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What is Failure Demand?

 , November 16, 2015 updated on March 01, 2018
Failure demand is additional demand for an organization's products or services due to that organization's failures. For example, if a telecom company has a cumbersome and failure prone process for canceling accounts, it may result in increased customer retention as customers are unable to easily cancel their service.
Organizations that benefit from failure demand may do so unintentionally. As a conscious decision, failure demand is often a questionable strategy that is the hallmark of low quality organizations destined for conflict with regulators and customers.
Overview: Failure Demand
FunctionEconomics
DefinitionDemand generated by an organization's failure to do something right.
ExamplesPurchases to replace products that easily break.
Sales of parts for a machine or vehicle that is high maintenance.
A telecom company that over-bills customers
Revenue generated by penalties for canceling a service due to customer dissatisfaction.
ImplicationsFailure demand may falsely lead an organization to think a strategy is successful that is in fact damaging reputation or brand value.
Related ConceptsReputational Risk
Regulatory Compliance
Switching Barriers

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