offered at weekends to attract visitors.
These are expected low demand dips and, as such, planning promotion activities to increase trade is simple. World-class businesses are equally proficient in identifying unexpected low demand dips; in short, they expect the unexpected. Far less predictable, unexpected demand dips can occur for a number of reasons – weather changes, consumer behaviour changes, strong competitor activities, economic factors – and can last for hours, days or weeks.
I was dining in a local village bistro and I commented to the owner how quiet they were. She answered that she didn’t know why they were quiet, as it was usually busy on a Friday evening. She was not aware that a competitor restaurant had advertised a major promotion event for that weekend. This business was going to suffer a trading dip over the weekend simply because the owner failed to predict the unexpected.
To help planning, sales forecasts are produced every year which take into consideration known factors such as sales trends and history. To expect the unexpected, business factors need to be monitored and evaluated monthly, weekly and even daily. By being aware of short term changes you are better equipped predict and plan for unexpected dips.