Marketing is the foundation of any commercial activity, as the main goal of a company is to successfully sell its products or services. However, there are cases when a marketer has overdone it and increased demand to the point where an entrepreneur cannot cover it. In such cases, demarketing comes into play. In this article, we will explain what demarketing is, how it works, and what demarketing methods are used in business.
What is demarketing?
Imagine you are starting a business, for example, selling sneakers made in China. Your initial capital is $3000, with which you bought 100 pairs of shoes, planning to sell them for $50 per pair.
After calculations, you determine that your net profit, including shipping and marketing costs, will be $15 per pair. You intend to reinvest these funds in the purchase of a new batch of goods. However, you did not take into account one important point – you did not tell the marketer about the number of sneakers in stock, and he has already attracted 200 buyers. As a result, you are forced to refuse half of them because you only have enough stock for 100 customers, and buyers will not want to wait for a new batch to be delivered. This leads to wasted marketing money, a lowered reputation, and a spoiled mood.
These problems could have been prevented if you had assessed your inventory in advance and adjusted your marketing strategy in time, reducing the promotional asset as you approached the limit of available stock.
Advantages and disadvantages of demarketing
Demarketing is a strategy aimed at reducing consumer interest in a product or service, not because of its harmfulness, but in the interests of business. This method is used in different contexts:
- Overproduction – this happens when production capacity is unable to meet all market needs, as illustrated in the previous example.
- The need to adjust the target audience: If your product has inadvertently attracted the wrong audience, demarketing will help you adjust your focus to a more appropriate consumer group.
- Government intervention, where governments can use demarketing to control market shortages or to reduce consumption of products that hurt public health, such as alcohol or tobacco products.
It is important to realize that demarketing requires a cautious approach. Too active actions in this direction can seriously undermine the product’s reputation, to the extent that subsequent advertising campaigns will not be able to restore a positive perception of the product among consumers.
Types of demarketing
Demarketing can be categorized into three main types, depending on the goals and resources it fulfills.
- Active demarketing is a strategy aimed at reducing demand for certain products or services. This method is often used by entrepreneurs and includes measures such as revising prices or product positioning strategies.
- Passive demarketing is used to slow down the consumption of goods in general or certain categories. Most often, such measures are taken by government organizations, and they may include organizing information campaigns, and imposing restrictions or bans on the sale of certain goods.
- Absolute demarketing, or counter-marketing, is a type that involves the complete removal of a product from the market or its complete prohibition. In the case of government agencies, this may include, for example, drug prohibition. For private enterprises, such measures are taken if the product can harm consumer health or the environment.
There is also another strategy that is sometimes associated with demarketing but operates on the opposite principle – creating an artificial shortage to stimulate demand. An example is the situation in Ukraine when rumors of possible problems with salt production led to the temporary disappearance of this product from store shelves.
Demarketing: tools and strategies
When discussing the topic of demarketing, three main strategies can be used depending on the customer’s goals:
Symbolic demarketing. This strategy is aimed at creating an artificial shortage to raise the prestige of the product. An example is the release of the iPhone when the device is positioned as an exclusive one, available only to a select audience. This approach makes the iPhone a desirable accessory among those who want to stand out, even though there are many more expensive alternatives on the market.
Global demarketing. This method is aimed at reducing the overall demand for a product among the entire target audience and is often used in large-scale campaigns.
Targeted demarketing. It is used to reduce demand among a certain part of the audience, which can negatively affect the image or profitability of the business. For example, a cafe popular with young people may start losing customers if it is frequented by noisy groups such as bikers. In this case, demarketing bikers can help to maintain the core audience of the establishment.
When it comes to demarketing tools, there is a wide variety of them. Here are some examples:
- Stopping advertising campaigns or reducing them. A simple but effective first step.
- Raising prices. This reduces the customer base, leaving the most able to pay.
- Canceling promotional offers. Reducing the number of promotions reduces demand, which is used when the market is oversaturated.
- Creating a negative perception. For example, government campaigns against smoking and alcohol consumption are aimed at shaping public opinion against these bad habits.
More examples of demarketing
For a deeper understanding of the concept of demarketing, it is useful to look at real-life examples. One of the most prominent representatives of this approach is Apple. The company has developed several strategies, in addition to those already mentioned.
One strategy is to gradually increase the cost of its new products. This reduces the overall demand for products, but at the same time contributes to the growth of profits.
Apple also applies demarketing to old iPhone models, stopping them from being updated. This reduces the interest in buying outdated models, pushing customers to purchase new devices, which leads to an increase in revenue.
Another example of demarketing is McDonald’s, which at the beginning of its operations offered a wide range of products. However, burgers and fries accounted for the bulk of its revenue. As a result of the decision to reduce the assortment, leaving only the most profitable products, the company demonstrated an example of classic demarketing, focusing on key products.
Conclusion
Demarketing is a strategy aimed at reducing or eliminating the demand for a product. It is used by both large corporations and small businesses, as well as government agencies. This strategy, which aims to reduce or eliminate/minimize the demand for a product, is reflected in various scenarios, from seasonal demand reduction to strategies to reduce demand for unwanted products or services. The implementation of demarketing requires careful analysis, strategic planning, and effective implementation, but it can be an important tool for optimizing resources and regulating demand.
