Demand Constraint vs Supply Constraint: What’s the Difference in Marketing?
Understanding whether your business is facing a demand constraint or a supply constraint is one of the most overlooked, yet critical elements of crafting a marketing strategy. Each scenario calls for a completely different approach to messaging, budget allocation, and growth planning.
In this article, we’ll break down the difference between demand and supply constraints, how they affect marketing, and what strategies work best for each.
What is a Demand Constraint?
A demand constraint occurs when the market does not have enough demand for your product or service, or when not enough people are aware of your offering. This is often the case with:
New products or services
Niche offerings with low awareness
Businesses entering new markets
In this situation, the bottleneck to growth is the customer. You need more people to find you, understand you, and want what you sell.
Marketing in a Demand-Constrained Business
If you're demand-constrained, your marketing strategy should focus on generating awareness and driving customer interest. This includes:
Top-of-funnel campaigns: Google Ads, Meta ads, and influencer partnerships to drive visibility.
Content marketing and SEO: Educate and nurture potential customers.
Strong value propositions: Clearly communicate why someone should care.
You’ll also want to be aggressive with lead generation and brand-building activities. If no one knows who you are or why you matter, your job as a marketer is to create demand.
What is a Supply Constraint?
A supply constraint occurs when you can’t deliver more of your product or service, even if more people want to buy. This can happen because of:
Limited staff or production capacity
Inventory issues
Service delivery bottlenecks
This is a common issue for professional services firms, eCommerce brands with backordered stock, or trades businesses with too few technicians.
Marketing in a Supply-Constrained Business
When supply is the issue, your goal as a marketer shifts dramatically. Instead of creating demand, your focus should be on managing existing demand effectively and maximising customer value. Tactics include:
Waitlist funnels: Capture interest for when capacity increases.
Price optimisation: Increase pricing to align demand with your limited supply.
Selective targeting: Focus on high-value or repeat customers.
Referral or loyalty programmes: Drive retention rather than acquisition.
Your messaging should emphasise exclusivity, value, and premium service rather than scale or reach.
Real-World Examples
Demand-Constrained:
A boutique B2B SaaS platform launches in New Zealand but no one knows it exists. The team invests in LinkedIn ads, case studies, and outbound email to build demand and educate the market.
Supply-Constrained:
A local plumbing company is booked out for weeks. They reduce Google Ads spend, raise prices slightly, and introduce an online form to prioritise high-value customers needing emergency service.
How to Tell Which Constraint You Have
Ask yourself:
Do we have more leads than we can handle? → Supply constraint
Do we have capacity but not enough leads or customers? → Demand constraint
Use analytics to back it up:
Website traffic high but few conversions? Could be a conversion issue, but if conversions are fine and you’re still under-booked → demand problem.
Calendar or delivery pipeline full but low spend on marketing? Likely a supply issue.
The Danger of Misdiagnosis
Treating a supply constraint like a demand problem can waste marketing budget and damage your brand (think long wait times, poor service delivery). Conversely, treating a demand constraint like a supply problem can lead to stagnation and missed growth opportunities.
This is why understanding your current constraint is fundamental to strategic marketing.
Final Thoughts
Whether your business is demand-constrained or supply-constrained will shape everything from campaign strategy to creative messaging. It’s not about doing more marketing—it’s about doing the right marketing.
At 1 Up, we help businesses align their marketing with real business constraints, ensuring spend efficiency and sustainable growth. If you’re not sure where your bottleneck lies—or how to market around it—let’s talk.