Conventional wisdom tells business owners that we should do our best to market our products in order to increase demand and drive sales. But in some cases, it may be better to do the opposite—a strategy known as demarketing.
So, what does demarketing mean? Sometimes called “reverse marketing”, there are a few different types of demarketing used by brands and businesses. Chiefly, the concept centres around decreasing demand around a product or service, rather than increasing it. Whether you’re looking to limit production of a particular product, save valuable natural resources, create an air of exclusivity, or something else entirely, demarketing is a viable strategy to achieve short and long-term business goals.
What Is Meant by “Demarketing”?
Coined in 1971 by Phillip Kotler and Sidney Levy in their Harvard Business Review article “Demarketing, Yes, Demarketing”, the term demarketing encompasses multiple strategies for decreasing or otherwise influencing customer demand—temporarily or permanently.
Upon its inception, the purpose of demarketing was to manage demand during times of material shortages. Kotler argues that shortages are just are problematic as surpluses, and he presents the concepts of “underdemand”, “adequate demand”, and “overdemand”. In the case of the latter, demarketing is the strategy employed to reduce demand back to an adequate level.
In the modern era, demarketing has multiple applications, which we will detail in the following. While all of these seek to influence demand, the reasons for doing so vary. For example, demarketing is used as both a strategy for reducing harm to the environment, as well as to encourage elite groups of customers to buy luxury goods.
First coined in 1971 during a time of shortages, demarketing has numerous modern applications but generally describes a strategy used to decrease demand of a product.
The 3 Types of Demarketing
Given that demarketing is such a versatile strategy, it can seem a little nebulous to those unacquainted with its intricacies. Thankfully, it’s generally agreed that there are three times of demarketing, each of which strives to achieve a unique goal.
General Demarketing
General demarketing is just that—it aims to limit demand across all consumers. This can be due to shortages, to phase out an old or ineffective product, or to conserve natural resources. General demarketing strategies include raising the price of a product, eliminating/reducing marketing around a particular product, or publishing negative press surrounding the product—as in the case of recalled or ineffective products.
General demarketing is often used in an attempt to limit harm to the environment and maintain valuable natural resources. For instance, demarketing is used to limit the use of paper and plastic products among the general population, and offer suitable alternatives where possible. Furthermore, this approach is used to decrease demand for junk food and other products with low nutritional density in an effort to promote public health.
Selective Demarketing
Selective demarketing seeks to discourage demand among certain categories or classes of consumer, in order to cater to the target consumer. Perhaps the most obvious example of selective demarketing is using prohibitive prices to drive the purchase of luxury goods, such as fashion and cars.
Take, for example, the Birkin bag by Hermès—it can’t be bought online, and you must be “invited” by an employee of the Hermès brand store or company in order to get your hands on one. Though practices such as these maintain a high degree of exclusivity, they drive brand loyalty among their target demographic.
Ostensible Demarketing
Ostensible demarketing aims to create an artificial shortage of products in order to boost demand. If customers think only a small amount of a given product has been created, they may be willing to make a purchase, and pay a hefty price, just because they don’t want to miss out on the opportunity. This strategy is used in the world of luxury vehicles, electronics, and other types of consumer goods.
This type of demarketing may seem a bit counterintuitive, as it ultimately aims to stimulate demand. However, the mode through which it achieves this involves limiting a certain product’s availability.
Through general demarketing, selective demarketing, and ostensible demarketing, businesses can decrease demand among certain customers and/or increase demand among others.
Commonly Used Demarketing Strategies
Now that we’ve reviewed the main categories of demarketing, we can break down several strategies that aim to achieve distinct goals.
Price Discrimination
Price discrimination can be broken down into three categories, or “degrees”. First-degree price discrimination, aka “perfect price discrimination”, is a tactic used to encourage customers to pay different prices for the same product or service. For example, brands may make certain offerings more convenient at certain times, at higher prices. While not everyone will pay a premium for this convenience, busy individuals or those who require a product immediately may be willing to make a price sacrifice.
Second-degree price discrimination is when a business charges different amounts depending on the quantity. In some cases, buying in bulk and spending more outright gives you a discount on the price per unit.
Third-degree price discrimination seeks to charge different demographics of customers different prices for the same product—e.g. a movie ticket or airfare. In these cases, children and seniors may have to pay lower prices than adults.
Stock Outage
As referenced above, sometimes businesses will create artificial shortages to drive demand. In some cases, companies will even promise to deliver a product at a future date, which may impel the customer to make multiple purchases upon availability or delivery of the product.
Crowding Cost
As an alternative to standing in long lines or among huge crowds on major shopping days like Black Friday, or with the release of a highly anticipated product, some businesses allow customers to forgo the crowd and still purchase the product, but at a higher cost.
Differentiation
Differentiation demarketing is unique in that it actively seeks to annoy consumers, driving them away from their business and to their competition. This allows companies to maintain high prices or avoid duelling over prices with competitors.
Green Demarketing
The goal of green demarketing is to position a company as environment-conscious by encouraging lower product consumption. Brands like Patagonia, which we’ll shed more light on below, actually increase brand loyalty by urging consumers to buy less. Green demarketing is also used by health-conscious brands to encourage customers to take their health more seriously.
Demarketing is a multifaceted strategy that can be exploited in various ways to reach different ends.
Demarketing: Benefits
As insinuated above, there are numerous benefits associated with demarketing. However, it is crucial to be shrewd with your strategy, as an improper approach can turn all potential customers off and drive down sales and brand loyalty. With that said, here are some of the advantages of implementing a successful demarketing strategy.
Reducing Costs
If a certain product is too costly for a business to keep producing, or the return is not sufficient, a company can use demarketing to direct customers away from this product and save valuable money on production costs.
Reducing Waste
In some cases, demarketing is used to limit waste of materials and products. This goes hand in hand with green demarketing, as it encourages individuals not to buy—e.g. by being closed on major shopping holidays—contributing to less waste.
Reflecting Brand Identity
As referenced in our discussion of green demarketing, the strategy can be used to drive a strong brand identity that really “stands” for something. This kind of demarketing is especially appealing to younger consumers, who tend to be very invested in the ethos of the brands they choose to purchase from.
Conserving Resources
Conserving resources is a serious issue, and a legitimate case for demarketing. In the state of California, for example, water usage is limited, and incentives are given to those who switch their lawns to drought-tolerant alternatives.
In other cases, conserving resources has perhaps less to do with the health of the environment and more to do with actual material shortages. If resources are legitimately limited, businesses may demarket products to avoid a huge demand issue.
Controlling Markets
Certain markets are more profitable for certain businesses, and demarketing can help to exploit that. By limiting demand in some locations, such as those where distribution is difficult, and increasing it in others, businesses can ensure they tap into not only their ideal customers, but their ideal markets, allowing them to make a greater profit.
Promoting Exclusivity
For luxury retailers and certain other brands, customers only want to purchase pieces that most other people cannot. This exclusivity often comes down to how much a customer is willing to pay or, in some cases, whether the customer is part of a special group that is given greater/easier access to certain products than other customers.
The benefits of demarketing are broad and varied but allow shrewd brands and businesses to save money, increase profits, reduce waste, and essentially determine who purchases their products, and where.
Examples of Demarketing Campaigns
Though we’ve provided some examples of demarketing in action, below we’ll shed light on case studies that prove how different demarketing strategies actually lead to increased profit and/or brand loyalty.
Luxury Products — Louis Vuitton
Want to live in the lap of luxury? You’re gonna have to pay for it! And even if you can pay for it, it doesn’t mean that the brand even wants you to! In addition to our Hermès example above, let’s look at luxury retailer Louis Vuitton. This fashion giant sells some of the most expensive and sought-after clothing and accessories in the world. Not only is it expensive, but the brand employs selective demarketing to discourage certain customers from buying their goods. Most high fashion brand stores train their employees to only cater to those who fit their target customer description. If you do not fit into this group, it’s likely you’ll not even be approached by an attendant—even if you have the cash to hand. While this is undoubtedly discouraging to some, it increases loyalty among the select few deemed worthy of making a purchase.
Controlling Supply — LEGO
LEGO is a behemoth in its product category, but it has experienced struggles meeting increasing demand. Therefore, the company decided to decrease advertising to give themselves some breathing space—yet profits continue to increase yearly. Given its industry dominance, LEGO can control the supply of its products without being abandoned by its customers, helping it to continue on its steady path of success.
Green Demarketing — Patagonia
We referenced outerwear giant Patagonia earlier, as it is one of the best examples of green demarketing out there. In 2011, the brand’s “Don’t Buy This Jacket” campaign sought to discourage customers from overconsumption. With the boom in fast fashion and the widespread waste associated with Black Friday, Patagonia remained closed on the day after Thanksgiving and encouraged customers not to buy as much in order to help our Earth. Though this strategy may seem counterintuitive, it helped to reaffirm Patagonia’s commitment to decreasing harm to the environment, encouraging greater brand loyalty than ever before. After all, Patagonia is an outdoor clothing and gear company, whose target customers tend to share similar ideals about reducing harm to the environment.
Long-Term Subscriptions — Birchbox
Long-term subscriptions can be used to decrease desire around making a one-time purchase, instead signing a customer up for recurring purchases. There are numerous examples of successful employment of this strategy. For this article, we chose Birchbox, as they are successful in driving customer loyalty by harnessing both the element of surprise and the unique preferences of the individual.
By signing up for the subscription, customers get unique beauty product samples every month, and therefore can experiment with products before committing to purchasing larger amounts of them. While customers don’t know exactly which products they’re getting each month, by building their online profile, the offerings are likely to suit their preferences.
Demarketing has a very real presence in today’s world, and many companies have successfully exploited different strategies to increase the health and/or profits of their businesses while driving brand loyalty.
How to Set Up a Demarketing Strategy
Setting up a demarketing strategy is by no means a one-size-fits-all type of affair. As this article has sought to explain, each company’s strategy has a unique goal. Is your main aim to increase profits, reduce costs, generate exclusivity, reduce harm to the environment, or something else? You first need to answer this question before using the knowledge gained through your research to implement your demarketing strategy.
Furthermore, a large part of any successful demarketing approach is performing in-depth research on your target audience, so you can analyse sales trends and form a plan surrounding how to maximise profits.
Keep in mind that your demarketing strategy will involve more than just your marketing team. Make sure to develop a comprehensive approach in which all members of your team know which actions need to be taken. Whether you’re looking to break into international markets or make your brand appear more green, there’s a place for demarketing in your business approach.
Your demarketing strategy will be specific to your business, so it’s crucial to determine your goals and to research and analyse your customer base. From there, you can create a demarketing strategy that provides the best returns.
Demarketing: Important to Do It Right
Though its applications are diverse, demarketing is all about using strategies to limit or influence product demand among certain customers, in the short or long-term. Whether the aim is environmental or elitist, by employing the strategies set out in this article, demarketing can bring your business or brand to the next level.
