What Is Demarketing? (With Examples and Benefits)
Updated June 24, 2022
Demarketing is a process that can allow companies to control the pricing and demand of their products. This strategy can help organizations reach their goals for profit or expansion. If you're interested in pursuing a career in marketing or other business-related roles, understanding the principles of demarketing can help you apply these strategies during your career. In this article, we explain what demarketing is and why it's used, and we provide several real-world examples of this process.
Related: Essential Roles of a Marketing Team
What is demarketing?
Demarketing is a process in which a company develops strategies to reduce the consumption of a product. While traditional marketing often encourages customers to purchase more products, demarketing aims to limit a product's reach. Companies can use it in a variety of situations to control product use, price or demand. They may use these strategies for many reasons, including to conserve resources or increase demand.
Types of demarketing
Some different types of demarketing strategies include:
A company may use a general demarketing strategy when they want to decrease the consumption of a product for all users. This can help them conserve resources during shortages. It can also limit the reach of an old or less effective product. For example, a laptop company may use demarketing principles to limit the purchase of an older laptop model, encouraging customers to purchase the company's new model.
Selective demarketing is when a company uses demarketing strategies to limit consumption by a specific set of customers. They may do this to increase access for other groups of customers, including loyal customers or those who meet their ideal customer profile. For example, a company may demarket a product to the general population to maintain a sense of exclusivity for their rewards program members.
Ostensible demarketing involves a company creating a shortage to increase the demand for a product. Restricting the supply of certain products can create a demand for customers to find or collect hard-to-find items. This can allow companies to increase prices for in-demand products.
Examples of demarketing
Here are some examples of situations in which organizations may use demarketing to reach their goals:
If health care organizations are under stress, demarketing can encourage limited participation. This can help these organizations conserve resources. To limit patient participation, health care administrators can apply increased co-payments and user fees. They can also require that patients have a referral before seeing a specialist to limit the number of appointments made.
Promoting the use of paperless products is an example of general demarketing. To limit the use of paper, thus conserving trees and other natural resources, some companies have transitioned into electronic versions of services or products. Some examples of this include restaurants eliminating paper menus or utility companies offering incentives to enroll in paperless billing.
To encourage customers to purchase long-term subscriptions, companies can demarket individual purchases. Since individual purchases may be less profitable than long-term subscriptions, companies can make individual purchases seem less desirable by offering deals or exclusive products to customers who commit to purchasing the product for a longer time period. This principle may help organizations sell foods, cleaning supplies or other products that are frequently replenished.
To create the impression of exclusivity and increase demand, car companies may only manufacture a limited amount of certain high-cost vehicles. They may then focus their marketing efforts on customers who value exclusivity, such as car enthusiasts or collectors. While this may cause fewer cars to be sold overall, the company may make a higher profit for each car sold.
High-cost real estate
Real estate professionals may develop high-cost, luxury real estate options to appeal to wealthy renters or homeowners. They may do this to control the demographics of the people who live in a certain community or area. For example, they may want to create higher-cost communities to attract those who are willing to pay increased prices for luxury features.
Benefits of demarketing
Here are some potential benefits of a company or organization choosing a demarketing strategy:
Reduced costs and increased profit
If a company is no longer gaining sufficient profit from a product, demarketing can allow them to reduce costs by limiting production. Some reasons that products may not earn sufficient profits include high marketing or production costs. By demarketing these products, companies can focus on the production of more profitable products. This strategy can allow companies to control which products customers engage with or purchase.
If a company can't access sufficient materials to manufacture a product, demarketing can reduce demand as the supply of materials replenishes. Some reasons for material shortages include supply chain disruptions and recalls. Limiting the demand for certain products can allow a company to focus on products that are easier to manufacture as material sources rebound.
Appealing to an ideal customer base
Demarketing can allow companies to conserve resources by only selling products to their ideal customer base. This can also allow them to protect their brand identity. For example, a luxury company may want to appeal primarily to customers who are at least 55 years old and enjoy luxury travel. To do this, the company may demarket to other customers. While this may limit the amount of product the company can sell, it may allow it to increase prices and appeal to new customers who fit their desired demographics.
Control of market location
Demarketing can also allow a company to limit the demand for a product in certain locations. Some reasons they may do this include high costs of marketing to that area or challenging distribution channels. Similar to how demarketing can allow companies to sell products to their ideal customers, it can also allow them to sell to the locations that can make the most profit.
A company may use demarketing principles to limit access to a product, making the product appear to be exclusive. By creating an artificial shortage, a company can motivate customers to pay more for products or purchase more to avoid running out. They can also make their products seem highly desirable.
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