An abundancof customers does not always guarantee profit and benefit the business. Sometimes it’s easier to refuse part of the audience: demarketing will be a great help
Surprisingly, an entrepreneur is not always interested in good sales of goods. Sometimes there is a need for the opposite: if there is marketing, then there is also demarketing. A strategy to reduce demand and sales sometimes benefits the business owner.
Task demarketing
Let’s imagine a cafe where fast food sells out in one hour. And within an hour this cafe becomes empty. Those who come to it and cannot eat will be disappointed. Over time, the establishment will have no visitors left at all. Therefore, it is much more profitable if you don’t buy pies or shawarma so quickly.
Let’s imagine a restaurant where you can buy a glass of cheap vodka. Crowds of alcoholics will simply frighten caring parents — the owner will earn pennies on alcohol, but will lose more respectable visitors and will be forced to hire security and an army of cleaners to maintain order and cleanliness.
Demarketing will help everyone who:
- Unable to meet growing demand.
- Spends a lot of money on advertising.
- Doesn’t have time to serve visitors and is bogged down in organizational issues.
- Wants to get a target audience and get rid of ballast in the form of problem clients.
Balance of supply and demand
Sometimes it happens that an inexperienced novice entrepreneur is unable to predict the exact number of potential buyers. Even experienced businessmen fall into such traps. It is much more profitable to serve one person per hour, but get a good profit from him and chain him to you forever. Unjustified hype will lead to the fact that there will be no customers left at all, and cunning competitors will steal the idea and redirect the flow of profit into their pocket, having studied your mistakes. Miscalculations at the start lead not only to the loss of the client environment, but also to the severance of business ties and the receipt of a negative reputation.
About types of demarketing
Demarketing comes in three varieties. Businessmen are interested in an active type, which is aimed at reducing demand. The state uses passive demarketing; its task is to tell people about the dangers of tobacco, palm oil, and monosodium glutamate. The third type of demarketing is absolute. It is easier to replace it with the word confiscation: defective or counterfeit goods are simply confiscated from the seller.
About demarketing strategies
Every entrepreneur or marketer has the right to choose demarketing tactics. It can be divided into:
- General demarketing . The challenge is to reduce demand for the entire consumer environment. Selected target audiences are bracketed. The entrepreneur’s task is to increase profits not due to turnover and large volumes, but due to the quality of expensive products. To do this, you can refuse advertising and raise the price.
- Selective demarketing . It is necessary to reduce demand for a certain target audience. This segment may include low-income citizens, lumpen people, and people prone to crime. You can raise the price, arrange face control, position the brand for a solvent category.
- Imaginary demarketing . It is used when selling jewelry, expensive cars, and premium tours abroad. You can greatly inflate the price, eliminating 99% of potential buyers. An image of goods and services for the elite is created.
How does demarketing reduce demand?
There are several methods, which are dictated by the logic of what was discussed above. Required:
- Raise prices . The low-income part of buyers will immediately leave and profits will even decrease. But the balance of supply and demand will be normal. As soon as it becomes possible to offer people an unlimited amount of your goods, then prices can be lowered to a minimum, making money on turnover and defeating competitors.
- Collapse advertising. It can only be left where a wealthy and financial target audience will get to know it.
- Positioning the company as an elite one . This technique will allow you to get rid of unwanted target audience and preserve your image. An example would be a restaurant where people are only allowed in suits.
- Refusal of problematic clientele, which does not provide profit, but takes up time . One American cellular company has abandoned consumers who constantly complain. The management decided: “If the connection is bad, then there is no need to use it.” The analysis showed that the profit from such a category was symbolic.
- Direct refusal to serve some clients . This is a tough but effective method. An example is a cinema where there are age restrictions on a number of films. A more loyal method is to work according to the principle of clubs. This is what fashionable barbershops do, offering only services for men.
- Creating an alternative direction to shift consumer attention . If your brand does not want to sell consumer goods characterized by low profitability, then switch to souvenirs or seasonal goods with the company logo. This way you can get rid of what clogs the shelves, but does not provide profit. If your company repairs expensive equipment, but the residents of the village do not have it in their hands, then repair what they have.
- Formation of a negative image of goods for which there is increased demand . An excellent example is the warning on cigarette packs about the dangers of tobacco smoke. The state obliges the manufacturer to warn about the harmfulness of alcohol. Sometimes competing companies resort to such technology, but this is countermarketing.
And you can also forget about bonus savings for a while, promotion. Many freeloaders buy goods only when they are at maximum discount and the seller makes no money. Lovers of freebies always take away energy and do not bring income in the future.
Distinguishes demarketing from countermarketing
Sometimes disputes and confusion arise among entrepreneurs. The goal of demarketing is a conscious reduction in demand by a businessman for a specific purpose and reaching a new level in the future. The task is to preserve the business itself and its image. Countermarketing is used to deliberately attack a competitor’s reputation, cause damage to it, and attempt to lure away its customers. There has always been a brand war and there will always be a war.
How to protect yourself from losses?
Sometimes a demarketing move can be harmful and lead to a complete loss of clientele. First you need to take into account all the risks, calculate the costs of future and previous advertising expenses, estimate the sales volume in all your segments, and clearly know your net profit. Before deciding to take a demarketing step, you need to ask yourself the following questions:
- Are you really not yet able to meet the growing demand?
- What can you lose by reducing part of your target audience?
- Which product segments are profitable and which are ballast?
- Will getting rid of unprofitable goods cause catastrophic damage?
- What will be acquired now and in the future?
Let us remind you that any business is a risk. And the advice, real practice and experience of outsiders do not always help. What works for others may be disastrous for you. Be prepared for anything and don’t rush to jump in: sometimes an old friend is better than two new ones.
What do you think? Have they used demarketing tactics in their business? What important points are missing from the article?
