Demarketing: Types, Examples, and Role

Demarketing is a strategic approach used to intentionally reduce demand for certain products or services, often employed to manage resource scarcity, maintain brand exclusivity, or align with social responsibility. It involves tactics like raising prices, limiting availability, or decreasing promotions to achieve specific business objectives.

 

Ever noticed how you rarely see ads for Rolls-Royce, Ferrari, or Lamborghini, yet they're so desired? These luxury car brands masterfully use demarketing. By limiting production and forgoing typical advertising, they create an air of exclusivity. This scarcity drives high demand among affluent buyers, reinforcing their status as symbols of luxury and prestige. Their approach is not about reaching everyone but captivating the elite, thus controlling demand while enhancing the allure of their high-end vehicles.

This demarketing strategy is not only applicable to luxurious brands. Other brands like Volkswagen, Apple, and Coca-Cola also use this marketing strategy from time to time. We will talk about them later in the blog let’s begin with understanding the Demarketing definition. 

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Table of Content

• What is Demarketing?
• Examples of Demarketing
• Types of Demarketing
• Role of Demarketing in Business
• Demarketing Strategies and Examples

What is Demarketing?

Demarketing is a strategic approach used by businesses to deliberately reduce demand for a product or service. Typically employed in situations of excess demand, limited supply, or social responsibility, demarketing aims to discourage certain consumers or overall consumption. It involves tactics like raising prices, reducing advertising, or modifying the product's appeal. This counterintuitive strategy helps manage scarce resources, align with ethical standards, or recalibrate market demand. Demarketing is not about eliminating demand but managing and redirecting it more effectively and responsibly.

Examples of Demarketing

Coca-Cola: In light of health trends, Coca-Cola has subtly shifted its focus towards its diet and zero-sugar variants. While not directly reducing marketing for its classic sodas, the emphasis on healthier options serves as a form of demarketing the sugary drinks.

Volkswagen: Amidst increasing environmental awareness, Volkswagen has promoted its electric vehicles over traditional fuel-based models. By focusing on eco-friendly cars, they demarket their less sustainable options, responding to the global push for reduced carbon emissions.

Starbucks: Starbucks has used demarketing for some of its high-calorie, sugary drinks by promoting smaller sizes and alternative milk options. This shift caters to health-conscious consumers subtly reducing the demand for their more indulgent beverages.

Apple: Apple periodically demarkets older iPhone models by discontinuing them and focusing marketing efforts on newer, advanced models. This strategy encourages consumers to purchase the latest technology, gradually phasing out older products.

IKEA: IKEA promotes its sustainable and eco-friendly products, subtly demarketing their less sustainable options. This aligns with the growing consumer preference for environmentally responsible products. 

Types of Demarketing

General Demarketing: This is used when a company wants to reduce overall demand for its products temporarily or permanently.

Example: During water shortages, beverage companies like Coca-Cola and PepsiCo have engaged in general demarketing in certain regions by reducing production and advertising of water-intensive products to conserve resources.

Selective Demarketing: This targets specific segments of the market that a company deems less desirable or less profitable.

Example: Luxury brands like Rolex or Louis Vuitton often use selective demarketing by making their products less accessible to the mass market, preserving exclusivity and targeting only high-end consumers.

Ostensible Demarketing: A company appears to be demarketing a product but is actually trying to increase its appeal through reverse psychology.

Example: A nightclub may intentionally limit entry, creating an impression of exclusivity and high demand. This can attract more patrons who desire to be part of an 'exclusive' crowd, ultimately boosting the club’s popularity and demand.

Role of Demarketing in Business

Resource Management: Demarketing aids in managing scarce resources efficiently. For instance, during raw material shortages, companies might reduce advertising efforts to lower product demand, ensuring adequate supply for existing customers and maintaining quality standards.

Maintaining Brand Image: Luxury brands often use demarketing to uphold exclusivity. By limiting product availability or advertising selectively, they cater to an elite clientele, enhancing the brand's prestige and desirability among high-end consumers.

Social Responsibility: In addressing public health or social issues, companies like tobacco manufacturers use demarketing campaigns to discourage product usage. This approach aligns with social responsibility initiatives and regulatory mandates, promoting a positive public image.

Environmental Sustainability: Firms might demarket environmentally harmful products to embrace sustainability. This strategy aligns with ecological goals and caters to eco-conscious consumers, improving the brand's reputation as environmentally responsible.

Managing Overcrowding: Service industries like tourism use demarketing to prevent overcrowding. By reducing promotional activities during peak times, they ensure service quality and sustainability, enhancing customer satisfaction and preserving resources.

Crisis Management: In crises like product recalls, demarketing helps manage demand and public perception. It allows companies to focus on resolving the issue without overwhelming customer service channels, maintaining trust and stability.

Profit Maximization: Demarketing helps businesses focus on profitable segments. By deliberately reducing appeal to less profitable customers, companies can optimize their marketing efforts and resources towards more lucrative market segments, enhancing overall profitability.

Demarketing Strategies and Examples

Price Increase Strategy: Employed to target a more exclusive market segment by making products less affordable for the general population. This helps manage demand and maintains a brand's high-end image.

Example: Luxury brands like Gucci increase their prices periodically to reinforce their exclusivity and desirability among affluent consumers.

Reduced Promotion Strategy: Involves cutting back on advertising and promotional efforts to decrease demand, often used in situations of product scarcity or environmental concerns.

Example: During droughts, water utilities reduce advertising about water usage to encourage conservation among the populace.

Selective Availability Strategy: This strategy restricts the availability of products to certain locations or times, creating a perception of scarcity and exclusivity.

Example: Starbucks periodically offers limited-time-only drinks like the Pumpkin Spice Latte, making it exclusive to certain seasons and driving demand during its availability.

Customer Rationing Strategy: Implemented by limiting the quantity of products a customer can purchase, often used in times of shortages to ensure fair distribution.

Example: Supermarkets limited the number of essential items like toilet paper per customer during the COVID-19 pandemic to prevent hoarding and ensure wider availability.

Wrapping It Up!!

Demarketing emerges as a nuanced, strategic approach in marketing, essential in scenarios demanding demand regulation, resource management, and ethical considerations. By understanding its various types, roles, and strategies, businesses can effectively implement demarketing to achieve specific objectives, from preserving brand image to addressing social responsibilities. This concept, illustrated through diverse examples, underscores the importance of adaptable marketing tactics in a dynamic business environment.