From Airbags to Auto-Stop – Why Proactive Demand Management Wins
When seatbelts were introduced as a safety device in vehicles to reduce the likelihood of injury, society’s view on safety shifted. It took some adaptation and criticism before the idea of wearing a safety belt could really gain traction in the mind of drivers. As you recall, seatbelts started as an optional feature in a vehicle. Gradually however, visible consequences for not wearing a seatbelt surfaced. Eventually, everyone got over the initial pushback of wearing a device and finally, the strap began to resonate with society.
Today, seatbelts serve as a standard feature and can effectively reduce the likelihood of additional damage taking place. Our car *dings* with a monotonous, drowning tone until we adhere to “buckling up”. Seatbelts have saved countless lives and law enforcement agrees, as they’ll likely pull you over if you are driving without wearing one.
Looking at history, no one could argue that seatbelts were not a good thing for drivers. Similar inferences can be made about air bags – the adoption of which has clearly improved road safety by saving thousands of lives.
From airbags to auto-stop
The only real issue with seatbelts is that they do not proactively prevent dangerous situations from occurring, but rather serve as a reactive defense. They mitigate the impact of an accident. Today we see auto-stop features taking a huge step further, using advanced technology to prevent accidents from happening in the first place.
First we had seatbelts, then we had air bags and now, we have auto-stop (or auto-braking). Proactive demand management looks – in this example – more like the auto-stop technologies that are now becoming commonplace. When cars auto-stop, dependency on the air bags goes down. In the same way, when we proactively manage demand shortfalls, we become less dependent on pricing as a lever to mitigate vacancy loss.
Thanks to the wide-spread adoption of revenue management technologies, the pricing lever may be the easiest to pull. However, proactive demand management identifies additional KPIs that may be struggling (i.e. people, process) and maneuvers us in a different direction that is more assertive, making more decisions with real data. We can make more granular and targeted decisions to stimulate demand in the necessary areas (ex: unit type, floor plan, demographics, etc.) with the most accurate approach.
- Increase ad-spend on your pay-per-click (PPC) campaign for studio and one-bedroom apartments due to low two-bedroom availability
- Coach employee on mandatory telephone qualifying techniques due to poor lead-to-visit performance for incoming calls
Each of these safety features has improved travel similar to how these things have improved revenue and lead management processes. Common examples like the ones above indicate that a need for a more effective and efficient demand generation process exists.
Mitigating the demand gap
Uncertainties can be found in any “real world” system. When these uncertainties exist in your organization’s demand model, performance suffers. Revenue management has mitigated this to a considerable degree by predicting gaps in advance, providing the opportunity to address them and bringing rigor and discipline to the pricing process. The adopters of revenue management have been reaping the rewards ever since.
Now, the idea turns from what can work well with revenue management to what can work significantly greater. Just as motoring continues to improve through the addition of proactive measures like auto-stop, additional forms of analytics can add to the gains from revenue management. Consider a softening market: prescriptive analytics can surface insights earlier and provide more options for proactively managing them within your lead management process. For example, predicting the total demand required to fill units, alerts the owner/operator of insufficient demand in a time frame that allows them to quickly take action to stimulate demand.
What’s the hold up?
The concept is both compelling and undeniable, however two things hold operators back:
- Analytical resources
- Organizational alignment
This refers to the points made earlier about limited analytical capabilities with current processes. By now, the realization for a pre-emptive change in generating and nurturing demand should be obvious by the principles that have been discussed.
In the past, Marketing and Operations haven’t usually been seen as working in conjunction with one another. Now, it’s becoming more and more transparent that they complement each other in ways that are crucial for stimulation and bottom line growth. So how do we align the two if they’re still independently operating? We must tear down the internal dividers between departments.
This isn’t the first time that a new analytical process has depended on the breaking-down of barriers between organizational silos. The same was true at the inception of revenue management, more than a decade ago, where the fledgling discipline of revenue management had to find a way to work with operations. The time has come to embrace this notion once again.