When dealing with difficult or unprofitable customers, some managers—possibly many—have felt tempted to press the “delete” button. In fact, a company’s procedures should include “demarketing” or dropping customers. According to this author, relationship demarketing would result in very significant gains if it enabled a business to concentrate its efforts and fortify its bonds with the most important clients.
According to the electronics retailer, customers who frequent Best Buy stores fall into two categories: “angels” and “devils.” According to research, angel clients are less demanding than devil clients and spend more money on expensive new technologies. Devil customers, on the other hand, appear to purchase goods, submit rebate applications, return the purchases, and then repurchase them at discounts offered for returned goods. They discover prices that have been quoted on the Internet and ask the store to uphold their lowest price guarantee. Devil customers, in the words of Brad Anderson, CEO of Best Buy, “can wreak enormous economic havoc ”.
For better business outcomes, businesses have paid close attention to managing the attitudes and behaviors of their customers. But if they also upgraded their customer mix, they could do more to boost their performance. Most businesses manage their product markets similarly to investment portfolios, which makes sense if those markets are the primary assets of the company. However, if clients are viewed as the company’s most valuable assets, the company must consider client portfolios and allocate resources to build successful, long-lasting relationships.
Utilizing a matrix like the one shown in Chart 1 is one method for evaluating a company’s customer portfolio. Companies can enhance business performance by cultivating relationships with preferred customers and managing other customer relationships for greater lifetime profitability and strategic value. For instance, banks encourage their supposedly routine customers to use ATMs and online banking, lowering service delivery costs and boosting profitability. Companies like Bell, Rogers, and Sears Canada aim to develop more complex relationships with desirable customers, which raises the strategic value of these customers.
Demarketing – meaning, explanation with example
Types of demarketing
Some different types of demarketing strategies include:
General demarketing
When a business wants to reduce the consumption of a product by all users, they may employ a general demarketing strategy. This can help them conserve resources during shortages. Additionally, it may restrict the market for a dated or ineffective product. For instance, a laptop manufacturer might employ demarketing strategies to discourage customers from purchasing an older model of laptop in favor of the brand’s more recent model.
Selective demarketing
When a business employs demarketing techniques to restrict consumption by a particular group of customers, this is known as selective demarketing. They might carry out this action to open up access to other customer groups, such as devoted customers or those who fit their ideal customer profile. For instance, a business might stop marketing a product to the general public in order to keep their rewards program members feeling exclusive.
Ostensible demarketing
In ostensible demarketing, a business fabricates a shortage to raise demand for a product. Limiting the availability of certain goods may spur consumer interest in locating or collecting those goods. This can allow companies to increase prices for in-demand products.
What is demarketing?
Demarketing is the process by which a business creates plans to lower product consumption. Demarketing aims to restrict a product’s reach, in contrast to traditional marketing, which frequently encourages consumers to buy more products. It can be used by businesses in a variety of circumstances to regulate demand, price, or product use. They may employ these techniques for a variety of objectives, such as resource preservation or demand generation.
Examples of demarketing
Here are some scenarios where businesses might use demarketing to accomplish their objectives:
Health care
Demarketing can encourage limited participation if health care organizations are under pressure. This can help these organizations conserve resources. Health care administrators can implement higher co-payments and user fees to restrict patient participation. To reduce the number of appointments made, they can also demand that patients have a referral before seeing a specialist.
Paper products
One instance of general demarketing is encouraging the use of paperless products. Some businesses have switched to electronic versions of their services or products to reduce the use of paper and protect trees and other natural resources. Examples of this include dining establishments discontinuing the use of paper menus or utility companies providing incentives for switching to paperless billing.
Subscription packages
Companies can demarket single purchases to entice customers to buy long-term subscriptions. Companies can make single purchases seem less desirable by providing discounts or exclusive products to customers who commit to purchasing the product for a longer period of time because single purchases may be less profitable than long-term subscriptions. This idea might support businesses that sell restocked goods like food, cleaning supplies, or other goods.
Luxury vehicles
Automobile manufacturers might only produce a small number of certain expensive vehicles to give the impression of exclusivity and boost demand. They might then target customers who value exclusivity, like car enthusiasts or collectors, with their marketing campaigns. Overall car sales may decline as a result, but the company may still sell more cars at a higher profit.
High-cost real estate
In order to attract wealthy renters or homeowners, real estate professionals may create expensive, luxurious real estate options. They might do this to manage the demographics of residents in a particular neighborhood or area. For instance, they might want to develop more expensive neighborhoods to draw people who are willing to pay more for upscale amenities.
Benefits of demarketing
Here are a few advantages of a demarketing strategy for a business or organization:
Reduced costs and increased profit
Demarketing can enable a business to cut costs by limiting production if it is no longer making enough money from a product. High marketing or production costs are some factors that could prevent products from making enough money. Companies can concentrate on producing more lucrative products by demarketing these products. Using this tactic, businesses can decide which products consumers interact with or buy.
Conserved resources
Demarketing can lower demand as the supply of materials replenishes in the event that a business cannot obtain enough raw materials to manufacture a product. Material shortages can occur for a variety of reasons, such as supply chain problems and recalls. Limiting the demand for certain goods can enable a business to concentrate on goods that are simpler to produce as raw material sources recover.
Appealing to an ideal customer base
By limiting product sales to their ideal customer base, demarketing can help businesses save resources. This can also allow them to protect their brand identity. For instance, a luxury business might prefer to target clients who are at least 55 years old and enjoy luxury travel. To do this, the company may demarket to other customers. While this might reduce the amount of product the business can sell, it might also give it the opportunity to raise prices and attract new clients who fit their target demographic.
Control of market location
Demarketing can also enable a business to restrict where a product is in demand. They might do this due to difficult distribution channels or high marketing expenses in that region. Similar to how demarketing enables businesses to market to their ideal clients, it likewise enables them to sell to the markets where they stand to profit the most.
Exclusivity
Demarketing principles may be used by a business to restrict access to a product, giving the impression that it is exclusive. A business can encourage customers to pay more for goods or buy more by making an artificial shortage happen. They can also make their products seem highly desirable.
FAQ
What is demarketing in simple words?
When a business wants to stop marketing its product to everyone, general demarketing is carried out. When a company wants to lower the overall demand for product consumption, it always takes this action. State and federal governments deregulating the sale of alcohol and cigarettes to the general public are examples of general demarketing. 2.
What is the purpose of demarketing?
Demarketing is defined as the practice of using advertising to reduce demand for a good that is in short supply.
What is demarketing in tourism?
Demarketing is regarded as a crucial tool for reducing demand for or consumption of a specific good or service, or rationalizing its use, permanently or momentarily (fuel, electricity, water, etc.). ) because of the scarcity of these resources and their significance to nations’ economies.
