The PM Playbook
4 min readJun 22, 2023

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“Supply Creates Its Own Demand: Unveiling the Key Concept in Product Management”

Introduction:

In the field of product management, there is a well-known concept that has stood the test of time: “Supply creates its own demand.” Coined by the renowned economist Jean-Baptiste Say in the early 19th century, this concept challenges the conventional belief that demand is solely driven by consumer preferences. Instead, it suggests that when products or services are made available in the market, they inherently generate their own demand. In this article, we will delve into the concept of “supply creates its own demand” and explore its significance in the realm of product management.

  1. Understanding the Concept:

At first glance, the notion that supply can create demand may seem counterintuitive. However, the underlying principle revolves around the idea that when a product is introduced to the market, it not only satisfies existing needs but also creates new desires among consumers. This happens through several mechanisms:

a. Awareness and Education: By making a product available, companies raise awareness among potential consumers who may not have been previously aware of the product or its benefits. Through effective marketing and communication strategies, customers become educated about the features and advantages, thereby creating a demand that did not exist before.

b. Demonstrating Value: When a product enters the market, it often brings unique features or improvements that set it apart from existing alternatives. By showcasing the value proposition and highlighting the benefits, companies can generate interest and stimulate demand among consumers who may have been content with their current options.

c. Filling Unmet Needs: Sometimes, a product can address unmet needs or gaps in the market. By identifying and catering to these untapped areas, companies can create demand for their products where it previously did not exist. This may involve introducing innovative solutions or reimagining existing offerings to better align with consumer requirements.

2. Application in Product Management:

The concept that “supply creates its own demand” holds significant implications for product managers. Understanding this principle allows them to approach product development and marketing strategies with a fresh perspective:

a. Market Research and Validation: Product managers need to conduct thorough market research to identify potential demand and unmet needs. By understanding the target audience, their pain points, and their aspirations, they can design products that create their own demand by effectively addressing these factors.

b. Product Differentiation: To stand out in a crowded market, product managers must focus on differentiation. By emphasizing unique features, benefits, or improvements, they can capture the attention of consumers and create a demand that surpasses existing options.

c. Marketing and Communication: The concept of supply creating its own demand highlights the importance of effective marketing and communication strategies. Product managers need to craft compelling messages that educate consumers about the value and benefits of their products, generating interest and desire among potential buyers.

d. Iterative Improvement: Embracing an iterative approach to product development allows product managers to continuously refine their offerings based on customer feedback. This feedback loop enables them to better align with consumer needs, ultimately driving demand through product enhancements and adaptations.

For example — Limited Edition or Exclusive products

Companies often release limited edition or exclusive products with restricted availability. By intentionally limiting the supply of these products, companies create a sense of exclusivity and scarcity, which in turn generates a heightened demand among consumers. The idea that only a select few can acquire these unique items creates a desire and urgency to possess them, even if the initial demand may have been relatively low. Examples of this strategy can be seen in the fashion industry with limited edition designer collaborations or in the technology sector with limited quantity releases of new gadgets. The limited availability of such products amplifies their desirability, thereby creating their own demand.

Conclusion:

The concept that “supply creates its own demand” challenges the traditional belief that demand is solely driven by consumer preferences. By understanding and leveraging this concept, product managers can navigate the dynamic landscape of product management more effectively. By developing products that fill unmet needs, differentiating themselves from competitors, and communicating the value proposition, they can create a demand that extends beyond the boundaries of existing market preferences. Ultimately, embracing this concept empowers product managers to drive innovation, capture market share, and achieve success in the ever-evolving world of product management.

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The PM Playbook

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