Value demand & failure demand are two terms that have joined the vocabulary in these cost conscious and efficiency minded times.
What is VALUE Demand?
Value demand is demand for a service, created by the customer when they need something, for example:
“Can you let me know what time the next train to Leeds leaves & which platform?”
Some value demand is hidden because its what a business does every day.
For example, people expect the Council to empty their bin every week – they don’t have to ask for this to be done
… But what if it doesn’t happen? Then it becomes “failure demand”
What is Failure Demand?
Failure demand (sometimes called failure driven demand) is demand for a service when an organisation fails to do what the customer expects, or fails to do something how, or when, the customer expects it, for example:
“You didn’t deliver my new fridge when you said you would.”
“I asked for a claim form last week, but I’ve not received one.” or, less obviously:
“I’ve received a letter from you, but I don’t understand it and I’m not sure what to do!”
if the Council had done what the Customer expected – that is emptied their bin or the delivery men done what they had promised – delivered the new fridge or the author been more thoughtful in the wording of the letter;
…then the Customer wouldn’t have had to make extra contact;
the action (or failure of action) created failure demand from the Customer!
Why Does Understanding the Difference Matter?
It is important to understand the difference between Value and Failure demand because;
Failure demand is bad for customers – they have to make contact with an organization to sort it out.
Failure demand is bad for the organisation – every time it happens time and money is spent on sorting it out
If a business doesn’t know failure demand is happening, or how often, then it will never do anything to change it!
Who Creates Value and Failure Demand in Services?
This doesn’t mean that people creating or delivering failure demand are bad people, or doing a poor job..
Failure demand normally occurs as a result of the ‘system’ within which they work – the ‘system’ is what sets the limits as to what they can do, how they can do it, when they can do it, etc
They may know that something isn’t working well, but don’t feel able to change it and have no way of showing the problem.
Gathering information on value and failure demand gives managers knowledge of its ‘systems’ and helps it to learn where the ‘systems’ may need to change
So perhaps the question should be ‘What creates?’ rather than ‘Who creates?’ failure demand!
How Can I Assess Whether something is Value or Failure demand?
Think about what drove the customer to make this contact with you
(It’s about the cause and NOT the outcome of the contact).
This will usually be obvious when you talk to the customer to establish need, and listen to (or read) what the customer has to say.
This is the easy part…
Of course – fixing problems and identifying the causes of failure demand is usually the hard part