DEMARKETING Explained

EXECUTIVE SUMMARY

          Demarketing is an attempt or device to reduce or limit demand for consumption of a specific product or service on a permanent or temporary basis.  This attempt can led to an outcome of excessive demand which may have some effects on the objectives of an organization.  Therefore, demarketing is able to be applied on both private and public sector goals.  Marketing is basically dealt with the problem of increasing or stimulating demand in terms of over supply.  The use of the 4P's of the marketing concept, however, becomes the focal point of this objective.  Marketing focuses on the defining the firm's goals, recognized the important market, and understand the needs and desires of the customers.  Firms, at the same time, might be hampered with the problem of customer mix and marketing mix decision.

           Demarketing can be used as a device to decrease or reduce total demand, or types of demand and uses in relation to a particular stage of supply.  Once a firm acknowledges that demarketing is a must, then all the marketing approaches can be applied.  Marketing has been suggested as importance to the dilemma of decreasing demand as well as to the dilemma of increasing demand.  Demarketing should not be classified as mere marketing in the opposite side where the 4P's of the marketing are used to reduce demand. If demarketing is implemented appropriately, then firm is able to enjoy a viable future and a more secure, predictable short run.

DEMARKETING

Introduction

          Demarketing, the methods that have been used to reduce market demand for a particular item or product.  Demarketing usually involves the alterations of marketing mix variable to affect lesser demand when it is bigger than an organization can or able to tackle the situation.  Oftentimes, demarketing methods involve raising prices, reducing advertising and promotion expenditures, or deleting product benefits.  Usually, demarketing may be intended to decrease demand either for a shorter period or forever.  In selective demarketing, a company may try to decrease demand in a specific or particular market such as the one that is considered to have less profitable than others.  This can be classified as an appropriate planning when a company is encountered with an overfull demand state.

          Demarketing is considered to be the reverse of marketing.  The version of demarketing became a very hot issue in the early period of 1970's especially with the popular incident when the supply of a variety of items became very limited.  According to Phillips and Sidney, demarketing is basically defined as: ".... attempts to discourage customers in general or a certain class of customers in particular on either a temporary or permanent basis." (1971)

DEMARKETING

          Demarketing strategy is able to be implemented in various forms such as keep close attention of the time requirements of different customers or clients.  Demarketing can be expressed as rationing supplies by differentiating customers on an equitable basis.  The third strategy of demarketing is explained as recommending to customers to utilize a substitute product temporarily in terms of demarketing.  The final demarketing strategy is to divert a customer with a spontaneous need or requirement for the item to another customer in which the company or firm has already supplied or provided the item recently and who the customer is unlikely to use the item until a certain period of time in the future.

          Demarketing strategy has been focused toward maintaining customer goodwill at the times when the demands of the customer do not match appropriately.  On the other hand, demarketing strategy may probably lead to improved revenues in the long run.

          The famous concept of marketing is to deal with the dilemma of expanding need or demand.  This concept is related with the rising period of items that are oversupply.  However, marketing has a strong relation of identification with the dilemma of buyer markets.  In reality, excess demand is more or less the same in situation as excess supply.  In addition to this problem, a company may encounter a major difficulty in terms of customer mix and marketing mix decisions in times of over demand.  The duties and responsibilities of demarketing in the long run is to ensure that the demand have to be at the same stage and composition which suits the objectives and goals of the company.

          There are three different forms of demarketing.  The very first is called the general demarketing.  This form may probably need especially when a company plans to reduce the amount of total demand.  The second step is known as the selective demarketing.  This step takes place when a company decides to discourage the demand occurs from specific groups of customer.  The final type of demarketing is referred to as an ostensible demarketing, which includes the feature of planning to discourage demand that acts as a device for the purpose of increasing the situation.

          General demarketing can be sub-categorized as temporary shortages, chronic over popularity, and product elimination.  In the case of temporary shortages, many companies possess the problem of misfortune and fortune especially in searching for specific products or items in over demand.  The superior in the management level may either make an underestimated demand or overestimated the production.

          Here are some of the cases that have been drawn back for temporary shortages.  In the early 60's, Eastman Kodak launched its Instamatic camera; however, this company realized that they were hampered with the problem of runaway demand.  Also, in the same period of time, Wilkinson Sword came out with its latest stainless steel blade.  Due to this introduction, this company was being criticized by both regular and new dealers for supplies as none of them felt that they were satisfied.

          Sometimes in the late 1960's, the company named Anheuser-Busch was underestimating the growth level in demand for its famous Budweiser beer.  This company then discovered that it has to ration supplies to its good dealers and market.  The last case of the temporary shortages occurred in the period of early 1970 between the savings and loan associations in which they were hampered with problem of oversupply of savings in relation to their ability to invest the funds and at the same time to discourage the savings customers.

          The above-mentioned cases referred to as temporary shortages where the company enables to bring forward enough plant expansion.  There are various steps being used to encourage DE consuming such as reduce sales promotion expenditure, cut back salesmen's selling time on the items and their activities budgets, increase the price and other criteria of sale for the beneficial of the marketing company, and finally, reduce product quality or content which may result in demarket at a slower phase.

          In addition to the above situation, marketing management needs to develop a good and reliable plan of product allocation.  Management should be able to allocate the products in a situation of first come first serve in which the dealers and customers should receive their stocks according to their ordering.  Also, management can practice the allocation of the product by emphasizing on proportional demand basis.  In addition, a company might also allocate supply toward a favored customer only or a company can put the product demand on the highest bid basis.  However, the policies for allocating supply are necessary for top level management to play an essential part in giving advice concerning the impact on the alternatives that might take place in the long run.

          The second sub-category of general demarketing, chronic over popularity, where an organization is facing with this problem right now in which it is trying to bring the demand down to a permanently lower level.  There are two factors involved for chronic over popularity.  Firstly, the product's present popularity seems to be the biggest draw back to the long run quality of the item.  Secondly, over popularity can be considered as a problem as more management does not want to hold responsibility on all of the demand.

          The last topic of general demarketing is product elimination in which a deft demarketing is needed especially when a company plans to eliminate a product or service in which the regular and loyal clients might still needed or desired of the item.

          The second form of demarketing which has been mentioned earlier is known as selective demarketing.  Selective demarketing can be discussed into two different ways.  First, it refers to a deliberate decision of segments that need to be avoided, and secondly, a particular way of selection to drive off the unrequired clients.  Usually for selective demarketing, the company has no choice of refusing the rights of sales; as a result, company’s tries to figure out ways to discourage demand from the unwanted customers.  This can be practiced in a situation when a company markets or focused its attention to only one group of segment of the public.  It is most likely to discourage those that need the product or item desperately.  In some situations, marketer is not given the choice to charge a discriminatory price especially to those unwanted group.

          Oftentimes, when a company plans of discouraging, it actually is hoping for product availability.  In relation to this, a company might offer a bad service to the undesirable clients or group of customers.  Besides, a company may also put pressure for these undesirable clients to figure out the way for product channels or information.  However, an organization needs to have the freedom of choice or defense its important customers in a situation where revenues are the main issue.  On the reverse side, an organization should not be prejudiced or biased against potential buyers who do not possessed the criteria that the organization is expecting, and discrimination needs to be avoided completely.

          The last or the third type of demarketing is called the ostensible demarketing.  Here, it creates the feature of refusing a large amount or number of customers by hoping that the product seems to be more valuable than the customers themselves.  Most marketers decide upon the principle or concept that people need what they feel may probably not that easy to achieved or feel happy if they were being ignored by the seller.

          Marketers need to integrate the changes in the business environment which include several factors such as effective new product, pricing, distribution, and promotion strategies.  These factors are often called the 4P's of marketing concept. Usually, demarketing involves in a changing of marketing orientation.  "Recent changes in the business environment have focused attention on a wider range of marketing tasks which include that of reducing overfull demand, or demarketing." (Phillips Kotler & Sidney J. Levy, pg. 74-80).  According to marketing management strategy, marketing will stay as an important position of management decision making and turn out to be the best form of choice.

          In terms of integrated approach, marketing has long been recognized as the changing management in relation to the opportunity assessment in the market as well as in the integration of change into organizational decision procedures.  This implementation of marketing planning required both attentions for long term and short term effects.  As for the demarketing position, it needs to understand that a firm knows more about the consequences of its action in related to the customers.  However, for marketers whose products are heavily depended upon derived demand, there is a need to be more aware with the problems and trends in the ultimate market.

          In demarketing, most or oftentimes marketers are encountered with the social change that is, the shifting of social values and attitudes away from the excessive consumption to the limited consumption.  However, it is not that easy to obtain changes in direction than it is to launch existing attitudes and behavior.  Here, a marketer needs to understand the concept of marketing problem that is; a problem to one organization is a chance or an opportunity to another.

          Demarketing is considered to be an integral component of general marketing and needs to be positioned from a very wider prospect instead of a limited point of view.  Marketing management needs to be more aware of the situations of marketing mix elements in terms of marketing environment shifts from excess supply to over demand.

          In developing a substitution strategy, it is the marketer’s responsibilities to ensure the possible alternatives through evaluation in terms of supply trends, price trends, technical compatibility, product quality acceptability, time interval to achieve change, cost of change, and political stability.  However, the impact of substitutes on product quality needs to focus on special consideration.  Product demand has a connection with the level of quality and consumer expectations.

          "Market research, on the other hand, has put more attention on the growing profiles of purchase behaviors and styles.  Also, researchers have to be more aware in terms of making progress in their ability to assess for the coming behavior and need to continue observing the trend approach that offers interesting potentials." (Jack J. Honomich, pg. 30-31)

          During the times of over supply, the pricing strategies have been developed to achieve sales volumes as a mean for corporate profitability and then focused the attention on the penetration price levels.  While marketers recognized the basic essential of keeping prices at a lower level, the shortage situation has been connected with the fast changing cost that need to be reconciled if the product or item plans to stay on a profitable position.

          "Fairchild Camera and Instrument Corporation recently bowed out of a price war with Texas Instruments for two control modules for Polaroid Corporations SX-70 camera, because the profit margin would not be sufficient given the new business environment." (Business Week, pg. 42-46).  Marketers are able to reduce demand for their product by increasing or putting an extremely higher price.  However, this method is basically narrowed down both by control regulations and by the nature of competitive price levels and consumer expectations.  As a result of this method, companies have to offer a range of service factors concerning their products in order to receive a better position of the sales growth in the market.

          The best method for the growing of the channels of distribution has put a lot of emphasizes on time, and in relation to this, there is controlled flexibility for short term changes.  However, the concept of mass distribution is hampered by the pressure in the present environment, and also, marketers need to realize of the opportunity and the potentiality for the overall planned restructuring of the distribution channel.  Since marketers focus more attention on reducing consumer demand, this might enable marketers to implement the strategy of target segment distribution.  However, the problem that the marketing management is encountering today, basically, deals with the questions of how to allocate the available product supplies and how to maintain the goodwill of the distributors and customers.

          One area or field of uncertainty and insecurity is the evaluation for the cost effectiveness especially for promotion program.  Here, quite a large number of marketers plan to reduce advertising and sales force budgets in relation with the situation of declining in supply.  As a tradition and custom, sales force performance has been based on sales volume and quota requirement.  "In the present market environment, however, an extension of performance criteria is necessary and should include service orientation and marketing intelligence.  The service focus requires that salesmen solve their customers' supply problems and be well informed on the product availability and allocation procedures." (Business Week, pg.54-61).  The attention in advertising need to be on creating new trends and waves that have connection with the emerging social value patterns and that specify action alternatives for customers if there is a needs or requirements in developing important changes in consumer behavior and orientation.

          Here are several ways of assessing and implementing the strategies of demarketing.  Demarketing strategies include a wide range of applications.  Marketing strategies are changing due to various factors such as scarcity of materials, problem of inflation, and higher cost in every aspect of a business.  Demarketing can become a more commonplace since resources turn out to be more scarce and higher priced as well as governments place more pressure on marketers.

          Marketing strategy needs to accommodate changing environmental and internal influences.  A demarketing strategy quite often has been referred to as a reaction to actual or threatened shortages of raw materials.  In order to coincide or match with supply, the marketer is required to reduce or ration demand.  As supplies of resources become increasingly strained, the growth and development of the market expansion especially for the strategies seemed to be a major difficulty to implement.  So far, a few numbers of efforts have been implemented in order to identify different categories of demarketing which had been explained earlier such as general, selective, and ostensible demarketing that referred to as a same term of trying to discourage demand.  Basically, the breakdown of demarketing is based on the portion of the market that is affected by the strategy.

          Cullwick (1975) mentioned two different types of demarketing strategies.  "A demarketing strategy will either ration demand or reduced demand.  When rationing demand, the marketer attempts to spread limited supply of products throughout the market.  When reducing demand, active efforts are made to lower the overall demand for the product."

          Demarketing strategies can be grouped according to the degree of which they reduce or control demand.  Demarketing strategies include passive demarketing, active demarketing, and complete demarketing.  Passive demarketing is being identified as a situation where consumers may not use the product but still it available to those consumers persuaded by the demarketing strategies.  However, as for active demarketing, it would use the marketing mix to ration, decrease, or restrict demand in several or every market segment.  The third strategy is called the complete demarketing which will cease sales of the product.

          Consumerists and marketing critics have putting some pressures on marketers to be more socially responsible.  If there is demand occurred for the product, then the marketer could probably be in a no-win predicament.  Consumers will switch to competing brands if the marketer discontinues marketing the product or item unilaterally.  On the other hand, if marketers plan to continue to market the product, then special government agencies could place a tremendous pressures or regulations on the firm.  Another alternative is to have trade association practice self regulation.

          "There are two specific objectives for a passive demarketing strategy.  Firstly, consumers would be educated as to the negative impact of the product on society, the economy of the environment and, if the alternative products and behavior to that product.  The company would continue to keep the product on the market so as to maintain sales to consumers unaffected by the demarketing effort.  Secondly, special interest groups, regulatory agencies, and executives of the firm wanting the firm to be more socially responsible would be evidence that the firm is moving in a positive direction.  If the marketing effort is successful, pressure on the firm will then be reduced." (Stern, 1971).

          The investment in a demarketing campaign could lead to a reduction in sales if there is no alternative product is available to consumers.  However, the demarketing effort must be able to satisfy the critics of the firm.  Those who expect the firm to act in more socially responsible attitudes and behavior must put a total confidence that the firm is trying its very best effort to adjust the behavior of the consumers.  Besides influencing customers, demarketing effort needs to be conducted especially when there is a chance or opportunity to success.

          A consumer education program for demarketing strategy can be effective if it follows some of the steps mentioned below.  "A reasonable segment      of consumers should be receptive to an educational program and will be likely to alter their behavior.  A program must have an existing attitudinal base to be effective.  An education demarketing campaign will meet with more success if it is conducted in conjunction with other demarketing efforts.  The demarketing effort should not be viewed as a short run strategy.  The support within the firm should be substantial before a campaign is begun." (MAJOB, pg. 36)

          In order to reduce demand for a product or service, a marketer needs to use an active demarketing.  Active demarketing is a strategy that is used in an attempt to limit and decrease demand in order to match supply.  In addition to this, active demarketing can be utilized when a firm identifies less profitable products in its product mix.  Besides, active demarketing can target both the entire market or at specific market segments.  The marketer is enabling to create rationing or short-run active demarketing strategies when temporary developments take place with no significant long run effort.  To have a clear understanding, active demarketing program can or enable to limit the sales of a product which could focus on a market segment or on the entire market.  This strategy has been used in several situations and companies such as chemical firm, utilities for electricity, and water shortages.

          In order to adopt an active demarketing strategy, some guidelines need to be followed before this strategy can be performed such as image of the firm, personnel impact, legalization, elasticity of marketing mix, and segmentation.

          The final strategy of demarketing is referred to as the complete demarketing.  Complete demarketing can be implemented if a marketer feels that the product is no longer necessary to be utilized or the consumers are not required to buy the item.  In addition to this situation, forced complete demarketing would be carried out if the complete demarketing program was being enforced due to the outside pressure.  Good example of the force demarketing program is government recalling for the products as these products are not suited to be in the market.  One of the incidents that took place was the Proctor and Gambles.  This company had to withdraw one of its products called Rely tampons.  Besides withdrawing the product from the market, this company also has to convince the customer of not to buy the product through promotional campaign and the product needs to be returned to the retailer.

          A cost benefit dilemma is encountered when implementing a voluntary complete demarketing program which include the dollars to recall the product, the opportunity cost of spending resources for recalling the product, facing the image problem, and reactions from the directors and stockholders.  If the product is not suitable to be used, customers should not use the product.  Then, the customers are highly protected.  Once the product is removed quickly from the market, then the legal problems can be minimized.

CONCLUSION

          To conclude this hot issue of demarketing, it is not difficult to express that demarketing is only marketing in the opposite situation that includes product, price, place, and promotion policies which can be used to discourage demand.  However, there is the danger of excessive reducing short run demand rather than increasing the demand excessively.  On the other hand, the functions of marketing are basically to regulate the standard and shape of the demand so that it enables to conforms for both organizations current supply position and long run planning and goals.  Besides, marketing possesses a part in terms of excess demand that is the challenge which is to demarket appropriately and wisely.

          Marketers need to recognize marketing as the management of change for the growth of an environment of shortages reinforcement.  Demarketing strategy is considered as an integral part of overall marketing and it is important to strongly emphasize on decreasing or rationing demand.  In addition to this, marketing research needs to pay more attention on social and technological trend analysis in relation with the historical background of sales and purchase behavior.  By this, it can offer early signal of warnings especially with the changes in the market environment as well as launching sensitive strategies to acknowledge with the mentioned changes.

          Once marketing strategies become more cautious, then demarketing strategies enable or managed to be increased.  The passive demarketing aims to persuade customers from using the product, but at the same time keeps the product to be available in the market.  Active demarketing attempts to reduce overall demand.  Finally, complete demarketing takes place especially when the marketing of a product slowly become diminish, and the customers are informed carefully of not to use the product.  Here, the marketers need to be aware of the dilemma that they will probably have to face with.  In order to overcome the dilemma, different factors should be taken into account, different questions should be brought forward, and traditional goals of demarketing are always changeable and easily altered.