Demarketing

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Summary
Demarketing

What is Demarketing? Meaning.

Demarketing (DEM) is an umbrella term for a range of marketing tactics aimed at reducing demand for products or services. DEM can be used for various reasons such as countering overdemand and social marketing. DEM can be used by various entities, such as the originating business firm, but also by governement agencies and pressure groups.

Typical for all usages of DEM is a situation of (perceived) overdemand, triggering a wish to deliberately limit sales (possibly reducing profits).

DEM is also referred to as "Unselling" or as "Demand Containment".


Use of Demarketing

DEM can achieved through a combination of the 4 factors in the marketing mix (Product, Price, Place, Promotion) and also "aiming for policy changes to nudge and sustain healthier and more socially responsible behavioral choices (and) deeper understanding of the people we wish to serve, the environments in which they make choices, the market research we conduct and the programs we implement (Lefebvre and Kotler (2011)).

Its aim can be avoiding various problems and financial losses for the company using it, or fostering more socially responsible behaviour like in social marketing.


History of Demarketing

The term was coined in 1971 by Phillip Kotler and Sidney Levy in an HBR article titled "Demarketing, Yes, Demarketing."

In 1973, Kotler distinguished between the "current demand level" and the "desired demand level", arguing logically that in the context of marketing there can be underdemand, adequate demand, or overdemand. Each demand situation requires different marketing approaches and corresponding tasks. Specifically, where there is overdemand, the marketing task is to reduce demand by DEM.


Reasons for Demarketing. Advantages

Normally a company will try to create more demand for its products through marketing. But sometimes DEM is necessary or desirable to cope with increased demand, to limit the consumption of a harmful product, to withdraw the product from circulation or to stop working with a certain audience.

In particular, DEM is indispensable if products with limited stock are (temporarily) in high demand. The company is faced with the fact that it cannot ship the goods to everyone, and there might be not enough capacity for quickly scaling up the production. As a result, confusion, anger and chaos may occur among buyers, causing continuous problems (logistics, service department) for the business and resulting in loss of customers, negative reviews, damage to corporate reputation, etc.

The following reasons are typically behind the decision by a business to (temporarily) demarket a product:

  1. Reduce cost and increase profit: When a business feels like they don't gain anymore on a product, they can demarket it and channel people's attention to products that have the likelyhood to earn more.
  2. Scarce resources: When some production material is scarce, companies can demarket corresponding products so as to reduce demand and give room for the production materials to replenish.
  3. Health benefits: This advantage of DEM is seen in governments' efforts to reduce the demand for products like tobacco, alcoholic drinks, herbal drugs, etc.
  4. Segmentation: Businesses can (temporarily) turn off non-profitable or undesirable customers to focus on a more lucrative customer/market segment. A very succesful 5 star hotel might want to keep low-income earners away. A downside to DEM for this reason can be that a ban often makes a product even more desirable.
  5. Protect Corporate Reputation: Businesses can (temporarily) withdraw problematic products from the market to avoid damaging the corporate brand, identity, reputation.

Some Types of Demarketing. Categories

  • ACTIVE: Used by companies when they want to reduce the demand for their products. To do this, they raise prices, decrease advertising, change the message for the target audience, etc.
  • PASSIVE (SOCIAL): Used by the government to restrict the consumption of a certain product. For example, cigarettes, alcohol. Social advertising is used in the media, on the Internet, on television, legislation and product prices are changing.
  • ABSOLUTE: Complete withdrawal of goods from the market. For example, when a serious defect is found and/or the product is harmful to health. For example, Samsung withdrew their explosive Galaxy Note smartphones.

Sources:
Kotler, P. and Levy, S. (1971). "Demarketing, Yes, Demarketing", HBR 49(6), pp. 74-80.
Kotler, P. (1973). "The Major Tasks of Marketing Management", Journal of Marketing, Vol. 37 (October 1973), pp. 42-49.
Lefebvre, R., and Kotler, P. (2011). "Design Thinking, Demarketing and Behavioral Economics: Fostering Interdisciplinary Growth in Social Marketing". In book: "The Sage Handbook of Social Marketing", pp. 80-94.
Miklós-Thal, J., & Zhang, J. (2013). "(De)marketing to manage consumer quality inferences", Journal of Marketing Research, Vol.50(1), pp. 55-69.
Solly Matshonisa Seeletse (2016). "Demarketing strategy to develop perceived product reputation: applications in three distinct environments". Problems and Perspectives in Management, Vol.14 (4), pp. 230-235.


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