Demand Management Strategies

There are four strategies that can be used to influence the demand for a service, and for asset supply and operation:

• Education Strategies - which aim to influence consumer attitudes and behaviors by increasing awareness of the benefits and costs of consumption
• Pricing Strategies - which aim to influence demand by altering the price of the service
• Technological Innovation - which aim to minimize the demand for assets and provide alternative measures to offset demand
• Management Practices - which aim to improve the way services are delivered and assets are used to meet demand.

Pricing is often seen as the main demand management strategy. It has a key role to play in providing utility services such as water, sewerage and electrical power, where financial efficiency dominates and services can be discrete parcels.

However the other three strategies can have a greater long-term impact on community consumption among 'social' service providers, where it is more difficult to quantify and price service delivery.

Education Strategies

Education strategies aim to influence the level of demand by making customers aware of the financial, social and environmental benefits and costs of their actions.

This in turn will influence the demand for services and then the demand for assets.

In the private sector, education (under the title of advertising) is one of the most powerful tools for influencing consumer behavior.

An informed community is more likely to reassess its perception of need. Of its own volition, it may conclude that a service, or the manner in which a service is provided, is not appropriate or economically tolerable. It may thereby moderate its demand for that service.

Similarly, demonstration that a need may be satisfied in a different way can produce significant effects on demand for existing or proposed services.

The lead-time required for public relations/education programs may be considerable, and should not be underestimated if the full potential benefits are to be realized.

Typical examples of the use of education to alter demand include:

• Health - The focus is on improved motoring behavior, such as avoiding alcohol, use of seat belts, observance of speed limits etc, there are fewer accidents and injuries. The effect on assets is a need for fewer ambulance, hospital and court facilities.
• Water supply facilities - The focus is on the benefits of reduced consumption through leak reduction, "water saver" fittings, efficient garden watering practices, plantings that need less water, waste avoidance. The effects on assets include smaller headworks and reticulation, deferred augmentation, reduced energy consumption.
• Waste disposal facilities - The focus is on the benefits of recycling and conservation of scarce resources. The effect on assets includes fewer landfill sites, fewer haulage vehicles cycles, less road damage etc.

Pricing Strategies

The underlying premise is that consumption will tend to reflect the value of the service to the consumer.

When something is inexpensive, there is little incentive to use it prudently. Conversely, when it becomes expensive or beyond the financial ability of the consumer, consumption tends to fall.

Raising or lowering prices can therefore be used to discourage or encourage consumption.

Pricing strategies can also be used to direct consumption from one form of service to another, by adjusting the relative prices of the services.

For example, use of public transport can be promoted or discouraged by pricing it relative to private vehicle usage and customers' ability to meet the charges.

Pricing strategies can be used to encourage consumers to choose levels of service by offering a range of rates.

For example, a maintenance service that is available 24 hours might be offered at a certain rate per hour, while a lesser standard such as an 8-hour availability may be offered at a lower rate. This allows the consumer to make a choice about their level of service.

The key to implementing effective pricing strategies is to know the true cost of providing a service.

While pricing strategies can influence demand effectively, they can sometimes cause unexpected outcomes.

For example, imposing a toll on a highway to discourage excessive car usage and perhaps simultaneously promote the use of public transport may simply encourage motorists to use adjoining suburban roads to bypass the toll.

Technological Innovation

New technologies can be used to influence demand for assets by offering less asset-intensive solutions or by offering measures to offset the demand.

Examples include:

• Innovative building design and use - Advanced control systems for energy efficient air conditioning, ventilation and lighting, and insulation to improve thermal performance, can reduce power demands. If they are set up over a large enough catchment, they can delay or even remove the need for new or upgraded power supply infrastructure.
• Computer data storage and transmission - These can reduce demands for document storage in libraries, land title offices etc. They also reduce the demand for courier services to transport plans and documents.

Technological systems pervade almost every aspect of service provision. Using innovative systems can be a powerful way to reduce demand for capital assets.

Management Practices

Unlike the other strategies, changes to management or administrative procedures alter the demands on an organization's existing stock of assets.

This can be achieved by:

• Using assets outside the organization through long term leasing or short-term hiring
• Sharing another organization's under-utilized assets.