Demarketing - Types - Strategies

1. Marketing
Dattatreya Reddy Peram
Assistant Professor

2. Welcome from the “Age of Marketing to the Age of Demarketing “

3. Decrease + Marketing = DeMarketing
The term demarketing was coined by Kotler and Levy (1971) in an article
published by Harvard Business Review, titled “Demarketing, yes, demarketing.”
What is demarketing?
To reduce demand, without alienating loyal customers
To reduce demand by discouraging consumption from market
segments that are either unprofitable or that could injure loyal buyers

4. Reasons for demarketing can be one or more of the following:
1. There are not enough resources, especially in case of natural resources, and hence
must be preserved
2. The company cannot supply large quantities to match the demand
3. The cost of selling in a particular region is unusually high
4. Poor distribution channel/ no distribution channel available
5. The cost of promotion is unusually high

5. Example :
This happened in case of Tata Nano, when the demand for Tata Nano
increased from its supply level then Tata started promoting their other
products and completely stopped the promotion of Tata Nano.
When Maruti A-star was launched, for the promotion of A-star Maruti
started discoursing its customers to buy Maruti Estilo.

6. Marketing Mix of Demarketing

7. • Curtails in advertising expenditures and modification of message content;
• Reduction in sales promotion expenditures: investing less in trade exhibits, point-of-
purchase displays, catalogue space, and so forth;
• Cuts back in salespeople’s selling time and their entertainment budgets, requiring
that they focus on other products, spend more time in service intelligence work, and
learn to say “no” in a way that does not put off customers;
• Increasing the price and other sale conditions to the marketing company’s advantage;
• adding procurement time and expense, also referred to as “efforts and psychological
costs,” to discourage demand;
• Reduction in product quality or content, either to discourage consumption or make
the product more available and, thus, demarket at a slower rate;
• Curtailing the number of distribution outlets, using product shortage as an
opportunity to eliminate undesirable dealers and/or customers

8. Different Forms of Demarketing
1. General Demarketing
2. Selective Demarketing
3. Ostensible Demarketing

9. General Demarketing: Occurs when a seller
shrinks the level of total demand. Suppliers of
Electricity and Water use advertisements and
publicity campaigns during periods of excess
demand

10. Selective Demarketing: Occurs when a company discourages demand from
certain classes of Consumers. Adult communities demarket properties to
families with Children, and Producers of goods with a snob appeal avoid low –
image retailers

11. Ostensible Demarketing: Occurs when a seller creates artificial or perceived shortage to
whet consumer appetites. Limited distribution of goods may induce the consumers to
stockpile these “Hard-to-get” items
A good example of ostensible demarketing was the decision by Coca-Cola in 1985
to replace their staple product line with something called New Coke: the mistake,
according to Ringold (1988) and others was not the launching of New Coke (the
company spent $4 million on market research), but the decision to take the long-
established original product off the market.

12. Demarketing types
1. Passive Demarketing
2. Active Demarketing
3. Complete Demarketing

13. Passive Demarketing :
Here only consumers unaffected by
demarketing program and continue to use
the product.
Example: Warning on cigarettes and
highlighting harmful of cigarettes on
health comes under purview of passive
demarketing

14. Active Demarketing :
Active de-marketing It uses the
marketing mix to decrease demand in
several or every market segment.
Example: Regulating prices to reduce
consumption of products

15. Complete Demarketing :
Complete de-marketing It ceases sales of the
product.
Example: Recall of products from market in
case of unsuitability to the market.

16. Need of Demarketing
1. Maintain Supply and Demand Parallel
2. Long Term Objective
3. Maintain Quality of Product
4. Maximize the Profit in Market
5. Substitute demand Analysis
6. Proper Market Segmentation
7. Discourage Marketing Myopia
8. Proper Decision Making and Marketing MIX

17. Demarketing Strategies
1. Price Discriminating Demarketing
2. Bait and Switch Demarketing
3. Stock outage Demarketing
4. Crowding Costs Demarketing
5. Differentiation Demarketing

18. Price Discriminating Demarketing :
Salop (1977), Chiang and Spatt (1982), Narasimhan
(1984), and Gerstner and Holthausen (1986) have
shown that price discriminating firms may create
transaction costs deliberately to discourage
consumers from seeking the lowest price. Busy
consumers pay higher prices, whereas those with
small transaction costs pay lower prices.
For example, some retailers hold "3-hour sales" from
8 to 11 Saturday morning. Consumers who get to the
store before 11:00 am pay lower prices but incur the
inconvenience of early morning shopping. Busy
consumers who want a time-convenient product may
pay a higher price for that product, so a firm may
make the more convenient product more expensive.

19. Bait and Switch Demarketing:
The bait-and-switch demarketing strategy is
when a firm advertises one product in such a
way that the intention is not that the
consumers buy that product, but that they
buy a more profitable product in its place.
Gerstner and Hess (1990) and Chu, Gerstner
and Hess (1992) studied disparagement of
products in sales presentations or in point of-
purchase displays that are designed to
discourage consumers from buying featured
brands. These practices, however, might be
illegal.

20. Stock Outage Demarketing:
Another known demarketing strategy is stock outage demarketing, where a firm
actually plans a stock outage. Stock outages frustrate consumers, but stores often
offer rain checks that guarantee delivery at a future date.
Nevertheless, Hess and Gerstner (1987) showed that stores might profit from
planned stock outages with rain checks because customers may visit the stores
twice and buy complementary products on each visit. Balachander and Farquhar
(1991) showed that deliberate stock outages help stores charge higher prices and
earn higher profits. The possibility of a stock outage in one store makes
customers more eager to buy when the other store has the product in stock.

21. Crowding Cost Demarketing :
Crowding cost demarketing is a strategy
implemented on “Black Friday” when crowds
will deter many consumers from purchasing a
product at a lower price. Retail stores, hotels, and
airlines have limited capacities.
A low price usually attracts large numbers of
shoppers, so customers must hunt for space in
crowded parking lots and stand in long checkout
lines. Businesses may deliberately accept
capacity constraints, recognizing that some
customers would trade the higher prices for
reduced crowding. Gerstner (1986) derived
symmetric equilibrium prices and crowding costs
in such markets.

22. Differentiation Demarketing:
On the other hand, there has been growing scholarly interest in issues that can be
construed as demarketing. There are numerous specific strategies for demarketing that
would fall within the 4 P's definitions, although the demarketing terminology is not used.
Eitan Gerstner, James Hess and Wujin Chu discuss a few of them in their 1993 article,
“Demarketing as a Differentiation Strategy”. The differentiation strategy means that a firm
might use a “nuisance factor” that actually drives consumers away from them, and into the
arms of their competitors in order to keep their prices elevated. This can also be used to
avoid a price war with that competitor.

23. Examples :
1. HealthCare
2. Paper Reduction
3. Water Conversation
4. Junk Foods
5. Cigarattes & Alcohol

24. Departure Time