What is demarketing and why is it needed

What is demarketing? If in classical marketing all efforts are aimed at stimulating sales and attracting new customers to the product, then demarketing plays the role of a defensive structure in a besieged fortress. Have you ever faced a situation of increased demand for supply? When you do not have time to put the right amount of products, and buyers are dissatisfied go to competitors? It is in such cases that you need to use demarketing.

There are several downplay work strategies. It is important to use them correctly and not bend the stick, otherwise you scare all customers instead of just a little restraint consumption. Demarketing can also be used as a stimulus tool. You will learn how to do it from our material.

What is demarketing

In 1969, Philip Kotler and Sydney Jay Levy published an article “Expanding the concept of marketing” in AMA’s Journal of Marketing. This was the first material where a broad interpretation of the concept of marketing was given. According to the authors, you can not think only about the product, promoting the product. This process must cover political, territorial and ideological nuances.

As early as 1971, the same authors published an article entitled “Demarketing, Yes, Demarketing”, which clearly stated their position on the shortage of goods and its impact on demand. Kotler and Levy distinguish two groups of goods that require conscious regulation of demand: scarce and those that are accepted by customers without enthusiasm. The very concept of demarketing in marketing, the authors formulated as follows:

“Demarketing – is a set of methods to reduce the demand for something, such as the use of running water in its absence.”

Demarketing tools are essentially identical to the 4 pillars of classical marketing, but are designed to reduce demand.

As a result of influence the social behavior of clients is corrected and the following areas are processed: a

• portrait of the buyer with whom contact is necessary;
• features of the current decision-making environment;
• market research and application of schemes of influence.

Strategic methods of demarketing have changed significantly since the creation of this technology in 1970. If the basis of traditional marketing consists of four elements: the product, its value, territorial factor and advertising, which are used to increase demand and expand the customer pool, then in the framework of demarketing, the same tools perform opposite tasks. With their help neutralize customer surpluses and reduce demand.

Demarketing is a strategy to reduce demand for a product or service. It is sometimes difficult for entrepreneurs to reduce sales and consciously give up profits. But these steps are necessary in a situation of excessive demand, when withdrawing goods from circulation or when it is important to stop selling goods for a certain category of buyers.

Types and examples of demarketing

Demarketing is also called a strategy to curb demand. This technology is used in private and public companies.

Experts refer to the tools of demarketing different methods of work depending on the approach chosen by the organization:

• Most often, this approach is used at the state level to reduce the rate of consumption of a particular product. A striking example is the campaign to reduce the demand for cigarettes and alcohol. The tools are advertising in various sources, price regulation and legal restrictions.
• This approach is more often used by commercial firms to reduce demand for their own products. This approach raises prices, changes the message for TA, stops advertising campaigns.
• Absolute demarketing implies the withdrawal of products from the market. This is necessary when detecting a defect or dangerous consequences of using the product. For example, Samsung simply withdrew all explosive Galaxy Notes from sale.

Demarketing will be necessary with increased demand for products with limited stocks. Companies may find themselves in a situation where production capacity is not enough to provide everyone with goods, and scaling is not possible at this stage. In this case, it is important not to damage the reputation due to customer refusals.

Consider the example of an entrepreneur who has just released the first batch of products and conducted an advertising campaign. It was expected that, having sold the first products, he would be able to put the money into circulation and make a second batch. However, demand has unexpectedly exceeded the forecast and there is no question of gradual expansion. The entrepreneur can not quickly expand production, as it does not have the ability or desire. The only way out of this situation is to reduce the speed. In this situation, demarketing plays the role of the driver’s carriage – restrains excessively lively horses.

Another example. Imagine a craft beer bar, an establishment focused on hipsters, intellectuals, bohemians. The atmosphere of the place is available for long conversations to taste a frothy drink. And this bar is suddenly approached by a completely inappropriate drunken company. This is hardly what the owner of the institution wants. If you allow such visitors to the bar on a regular basis, you can lose the whole TA.

It is no coincidence that a large-scale campaign about the harm of butter and sugar was launched in the 1990s. The reason is simple: at that time, these two products were in short supply. To avoid popular unrest, a negative effect on the body of fast carbohydrates from sugar and cholesterol from butter was announced. Once the situation returned to normal, these products were returned to the category of useful. Announcing the harm of something is an effective way to reduce the demand for scarce goods.

Why does demand exceed forecasts?

Usually, start-ups suffer from this phenomenon: incorrect calculation of the level of demand, turnover and profit entails an error in sales plans. The reality is very different from the forecast. However, in a similar situation may be experienced entrepreneurs, such as the release of a new product or product line.

A full-scale advertising campaign can also cause an unbearable jump in demand. At the same time using offline advertising, targeting and context, the entrepreneur does not always expect a sharp increase in customer activity. If demand is excessive, demarketing will help. In most cases, the use of these tools is a temporary measure to stabilize the situation.

Another type of demarketing is government regulation of certain aspects, such as the control of rare animal populations. Authorities are restricting the issuance of hunting licenses, expanding Red Book lists and creating reserves in areas where rare animals live.

However, demarketing can have the opposite effect. It is known that the forbidden fruit is sweet – as well as with restrictions in all areas. Refusal to rent a certain movie will increase the number of pirated views on the Web, and the program blocked in the country will become much more popular than analogues.

What tasks are assigned toWhat tasks does the demarketing

What tasks does the demarketing strategy serve?

Changing the social policy of the state

Government agencies use demarketing tools to inform citizens about the harm to health of a product. This reduces the demand for a group of goods. Such a policy now applies to alcohol and cigarettes.

What steps does the demarketing strategy envisage in this case?

• Artificial price increase.
• Measures to reduce consumer incentives through advertising: from restrictions to total bans.
• Advocacy for non-use of the product (anti-smoking advertising).

However, not only harmful products fall under the demarketing state policy. There are other goals for which government agencies use similar methods.

Stimulation of import substitution: The

• price of imported goods rises, and analogues of local production do not change the cost.
• New duties and taxes are set for imported goods.
• The minimum amount of advertising of foreign cinema – the cinema is obliged to show mainly trailers of domestic films.
• Artificial restriction of showing foreign paintings on TV screens, etc. The number of domestic films in relation to imported ones is regulated.

Demographic control:

• Rising prices for contraceptives.
• Reducing the number of points for the sale of barrier contraception. They are simply withdrawn from sale in supermarkets.
• The ban on advertising abortion, restrictions and strict regulation of advertising for paid women’s consultations, also provide abortion services.
• Promoting the idea of ​​a large family, encouraging the population to have two or more children, presenting children as the highest priority.

However, demarketing strategies are implemented not only by state institutions, but also by commercial enterprises.

Decreased sales turnover

Not always a large turnover leads to increased profits. Sometimes smaller sales promise more profit. Demarketing in this case helps to realize the business goals of the project.

Let’s consider this situation on a concrete example: the businessman organizes business on manufacturing of luxury women’s bags from skin of rare animals. Tailoring of products is carried out manually due to what volumes are absolutely small. The cost of such bags is high, so the price is set much higher than the average price tag. Suppose that the human rumor worked 100% and the product began to be in high demand. However, there are too many people willing to buy a luxury accessory even at the current price. There are only two ways out of the situation: to increase production by providing for everyone, or to raise the price by selling fewer products. The first option will lead to the transformation of an exclusive product into a bag of the mass market category and a further reduction in price. While the second method will only increase profits, despite the loss of some customers. This is a competent demarketing strategy.

TA adjustment

This method is somewhat similar to the technology from the previous example, with the only difference that one or more categories of buyers are excluded from the TA.

Example:

• The management of the bar raises prices to cut off unwanted visitors: football fans, students, thereby creating an appropriate atmosphere for the target audience.
• The beautician makes the price tag for men’s procedures inflated because he prefers to work with women.

Here are the methods of demarketing used in the adjustment of TA:

• Artificial price increase.
• Changing the positioning strategy of the product, attention to the desired segments of the target audience.
• Use for advertising those channels that will lead buyers from the desired segment of TA.

The game of decline

In some cases, marketers are playing a double game. To attract the attention of the audience and increase sales in the advertising campaign deliberately declare high demand and shortage of goods (not enough for everyone!). Thus, demand does not fall, but, on the contrary, increases. Thanks to this scheme, marketers attract the attention of the target audience.

This strategy is most often used when bringing a new product to market. If no one has yet had time to properly evaluate the product, and the queues are already quite large – marketers have worked. Sometimes to create the appearance of excitement, even hire a crowd, and it pays off.

The same scheme is used when prices increase to justify changes in increased demand.

For example, a manicurist can warn customers about the rise in price of their services, citing a new record for a couple of months ahead. Even if it is a bluff and in fact the master has a lot of free windows, only 20% of customers will leave if the price increases by no more than 15%. The remaining 80% of customers will simply agree to the new terms. In this scenario, the earnings of a manicurist will not change, but there will be free time. When all the windows are occupied by new customers, you can re-announce the increase in cost and lack of time. But it is better to do such a trick no more than once every six months.

How demarketing differs from countermarketing

These two concepts should not be confused. Demarketing is the conscious actions of the company to reduce demand for goods. To preserve the business and reputation, entrepreneurs can go to reduce production turnover, abandon advertising or lose part of the TA.

Countermarketing, on the other hand, aims to reduce demand for competitors’ products. This task is solved by discrediting other firms. The ultimate goal is to attract some customers from competitors to yourself.

When companies do not manage to effectively organize an advertising campaign for their goods and services, they launch anti-advertising on competitors. Most often it is expressed in the desecration of the brand and products of another company.

The main purpose of countermarketing is to discredit the goods and services of a competitor in the eyes of consumers.

There are several schemes of counter-marketing:

• Accusations of intentional overpricing.
• Dumping – a significant reduction in the price of your product to lure the buyers of a competitor and thus contribute to its destruction.
• Counter-advertising. A clear example of such a scheme is the advertising “kvass is not a circle”.
• Filling social networks and forums with negative feedback about a competitor.

Dirty marketing techniques are often used against business in our country. Such schemes work especially well in the Internet space – it is a cheap and effective method.

Critics, evaluation services and various media play an important role in countermarketing schemes. It is not a rare situation when the arguments voiced by the critic have no real basis. For example, a media person after visiting a restaurant posts a negative review of his visit. It can be a one-time impression or a special order in the counter-marketing of competitors, but the impact of published information is very large.

Countermarketing methods are designed to discredit a competitor. Sometimes companies even wage brand wars by acting openly.

The most striking example of such a war is the advertising battle of fast food Burger King and McDonald’s.

This battle of fast food titans has been going on for more than a year. Burger King often uses aggressive advertising campaigns in battles for a piece of the market, which even cause dissatisfaction of a certain share of customers.

Scandalous slogan “PNLNH MKDNLDS! And yes, we smoked in the edge “condemned adults. This segment of the audience was not targeted at the restaurant, so the dissatisfaction of parents of adolescents was not critical for this advertising campaign. Yes, adults did not want to see a clear hint of obscene language, but the calculation of marketers was to attract the attention of adolescents, not their parents. Even the loss of some customers was uncritical for Burger King, so there was no tangible response to complaints about the posters.

McDonald’s responds to a competitor’s attacks in a more restrained manner, defending rather than counterattacking. This is easily explained by the fact that a significant share of McDonald’s profits come from family visits (approximately 40%): in order not to lose this TA, the restaurant is forced to tolerate the antics of a competitor.

McDonald’s marketers try to highlight their benefits as much as possible in advertising, and Burger King prefers to rely on provocative methods.

One example of a skillful game of advantage is the French McDonald’s advertising campaign. The fact is that in this region, restaurants “Burger King” is extremely small, so the poster “to the nearest Makavto – 3 km, to Burger King – 248 km” was a worthy continuation of the war of brands.

Burger King uses other slogans:

• “Stupid wopper, this is a box for Big Mac.”
• “Cheaper than you think.”

Not everyone considers such methods of struggle fair, but the figures confirm the effectiveness of such campaigns. In 2017, Burger King showed the highest growth rates among the three leaders in the fast food segment, its sales for this year increased by 3.6%. However, McDonald’s still holds the lead. Here is the picture of the market share distribution in 2016:

• 2% – McDonald’s;
• 6% – “Burger King”;
• 8% – KFC.

Countermarketing is a widespread method of combating competing companies whose products or services do not differ significantly from each other. The methods used are ambiguous in terms of morality, but have been used successfully for more than 100 years, for example, in the confrontation between Pepsi and Coca-Cola.

6 working demarcation strategies

1. Raising commodity prices

When using different demarketing schemes, demand should fall naturally. The easiest way to achieve this is to raise product prices. Those buyers for whom the product will become too expensive, will naturally be eliminated. However, the opposite effect is also possible – the excitement around expensive goods will rise, which will force people to buy products in stock.

1. Advertising Restrictions

When customer communication is set up on many channels and demand begins to approach the upper limit, it makes sense to restrict advertising. For example, by ceasing to place information in the media and leaving only advertising on social networks. After stabilizing the situation and preparing the capacity for expansion, you will be able to use inactive communication channels again.

1. Demarketing to change market positioning

When a company wants to attract a new target audience (often a more solvent segment), this scheme is used. The product is beginning to be positioned as a luxury product, not available to everyone. From this statement naturally follows an increase in price. It is important to properly justify such actions so as not to confuse existing customers.

An example of such a successful strategy is the Finnish brand Lumene. Initially, cosmetics of this brand were part of the mass market sector and were quite cheap. However, after changing the positioning, changing the packaging and updating the formulas, the brand entered the luxury segment. The price of their products has risen 3-5 times. Some customers, of course, abandoned Lumene, but a more solvent audience became interested in these cosmetics.

1. Negative feedback on high-demand goods

This method is related to countermarketing. False negative reviews posted on the Internet cannot be traced. It happens that companies in the pursuit of popularity take aggressive actions and knowingly pay fines. The most striking examples of the war of brands: “Pepsi” and “Coca-Cola”, “McDonald’s” and “Burger King”. These market giants exchange “courtesies” through the media, advertising and social networks.

1. Abandonment of part of the TA

Sometimes demarketing is used to weed out part of the audience. This strategy is more often used by closed communities, clubs, bars to work only with a loyal audience. An example of such a concept “for their own” – a bar without a sign Chainaya. Tea & Cocktails. An audience that does not share the value of this place will simply pass by.

1. Switching attention to other brand products

This demarketing strategy is used when the company’s most popular product does not bring the desired profit. In this case, manufacturers try to switch the audience’s interest to other products. Examples of this strategy can be found in retail stores, when buying one product from another of the same manufacturer, you can buy at a big discount. Buyers are willing to take such sets, thus creating demand for the second product. As a result, the company receives the expected profit.

Before applying one of the demarketing schemes in practice, you should weigh all the pros and cons. Overpricing or changing positioning can have the opposite effect: demand will only increase or you will completely lose customers. The safest method of demarketing is to slow down the advertising campaign.

In what situations the use of demarketing is justified

Most marketers agree that the most effective demarketing when you need to find and weed out insolvent customers. These measures can reduce costs and, consequently, raise the company’s profits. Statistics show that only 20% of customers make a profit, about 60% balance on the limit of the minimum income, and the other 20% – make a loss. To optimize the composition of the customer audience, marketing analysis should be conducted regularly. Here’s how you can arrange this work:

Calculation of all costs associated with customer service

These include:

• telephone conversations with customers;
• face-to-face meetings with them;
• conducting presentations, trainings, workshops;
• solution of force majeure situations;
• all costs associated with the sale of goods (including unforeseen costs: work on holidays, urgent deliveries, deliveries in small quantities, etc.);
• advertising and information materials for clients.

Sorting customer-paid and free services

For maximum efficiency, you should compare costs and sales for each individual customer. It is important to distinguish which services the company can provide for free and which to charge. The most correct way is to indicate in the invoice all the services provided to the customer, regardless of whether the buyer pays for them or not. Receiving an invoice with a list of all goods and services, even free, the client gets a complete picture of all the array of work performed for him. From the point of view of psychology such registration of accounts is more correct. If free services are not specified, the client perceives them as appropriate and does not feel grateful.

Customer base segmentation

In addition to sales for each customer, it is important to assess the quantitative and qualitative characteristics of cooperation with this customer: the total profit for this customer, its reputation, opportunities for partnership, duration of relations, ease of working with him. The more carefully the evaluation criteria are thought out and analyzed, the more effective the results of customer base segmentation will be.

Distribution of services by individual segments

After conducting a detailed analysis, services should be divided into segments and determine for which categories of customers part of the services may be free. Thus in the account you can specify all positions, having designated a part with zero cost.

Examples of application of demarketing methods in practice The

American company Sprint Nextel, which conducts business in the field of telecommunications, after analyzing customer calls to technical support, found some patterns. Most complaints came from a certain group of customers, so management decided that this audience was unfavorable for Sprint Nextel.

This position is radically different from the policy of our companies, which try to retain customers by any means. For example, some firms create complicated procedures for terminating a contract at the initiative of the client.

The American company TXU, which deals with energy, after analyzing data on work with consumers, decided to shift the focus to problem-free users. The audience that complains has become uninteresting to the company.

In what other situations is demarketing used? We also give examples from the financial industry. Thus, the American giant American Express conducted a campaign to close the accounts of customers whose profile fit certain characteristics. For each such transaction, the client was offered compensation of $ 300. Note that the closure of unused accounts is practiced by many banking organizations. This is done after a written notice to the account holder.

If the main purpose of demarketing is to weed out a non-target audience, then companies often offer unsuitable customers to turn to one of the competitors. Thus, a large American insurance provider Progressive Auto Insurance, after analyzing the customer’s application submitted through the site, makes its verdict on the level of profitability of such a customer and the possible risks to the company. If according to the results of the inspection the client falls into the category of high risk for the insurer, he is offered to apply to another company.

Demarketing is often used in the segment of expensive goods in determining the market price of the product. In this way, companies filter the solvency of the audience and separate their products from their competitors. A similar model has been used by Apple for many years. Traditionally expensive products of this manufacturer have an army of their loyal fans who appreciate Apple products. In addition, the company works only directly with customers, even a legal entity buys equipment from this manufacturer on terms for individuals.

Despite the sluggish economic crisis, demarketing methods have been used successfully in many areas. For example, many European hotels prohibit accommodation in a room with children.

Many brands in the VIP segment prefer to use demarketing tools when necessary to narrow the target audience.

Any branch of the market can be divided into segments: budget and VIP. For better positioning of a product, the company should conduct a competent segmentation of goods. Using demarketing methods, you can reorient some of your solvent customers who want to get better products and services, from the budget to the VIP segment. This transfer of customers between groups of goods not only contributes to profit, but also has a positive effect on the reputation of the enterprise. The firm is represented by a customer-oriented and honest organization. Demarketing methods thus start a chain of price changes: more customers in the VIP-segment, then increasing demand for this group of goods and a systematic increase in price. This trend leads to an increase in demand in the budget segment. For companies that produce only inexpensive products, usually do not require the use of complex schemes. Revenue will grow due to regular customers and higher prices.