Managing seasonal demand
If your business experiences fluctuations in sales depending on the seasons, buying cycles or holidays, find out how to maximize sales during peaks and minimize losses in the valleys.
One of the greatest challenges for any business is the sudden fluctuation in sales and cash flow due to seasonal cycles. Feasts and famines both have their issues (either the business can’t cope with demand, or there’s not enough work to pay the bills). Creating a sales strategy around your industry characteristic is the key to solve this seasonality which could be date specific events such as national holidays (it’s always Christmas on December 25 th ), school vacations, weekly and weather seasonality where you know certain days are always busier than others. There is also unpredictable demand like a crisis that cuts sales, a sudden boom that doubles your business overnight or there is a local event you know will bring in one-off business.
To help spread the impact of seasonality in your business consider the following strategies:
Flatten the demand curve
Use your sales and marketing tactics to spread demand across the year by promoting either side of the peaks (especially if you lose customers because you’re too busy). If you can, encourage customers to bring their purchasing forward or deliver later to even out the sales bump.
During the troughs, you’ll want to encourage more customers to fill up the gap. Some tactics to do this include:
- Changing your price. If demand is high, you could increase prices with the assumption demand will drop just enough to still be busy. And if demand is low, offer discounts or incentives to encourage purchase.
- Allow customers to pre-purchase in exchange for a discount, free product, service or other high value but low-cost item.
- Set up a yearly payment plan or subscription model that encourages customers to pay monthly.
Spreading sales can be harder with perishable products and services, but there could be new products you could source to take the slack.
If you can diversify what you deliver during quiet periods, it could provide additional opportunities to redirect resources and be more resilient to fluctuating demand across the year.
Ways to diversify include:
- Launching new products or services outside your usual sales high.
- Consider partnering with other businesses that are complementary (you sell their products when you’re not busy, they sell yours in return) or sub-contract and supply to larger businesses.
- Importing or export non-seasonal products or investigate becoming a supplier to non-seasonal businesses.
- Looking at new sales channels such as moving parts of your business online to sell in other regions that don’t suffer wild seasonal swings
Don’t forget to search the internet, subscribe to industry news, visit business association sites and talk to suppliers and experts to validate your ideas.
Keep your ear to the ground
If it’s possible, take short-term advantage of anything that occurs out of the ordinary even if it’s only for a few days like a sports or cultural event hosted locally. This includes opening for longer during the day and seven-day weeks if you need to. Also consider opening pop-up stores in other regions or creating your events in partnership with other businesses to generate demand.
Develop contingency of supply
Identify and access surplus product or services to satisfy temporary high demand if needed, or if you’re recovering from a crisis and now need to scale back.
Manage the off season
Think about what you can do to efficiently scale down for the expected drop in sales and when customers may still need support. This could mean closing parts of the business (think ski fields in summer, professional services during Christmas), using the time to prepare for the next season, or doing something else. It’s not unusual for some businesses to have two separate parts to their business that open and close with the seasons.
Manage the on season
If you do find a sudden increase in demand, remember to expand or manage customer service levels. The last thing you want is unhappy customers waiting for delivery or to run out of product. Identify and access surplus product or services to satisfy temporary high demand if needed. To help do this:
- Arrange back-up suppliers in case your existing providers run short and buy in volume before any expected increase, so you don’t run out. If you can buy inventory on consignment (only pay for what you sell) even better.
- Use inventory management software linked to sales so staff don’t order too much of the wrong item and be prepared to offload any spare product or materials at the end of the season.
- The supply of staff is also critical so plan to add people quickly when busy and reduce when you’re not. Juggling staff during the holiday season when everyone wants time off can also be tricky.
Investigate contracting out parts of your operation to other businesses if demand blows out.
Almost every business has some form of seasonal demand and it’s not always a disaster if that’s the dynamic of your industry. How you manage and deal with the issues that could derail your business is what counts and take care to save and protect any cash surplus during the good times to rely on when times are tight.
- Ask for the event calendars of local sports clubs, towns, or cities to build a sales campaign for one-off occasions.
- Form partnerships with other businesses that either have different seasonality cycles or are in totally different industries that don’t experience fluctuations at all.
- Audit the type of seasonality your business experiences and then develop contingency strategies to manage the impact this will have.
For informational purposes only. There is NO WARRANTY, expressed or implied, for the accuracy of this information or its applicability to your financial situation. Please consult your financial and/or tax advisor.