What is Demarketing? Types, Examples & Benefits

Demarketing occurs when a company reduces demand for its product or service due to inadequate supply or excessive promotion and distribution expenditures in some locations, lowering profit margins. It is sometimes dubbed “unselling” or “marketing in reverse.”

Every firm tries to outperform its rivals, so promoting a product or service is necessary. Marketing accounts for 11% of corporate budgets; according to studies, 30% of organizations use it to boost sales.

Some companies choose demarketing in this age of fierce competition and aggressive marketing. It may seem odd, but demarketing is also used to lower product demand. We will explain demarketing in this article.

What is Demarketing?

Demarketing is a tactic for decreasing demand for a product. According to Businessdictionary. Com, demarketing refers to efforts to discourage (rather than destroy) demand for a product that a company cannot or does not want to supply in a specific region due to high distribution or promotion costs that allow only a small profit margin. Common demarketing tactics include raising pricing, reducing advertising, and redesigning products.

Phillips Kotler and Sidney Levy coined the term “demarketing,” which refers to a company’s efforts to minimize product consumption. Webster’s Dictionary defines demarketing as “advertising to reduce demand for a product in short supply.”

Demarketing refers to any attempt to discourage customers from purchasing a specific product.

Key Takeaways

• Demarketing is a practice that actively reduces demand for a product or service, usually owing to supply limits or excessive prices that harm earnings.
• It includes strategies like raising pricing, reducing advertising efforts, and altering products to make them less desirable.
• Philip Kotler and Sidney Levy established the notion emphasizing conscious efforts to reduce consumption.
• Demarketing may be essential when a product is in low supply or when marketing and delivery costs make some locations less profitable.

Importance of Demarketing

Demarketing may be undertaken for a variety of reasons, including those stated below:

• The supply cannot match demand.
• Resources, particularly natural resources, must be preserved.
• The cost of advertising the goods is exceedingly high.
• Insufficient or nonexistent distribution channels.
• The cost of selling in a given location is particularly high.
• Protect consumers against potential dangers, such as alcohol or tobacco.

Several reasons might be given for implementing demarketing. However, the result is always to discourage demand, allowing the corporation to generate profits even if it sells fewer things.

Types of Demarketing

Demarketing strategies are divided into three kinds. The three types are:

1. General Demarketing

General demarketing is when a company wants to demarket its product to everyone. It is always done when a firm wants to reduce the entire demand for the product.

Examples of general demarketing can be State and Central Governments demarketing alcohol and cigarettes for the entire population.

2. Selective Demarketing

Selective marketing is when firms target a select class of consumers and aim their demarketing strategies at them. This is mainly done to protect loyal or core consumers.

An example of selective marketing is an elite real estate builder demarketing its project to maintain exclusivity and the snob value associated with its project.

3. Ostensible Demarketing

Ostensible demarketing is the phenomenon of creating an artificial shortage to stimulate demand and consumers’ appetites. A limited supply of goods is created so that consumers start stocking these “hard to get” products.

A very good example of ostensible demarketing occurred with BMW in 1997 when it restricted its supply in the entire UK market.

Examples of Demarketing

Here are a few examples of demarketing in different settings that show how this approach can be used in different fields to reach specific goals:

1. National Parks and Tourist Spots: Some popular tourist spots and national parks use demarketing tactics to keep visitors from overstaying their welcome and to protect natural resources. Some ways to do this are to use reservation systems to limit the number of visitors, raise admission prices during busy times, or advertise less-visited places to spread out tourist traffic more evenly. For example, to protect their unique environment, the Galápagos Islands have set strict visitor limits and clear rules for visitors.

2. Fast Fashion Brands: Because fast fashion has been criticized for being bad for the environment and for being unethical, some brands have started to use demarketing tactics that make people want to buy less, choose items that will last longer, or support recycling and upcycling projects. This strategy aims to change the brand’s image toward actions that are better for the environment.

3. Water Utilities During Droughts: Like the other utility companies we discussed, water utilities may stop marketing their services during serious droughts. This can be done by limiting how much water people use, like not letting people water their lawns or wash their cars with potable water, and by running programs to teach people how to save water.

4. Drugs Not Necessarily Necessary or for Beauty Purposes: Some drug companies have been in ethical trouble and have been closely watched by the public because they aggressively sell drugs that are not necessary or for beauty purposes. Companies may stop marketing these items in some situations to focus on making medicines that treat more important health problems. This makes their brand more aligned with ethical standards and public health priorities.

5. Airlines When Environmental Concerns Are High: As concerns about climate change and carbon emissions rise, airlines may use demarketing tactics. This could include promoting programs that offset carbon emissions, encouraging shorter trips on more environmentally friendly means of transportation, or even cutting down on the number of flights to some places.

These examples show that demarketing techniques can be used in many different areas. They are often used to control demand in a way compatible with ethical, environmental, or resource management goals.

Demarketing Strategies

1) Bait and switch marketing

This general demarketing strategy involves firms marketing one product so that consumers buy another more profitable product from the same firm. However, this demarketing is not considered legal since it involves deception.

2) Price discriminating demarketing

When firms implement a price-discriminating strategy, they deliberately create transaction costs to discourage consumers from seeking the lowest price. Thus, busy consumers pay a higher price, whereas consumers with low transactions pay a lower price.

3) Stock outage demarketing

In this kind of demarketing strategy, firms create an artificial shortage of their product. However, though they create a shortage of products, they have offers where they guarantee delivery at a future date. An artificial shortage makes consumers buy more of the product when it becomes available quickly.

4) Differentiation marketing

This kind of demarketing addresses the 4 Ps of marketing. The 4 Ps of marketing are Product, Price, Place, and Promotion, and businesses try to implement demarketing strategies by focusing on the 4 Ps.

Some businesses increase the price of their product and thus start discouraging cost-conscious consumers from purchasing the product. In contrast, others address the second P, i.e., Product, and remove any warranty or accessories they previously provided with their product. To address Place, firms sometimes limit the availability of their products at certain places and thus employ a demarketing strategy. The last P, promotion, is addressed by reducing product promotions.

5) Crowding cost demarketing

This strategy is used when a large crowd is expected on a particular day. On discount days, like Black Friday, a huge crowd of consumers descends on stores, and this crowd acts as a deterrent for some consumers who prefer paying a higher price to stay away from the crowd.

The Strategic Role of Demarketing in Business

Demarketing seems odd, but it is an important part of today’s fast-paced business world. This talk looks at how demarketing can be used in different fields, highlighting how important it is for businesses to have lasting and moral goals.

• Effective Allocation of Resources: Demarketing is an important tool for managing resources wisely. For example, companies might cut back on their advertising when there are insufficient supplies. This planned drop in demand helps companies keep quality and availability high for loyal customers, especially in industries with unstable raw material sources.
• Maintaining Brand Prestige: Demarketing means maintaining exclusivity for high-end and expensive brands. By limiting access or being selective in their marketing messages, high-end brands maintain an air of desirability. This strategy makes them more appealing to wealthy people and strengthens their position as the market leader.
• Fulfilling Social Obligations: Demarketing can help stop people from buying certain goods by focusing on bigger societal issues. For example, companies in the fast food or alcohol industries might start efforts to get people to drink less, which is good for public health and in line with social norms.
• Supporting Environmental Causes: Companies that care about the environment must rethink how they promote goods that are bad for the environment. Companies show their commitment to sustainable practices by reducing the number of these things they sell or changing how they market them. This makes them more appealing to growing consumers who care about the environment.
• Getting rid of service overload: Demarketing helps lower the risk of overcrowding in industries that tend to have seasonal peaks, like the travel and leisure industries. Businesses can ensure customers have a great experience by limiting their marketing during busy times. This protects their image and the environment from the damage that too many tourists can cause.
• How to Handle Crises with Grace: When there are product recalls or other crises, demarketing is a smart way to keep demand and customer standards in check. This approach lets businesses focus on fixing the issue, which protects customer trust and makes the healing process go more smoothly.
• Finding Profitable Niche Markets: Businesses can shift their attention to more valuable customers by making their goods less appealing to groups that do not buy them as often. This careful approach to marketing ensures that resources are used more efficiently, increasing profits and ensuring the business’s long-term success.

Overall, demarketing goes beyond its negative connotation and is a sophisticated strategy aimed at sustainability, social duty, and a strategic approach to resource management.

Steps to Craft a Winning Demarketing Strategy

1. Understanding the marketing objectives of the firm by setting clear goals

The first step in crafting a successful and effective demarketing strategy is understanding the firm’s marketing objectives. This means analyzing what the company wants to achieve with its marketing efforts, such as increasing sales, brand recognition, or reducing market share. Once these objectives are clear, crafting a demarketing strategy that meets those goals becomes easier.

2. Understanding consumer behavior in detail

The second step is to understand consumer behavior in detail. This includes analyzing customer attitudes and buying patterns and researching competitors’ activities. By understanding the factors that influence a customer’s decision-making process, it will be easier to craft an effective demarketing strategy that considers all of these considerations.

3. Combining the marketing objectives and insights into customer behavior

The third step involves combining the marketing objectives with insights into customer behavior to create a tailored demarketing strategy. This includes deciding which products or services to target, how to reach customers most effectively, and what tactics will reduce demand for those products or services.

Unlike marketing strategies, demarketing strategies are challenging and need to be crafted precisely so they do not backfire. However, their complex nature does not deter marketers from implementing them and successfully turning away the wrong consumer while simultaneously attracting the target consumer.

Benefits of Demarketing

1. Reduced levels of overconsumption

Demarketing strategies effectively reduce overconsumption by discouraging customers from buying more than they need. This can reduce waste and minimize the strain on natural resources.

2. Improved customer perception

Demarketing strategies can create a positive impression of the brand among customers. Consumers appreciate when companies are responsible and work to limit their environmental impact.

3. Increasing profit and reducing the cost of production

Companies can limit consumption and reduce waste, saving money on production costs. Additionally, demarketing helps protect the brand’s reputation, which can bring in more customers and increase profits.

4. Improved environmental protection and sustainability

Demarketing strategies often lead to increased environmental sustainability and environmental protection. By limiting the use of resources and encouraging sustainable practices, companies can greatly reduce their carbon footprint and help protect the environment.

5. Creating exclusivity

Demarketing creates an air of exclusivity around products and services. By limiting the number of customers, companies can develop a sense of scarcity and increase demand. This can boost sales and profits and create positive brand associations with exclusive products. Through market location and demarketing campaigns, companies can target high-end customers willing to pay a premium for exclusive items.

Implementing the demarketing strategy can reap companies a wide variety of benefits. From reducing overconsumption to creating exclusivity and improving environmental protection, there are various advantages to deploying demarketing strategies. It is an effective and powerful tool for companies looking to positively impact the environment without sacrificing profits.

Stories Of Successful Demarketing

When demarketing tactics are used correctly, they can be very helpful for both the business and society. Here are four examples of demarketing tactics that worked well in different fields:

1. Patagonia in the Clothing Industry: Patagonia, a brand known for caring about the environment, started the “Do not Buy This Jacket” ad to get people to think again about what they are buying and how it will affect the world. This strange marketing plan was meant to cut down on trash and consumption by getting people to buy only what they needed. Even though Patagonia stopped selling its products, brand loyalty and sales increased because people liked the company’s morals and commitment to protecting the environment.

2. Singapore’s Efforts to Conserve Water: Because Singapore has limited water resources, it used a multifaceted demarketing plan to get people to use less water. This meant raising the price of water, running programs to teach people how to save water, and putting strict rules about how much water can be used. These efforts have been very successful, lowering the amount of water each person uses and helping the country reach its sustainability goals.

3. The City of Venice and Tourism Management: Because Venice was so full of tourists, it used “demarketing” methods to handle and lessen the bad effects of too many visitors. Some of the steps that were taken were to guide tourists to less crowded areas, charge admission during busy times, and limit the number of cruise ships that could visit. These efforts have helped the city’s infrastructure, and residents’ quality of life has increased. The tourism business has also been kept alive.

4. Tesla’s Refocus on Sustainable Transportation: To cut down on production costs and focus on models that are in higher demand and have a bigger effect on sustainability, Tesla, Inc. has stopped marketing some models and variations of its electric vehicles (EVs). Customers have fewer options because of this approach. Still, it has helped Tesla make the best use of its resources, speed up the production of its most popular models, and strengthen its brand’s connection with sustainability. Tesla’s method has helped more people accept and want electric vehicles, which promotes environmentally friendly ways to get around.

These examples show how demarketing strategies can improve a brand’s reputation, better use resources, and positively affect society by aligning business goals with social and environmental goals.

Top FAQs on Demarketing

What is demarketing?

Demarketing is a business technique used to lower the number of people who want to buy certain products. This could be a practical choice when supplies are low, a choice to keep up an air of status, or a step toward moral obligations. Some strategies are raising prices, cutting back on marketing spending, and controlling who can get goods.

Why do companies use demarketing?

Organizations use demarketing to manage limited resources, protect the environment, maintain their brand’s uniqueness, and handle too many customer demands. It encourages people to follow the rules, supports long-term success, and protects the services’ quality.

What are the types of demarketing?

Companies use demarketing as a strategy, which can be broken down into three main groups:

1. General demarketing, which aims to lower demand across the board and target all customers.

2. Selective demarketing is a strategy for lowering demand in certain market segments. It is often used when a company wants to avoid certain customers or market areas.

3. Ostensible demarketing cleverly tries to look like it is lowering demand while creating more interest in the product or service. To make a product seem more exclusive, a high-end brand might limit purchases, making the product more attractive to customers.

Can demarketing be considered a negative strategy?

Even though demarketing’s main goal is to lower demand, it should not be given a bad name. It often does good things, like encouraging long-term buying habits, compensating for a lack of resources, and raising a brand’s status. Most social and environmental goals are in line with responsible demarketing.

How is demarketing different from anti-marketing?

Demarketing is all about lowering demand on purpose while keeping people interested in the product in the future. On the other hand, anti-marketing does not allow any advertising, usually for things like fast food that are seen as bad or socially questionable.

Conclusion

In the end, demarketing is a strong, if unusual, strategy that helps businesses deal with the complicated modern markets in a moral and environmentally friendly way. Businesses can better manage their resources and protect the environment by purposely lowering demand for their goods. They can also create a niche of exclusivity that raises the value of their brand.

Demarketing is a powerful tool that, when used properly, can lead to amazing successes in many fields. It can help reduce waste, protect natural resources, improve customer perception, and align with social values. It shows businesses changing their focus from just making money to being more responsible, sustainable, and customer-focused. It also shows how important demarketing is for achieving long-term business and social goals.

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