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DeMarketing: increase profits hushing up the demand

Del: 21/09/2006

Demarketing, yes, that’s what it is, DE-marketing.

Just the way we marketers have always done the impossible to awaken and stimulate the demand, on some occasions it’s worth hushing it up.

In this article we see when and why its convenient to apply this type of strategy.

By demarketing we mean the ensemble of activities carried out to discourage clients or a specific segment of these to purchase your products. The first definition of this strategy dates back to the 70’s (“Demarketing, yes, demarketing” Kotler, Philip & Levy 1971).

There are several demarketing strategies:

general demarketing when the company decides to discourage the purchase of its products on behalf of the entire clientele.

selective demarketing (or relationship demarketing) when it is decided to discourage purchasing on behalf of specific market sectors considered non profit-making.

apparent demarketing when it is decided to limit the distribution proposing a number of insufficient pieces to the market compared to the demand so as to overestimate its value (typical in the automotive sector for the high market segment.)

The general demarketing seems almost insane, but if you think of it we have actual cases before our eyes. Think of the suppliers of electricity or gas which in periods of high consumption advertise for the reasonable use of energetic resources in order to avoid waste. Aren’t these attempts made to lower the level of demand?

Ok, another example, in the past years the major tabacco companies have changed strategy, going from stimulating the desire for a cigarette to discouraging its use.
Now Philip Morris (Marlboro), JT tobacco, etc. have understood that pushing the purchase of unhealthy products is non profit-making. So its better to adjust, they condemn them, they try to persuade young people not to smoke, they drive the brand further and further away from the production and while demarketing they score two goals:

-they keep clients they already have, improving the brand equity
-they make cigarettes “more forbidden” for young people and therefore more appealing

The selective demarketing is part of the logic of a company’s own client portfolio management.
Not all clients are profit-making and not all clients are served.
As a consultant I have often heard: “for me clients are all good”, “our product is transversal”, “the client is always right”, etc. Actually no company that wants to make profits can even think of satisfying 100% of its clients, it would simply be anti-economic.

It’s necessary to make some choices, more or less pressing but however choices!
In a beautiful article dated April 06 in the Ivey Business Journal there was a proposal to change the well-known phrase “the customers are always right” in “The Right customers are always right”, it could be a good idea!

Demarketing is applied to those clients that have a low strategic value and a life time value (the economic cycle life of a client) considered well-below the average.
How are they identified? Generally working on the client’s history, its characteristics and its typical purchasing behaviour.
How do you apply it? It very much depends on the product or on the service that is intended to be promoted, some major retail companies exclude inappropriate clients simply by “cutting them out” of the mailing list, commercial targets and promotions.

>> The apparent demarketing is the most common strategy to place a product or service among the elite. Think of the clubs, in the most exclusive, you get in only if you know someone, people wait patiently outside and often they can’t even get in. Not always because the club is full!
I’ve already mentioned its application in the automotive field where the shortage of vehicles determines an apparent deservice towards the purchaser making him wait for months for a car.
Do you really think it’s only a matter of production capacity?
No, its mostly a demarketing strategy so as to increase future profits, yes profits of DE-marketing.

                                                             Ing. Simone Lovati
                                                        Consulente marketing strategico

http://www.advboucle.com/

 
 

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