Demand sensing and shaping are two key concepts in E-Commerce that can help you optimize your inventory, pricing, and marketing strategies. In this article, you will learn what they are, how they differ, and why they matter for your online business.
Demand sensing is the process of collecting and analyzing real-time data on customer behavior, preferences, and feedback to predict and respond to changes in demand. Demand sensing uses various sources of data, such as web analytics, social media, customer reviews, sales history, and external factors, to create a more accurate and timely forecast of demand. Demand sensing can help you adjust your inventory levels, replenishment plans, and pricing strategies to meet customer expectations and avoid overstocking or stockouts.
Demand sensing is relevant to industries that have a high variability in demand and the ability to easily adapt their upstream supply chain such as inventory management or demand planning. For example demand sensing is relevant for the CPG or Fashion industry.
Demand shaping is the process of influencing and stimulating customer demand through various tactics, such as promotions, discounts, cross-selling, upselling, personalization, and loyalty programs. Demand shaping uses the insights from demand sensing to target the right customers, at the right time, with the right offer, to increase sales and profitability. Demand shaping can help you optimize your marketing campaigns, product assortment, and customer experience to create more value and loyalty for your online business.
Demand sensing and shaping are complementary but distinct processes. Demand sensing focuses on understanding and anticipating customer demand, while demand shaping focuses on creating and enhancing customer demand. Demand sensing is more reactive and adaptive, while demand shaping is more proactive and strategic. Demand sensing aims to align your supply with your demand, while demand shaping aims to align your demand with your supply.
Demand sensing and shaping are essential for E-Commerce as they can help improve performance and competitiveness in a dynamic and uncertain market. With demand sensing and shaping, you can reduce inventory costs and risks, increase revenue and margins, enhance customer satisfaction and retention, and gain competitive advantage. This is done by having the right amount of products available for your customers, setting optimal prices and offers for your products based on customer demand and willingness to pay, delivering relevant and personalized products and services that meet or exceed customer needs and wants, and being more agile and responsive to changing customer behavior and market conditions.
To implement demand sensing and shaping effectively, you need to have a robust and integrated data infrastructure that can collect, process, and analyze data from multiple sources and channels. You also need to have a clear and consistent strategy that aligns your demand sensing and shaping objectives with your business goals and customer value proposition. Moreover, you need to have a collaborative and cross-functional team that can coordinate and execute your demand sensing and shaping activities across your supply chain, marketing, and sales functions.
Demand sensing and shaping come with their own set of challenges. Data quality and availability must be ensured to be accurate, complete, and timely, as well as having access to relevant and reliable data sources. Data integration and analysis must be done from different systems and platforms, while using advanced analytics and AI tools to generate actionable insights. Additionally, data security and privacy need to be protected from unauthorized access and use while complying with data protection regulations. Finally, an organizational culture of data-driven decision making and innovation must be fostered while aligning the organizational structure and incentives with the demand sensing and shaping strategy.