What Is Demarketing? (Types, Benefits, and Examples)

By Indeed Editorial Team

Published April 26, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Companies use various strategies to control the demand and pricing of their products. They often use these strategies to reach profit and expansion goals. Understanding how to implement these strategies can help you apply them to your marketing or business career. In this article, we define demarketing, explain its types and benefits, discuss various strategies, provide steps to develop them, and share a few examples of how it works.

What is demarketing?

Demarketing is an advertising method companies use to reduce the consumption of a product. Traditional marketing encourages more consumer purchases, while this type of marketing limits a product's reach. Businesses can use this strategy to control certain situations, including product use, demand, or price. It might benefit a company to use this if it has a low production capacity. Other reasons a company may use this advertising method include:

  • Creating exclusivity

  • Making their product more difficult to get

  • Encouraging customers to purchase another product

Related: Top 10 Skills of a Marketing Manager

Types of demarketing

Different types of this advertising method are:

General

This method helps decrease the consumption of a product for its users. A business can use this to conserve resources if it's experiencing a shortage. This can also limit the reach of a less effective product, allowing a company to market a new product instead. Technology companies often use this strategy to encourage consumers toward a more up-to-date model.

Utility companies often use this advertising method to encourage consumers to use their utilities, such as water or electricity, cautiously. Governments also use this marketing to conserve resources or try to prevent citizens from using harmful products. Examples include advertisements that discourage people from abusing alcohol or tobacco products.

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Selective

Companies use this technique to limit consumption by a certain group outside of their target market. Sometimes companies do this to increase a target audience's access to a product. This strategy can encourage loyalty programs and get products to an ideal consumer.

Niche companies frequently use this method to encourage brand loyalty. This method can also prove effective for specialized industries, like robotics. Within a niche industry like robotics, it's helpful to market only to those who understand the product. For these specialized companies and businesses, the selective technique can create a more solid relationship with customers who can likely benefit from their product.

Ostensible

This method takes advantage of shortages by increasing the demand for a product. By restricting certain products, a company might successfully target collectors and create the impression that their products are hard to find. In this way, they create value for their consumers and can increase prices for more recent products.

Ostensible advertisements can effectively create the illusion of limited supplies and customers buying impulsively. If the advertising creates a sense of urgency and conveys that customers have a limited amount of their product, customers are more likely to purchase it sooner. This method can work well for the automotive and technology industries.

Common demarketing strategies

Some of the most common strategies include:

  • Price discrimination: Selling the same product to different buyers for different prices so a company can maximize its sales and profits

  • Stock outage: Creating artificial shortages and sometimes guaranteeing delivery at a future date to encourage consumers to buy more of the product once it's available

  • Differentiation: Increasing the price of a product to discourage cost-conscious customers, adding exclusive accessories to a product that it later removes, or limiting availability to exclusive stores or distributors

  • Crowding cost: Marketing with an expectation of a large crowd because of discounts on a specific day and allowing some customers to avoid crowds but pay a higher cost during exclusive deals

Benefits of demarketing

Some benefits of using this advertising method are:

Increase profit and reduce the cost of production

If a product's profit margins decrease, this strategy can help companies reduce costs by slowing production. Reasons a product's profit margins may reduce include high production costs or marketing costs. Companies can use this strategy to focus on the production of more profitable products and control which products a consumer can access.

Target an ideal consumer market

Businesses can conserve resources by selling products specifically to their ideal customer. This helps the company strengthen their brand identity with their target audience. For example, an advertisement may present a challenge specific to one demographic but irrelevant to another. Although this limits how many units of a product the company sells, it also allows them to increase the price per unit. Increasing the prices protects profit margins while allowing the company to appeal to their ideal demographics.

Related: A Guide to Marketing as a Career

Create exclusivity

Companies can use these principles to limit consumer access to their products. Creating artificial shortages can motivate customers to pay more for the product. It may also encourage customers to buy more of the product than usual to avoid losing access to it. This creates more appeal around that specific product and the company.

Control market location

Smaller companies may limit their products' demand to a specific location. For example, they might place their business in a particular location if it's more likely to have their ideal customer. Small businesses can use this strategy to sell to ideal locations that produce the most profit. Reasons a company may do this include high marketing costs or to make improvements to distribution.

Conserve resources

Accessibility of manufacturing materials can limit a company's ability to produce a product. It can use these strategies to reduce demand and resupply their materials. Limiting demand can let a company focus on products that consume fewer resources or less expensive ones. With this strategy, it might decrease costs while still controlling demand.

Related: What Is Product Differentiation? A Complete Guide

How to develop a demarketing strategy

These steps can help you plan an effective strategy:

1. Understand objectives

The first step of any effective marketing plan is to set attainable goals. These goals may vary depending on the size of the company, target audience, and product. When you establish clear goals, you can plan how to achieve them.

2. Study consumer behaviour

Learning about the target audience is the next step. Using insights from websites, social media campaigns, and other digital and manual tracking sources, compile the data about your target audience. From there, you can analyze the data to find specific consumer trends and consider them while developing a marketing strategy.

3. Combine them

Combining a company's goals with data about its ideal customer often creates a successful strategy. By applying these strategies, you can use consumer data to create more targeted advertising. These same advertisements typically generate more customer data, like engagement, reach, and return on investment. Consistent performance reviews allow you to review your objectives and make more informed choices about marketing.

Examples of demarketing

Here are some examples of how this type of advertising can benefit different industries:

Luxury cars

Car companies can use exclusivity to increase demand. They can do this by manufacturing a few expensive vehicles and redirecting their efforts to customers who value a limited-edition vehicle. Overall, fewer vehicles might sell, but the company can make a greater profit from each unit sold.

Health care

Certain health care organizations can encourage limited client bases when their resources become limited. These resources can include medical supplies or personnel and labouring hours. Limiting their client base helps them conserve their resources, often to serve a population with a higher need, like cancer patients or patients undergoing dialysis. This is a strategy often used by medical specialists to limit their appointments. Administrators can also use strategies like increasing co-payments asking for a referral before seeing the patient.

Real estate

The real estate market can create high-cost real estate and target wealthy consumers. One strategy is to target specific demographics within a community. By targeting higher-earning customers, a company can increase the equity of the entire community while increasing consumer interest and loyalty. This consumer attraction ideally appeals to a specific kind of customer who's willing to pay higher prices for luxury homes or rental properties.

Subscription packages

Long-term subscriptions can lead to greater brand loyalty. Some companies use this type of marketing to limit individual purchases. For some businesses, the cost of production of an individual purchase can make selling a single unit impractical. By using strategies like loyalty deals or exclusive products, an organization can encourage its target audience to commit to their company long-term.

Related: Top 5 Marketing Fields to Explore for a Successful Career

Paper products

Applying this when marketing paper products reduces the consumption of production materials, conserving trees and other resources like gasoline to help the environment. Some companies usually create electronic services and products to replace paper products. Examples include restaurants using reusable menus or banks offering an incentive for enrolling in paperless billing.

Hospitality venues

Many hotels use the strategy of exclusivity in their marketing. Examples of this include parking for a specific kind of vehicle, like a large truck or small motorcycle. If the hotel has a restaurant attached, it can create further exclusivity by raising the food prices. These strategies encourage a wealthy consumer base to purchase accommodations quickly and can sometimes lead to future purchases.

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