Philip Kotler and Sidney ]. Levy

Demarketing,yes, demarketing

Rather than blindly engineering increases insales, the marketer's task is to shapedemand to conform with long-run objectives

ForewordThe way marketers try to cope with excess demandor unwanted demand may affect the company's long-run objectives just as much as do marketing policiesfor normal times. What kinds of situations leadcompanies to eut back on their marketing efforts?How do methods of de-cmphasis differ depending onthe type of problem? This instruetive and sometimesamusing analysis answers these and other questionsthat have never before been raised in HBR. It alsosuggests new directions for the study of marketing.

Mr. Kotler is the A. Montgomery Ward Profes-sor of Marketing in the Graduate School of Manage-ment, Northwestern University. He has written bookson marketing management as well as several HBRarticles. Mr. Levy is Professor of Behavioral Sciencein Management at Northwestern. As Vice Presidentof Social Researeh, Inc., he has directed research in-vestigations on behalf of numerous organizations.He is well known for his publications on consumerbehavior. (The cartoons arc by Mark E. Kclley.)

T popular conception of marketing is thatit deals with the problem of furthering or ex-panding demand. Whether one takes the tradi-tional view that marketing is finding customersfor existing products, or the more recent viewthat it is developing new products for unmetconsumer wants, it is seen as the technologyof bringing about increases in company salesand profits. The marketer is a professionalbuilder of sales volume who makes deft use ofproduct, price, place, and promotion variables.

This is a narrow concept of marketing and thepotential applications of marketing technology.It is a concept that arose in a period of goodsoversupply. It also reflects a widespread tendencyto define marketing in terms of what marketersought to do rather than to analyze what theyactually do under various cricumstances. Much

marketing literature approaches marketing withexhortations: define your objectives, know yourmarket, meet consumer needs, and so on—allunderlaid with the implied promise that thenyou will sell more. As a result, marketing hasbeen too closely identified with the prohlem ofbuyer markets.

But suppose that an economy were sudden-ly plunged into a state of widespread productshortages. What would be the role of marketingmanagement then? Would it evolve into a mi-nor business function? Would it disappear alto-gether? Or would it continue to perform criticalfunctions for the company?

Most production, financial, and marketingmen who are asked this question opine thatmarketing's role would be greatly reduced in ascarcity economy. They see marketing as a "fair

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Demarketing

weather" profession, one that seems to he im-portant chiefly in periods of excess supply. Inthis respect marketing differs from manufactur-ing, accounting, and other business functionsthat are critical in all stages of the eeonomy.

But this is an untenable position. True, ifmarketers are narrowly seen as responsihle pri-marily for finding customers or increasing de-mand, then they would seem superfluous whendemand becomes unmanageably great. However,in practice excess demand is as much a market-ing problem as excess supply. A company faces ahost of difficult customer-mix and marketing-mix decisions in periods of excess demand. It hasto find ways of reducing total demand or certainclasses of demand to the level of supply with-out damaging long-run customer relations.

Our name for this kind of activity is "creativedemarketing." More formally, we define de-marketing as that aspect of warketing that dealswith discouraging customers in general or a cer-tain class of customers in particular on either atemporary or permanent basis. The tasks ofcoping with shrinking demand or deliberatelydiscouraging segments of the market call for theuse of all the major marketing tools. As such,marketing thinking is just as relevant to theproblem of reducing demand as it is to the proh-lem of increasing demand.

Once this view is appreciated, the true char-acter of marketing's mission hecomes clearer.Marketing is the husiness function concernedwith controlling the level and composition ofdemand facing the company. Its short-run taskis to adjust the demand to a level and composi-tion that the company can, or wishes to, handle.Its long-run task is to adjust the demand to alevel and composition that meets the company'slong-run objectives.

In this article we will describe three differenttypes of demarketing:

1. General demarketing, which is requiredwhen a company wants to shrink the level oftotal demand.

2. Selective demarketing, which is requiredwhen a company wants to discourage the de-mand coming from certain customer classes.

3. Ostensible demarketing, which involves theappearance of trying to discourage demand asa device for actually increasing it.

(A fourth type, unintentional demarketing, isalso important but does not need to he con-sidered here. So many abortive efforts to increasedemand, resulting actually in driving customers

away, have heen reported in recent years thattbe dreary tale does not need cu be told again.]

General demarketing

At times excess demand can characterize a wholeeconomy, and at other times, only a limitednumher of firms. Even in the absence of a gen-eral scarcity economy, there are always individ-ual sellers who are facing excess demand forone or more of their products. While most other

companies may be looking for customers, thesesellers face the need to discourage customers, atleast temporarily. Their marketing stance mayhecome one of indifference or of arrogance. Ina responsible organization, however, attemptsare made to act in a framework that respectsthe marketing concept, i.e., the long-run aim ofdeveloping satisfied customers.

It is possible to distinguish at least three dif-ferent situations that may give rise to generaldemarketing hy a company. Let us consider eachsituation briefly.

Temporary shortages

Many companies have the periodic fortune—ormisfortune—of finding particular products in ex-cess demand. Management underestimated de-mand, overestimated production, or did hoth.The following cases illustrate:

0 Eastman Kodak introduced its Instamaticcamera in the early 1960's and found itself fac-ing runaway demand. A few years passed he-fore Kodak achieved enough capacity to handledemand.

0 Wilkinson Sword introduced its new stain-less steel blade in the early 1960's and was be-sieged by regular and new dealers for supplies,not all of whom could be satisfied.

0 Anheuser-Busch underestimated the rateof growth in demand for its popular Budweiserbeer and found itself in the late 1960's havingto ration supplies to its better dealers and mar-

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kets while it was making a crash effort to expandits plants.

0 Savings and loan associations in 1970-1971faced an ovcrsupply of savings relative to theirability to invest the funds and sought means

to discourage the savings customers. They werewilling to encourage small accounts, but re-fused large depositors.

These cases reflect temporary shortages of prod-ucts that are corrected as tbe company managesto bring about sufficient plant expansion, hithe interim, management must carry out twodistinct tasks. The first is that of demand con-tainment, i.e., curbing the growth of total de-mand. The second is that of product allocation,i.e., deciding which dealers and customers willreceive the available product.

Steps to encourage deconfiuming: Demand con-tainment is the attempt to stabilize or reducedemand so that the product shortage is notfurther aggravated. This is largely accomplishedby using the classic marketing instruments inreverse. To bring about deconsuming, manage-ment can:

O Curtail advertising expenditures for theproduct, modifying the content of the messages.

O Reduce sales promotion expenditures, in-vesting less in trade exhibits, point-of-purchasedisplays, catalog space, and so on.

O Cut back salesmen's selling time on theproduct and their entertainment budgets, askingthem to concentrate on other products, spendmore time in service and intelligence work/and learn to say no in a way that customers findacceptable.

O Increase the price and other conditions ofsale to the advantage of the marketing company.

I. See "No Sales Force for Sale," Sales Mananement, March i, 1970,P- 43-

(This may include eliminating freight allow-ances, trade discounts, and so on.)

O Add to the time and expense necessary forthe buyer to procure the product or service—what might be called his "effort and psy-chological costs"—as a means of discouragingdemand.

O Reduce product quality or content, eitherto encourage deconsuming or to make more ofthe product available and thus demarket at aslower rate.

O Curtail the number of distribution outlets,using the product shortage as an opportunity toeliminate undesirable dealers and/or customers.

Marketing management does not usually takethese steps in isolation, but rather as part of ademarketing mix. It should make judicious esti-mates of the elasticity and cross-elasticities ofthe different instruments, i.e., their impact ondemand when employed with varying intensity,both individually and in comhination. Other-wise, the demarketing program may overinhibitdemand, and the company may find itself fac-ing a shortage of customers.

Alternatives in allocation: While these demar-keting steps are being undertaken, marketingmanagement should also develop a sound planof product allocation. It must decide how, towbom, and in what quantities to allocate exist-ing supply. There are four plausible solutionsto this problem:

1. Management can allocate the product ona iirst-come, first-serve basis. This is a standardmethod regarded as fair by almost everyone ex-cept new customers. Dealers and customers gettheir stock in the order of their ordering.

2. Management can allocate the product on apropoTtional demand basis. This means deter-mining that the company can satisfy x'r of totaldemand and then supplying each customer withx'̂ r of its original order level. This is also heldto be a fair solution.

3. A company can allocate supply on a favoredcustomer basis. It determines its most valuablecustomers and satisfies their demand levels com-pletely; the remaining customers may receivesome fraction of their original order levels, withthe rest being back-ordered. This is held to bea discriminatory solution, even if an understand-able one.

4. A company can allocate products on ahighest bid basis. The supply goes to those cus-tomers who offer the highest premium for early

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delivery. While many people consider this anexploitative strategy, economists typically arguethat it makes the most sense since the productflows to those who presumahly need it most.

Policies for allocating supply should be madeby top management with marketing executivesplaying a central role in advising what impactthe alternatives would have on long-run cus-tomer relations. If it assumes that the shortageis temporary, management should estimate cus-tomer feeling toward the company in the post-shortage period when the demand-supply bal-ance is reestablished. Each general solution in-volves some amount and distribution of cus-tomer disappointment. If the company seeksto maximize its long-run, rather than short-run profits, it should choose solutions that min-imize the total disappointment of customersduring the period in question.

Chronic overpopularity

There are some real, although perhaps rare,situations where an organization is faced withchronic overpopularity, and it wishes for onereason or another to bring demand down to apermanently lower level. Two situations can bedistinguished;

in the first, the product's present popularitymay be seen as posing a serious threat to thelong-run "quality" of the product. For example,the island of Bali in the South Pacific has longbeen a tourist's dream. In recent years, it hasattracted a larger number of tourists than canbe handled comfortably with its facilities. Theisland is in danger of becoming overcrowded andspoiled. If tourism goes unchecked, Bali facesthe same fate as Hawaii, which has lost its pris-tine appeal because of teeming crowds and soar-ing prices,

The authorities in Bali are aware of this dangerand are considering measures to reduce demand.Their demarketing strategy is to reduce theisland's attractiveness to middle-income touristswhile maintaining or increasing its appeal tohigh-income tourists. They prefer fewer higher-spending tourists to a larger number of low-er-spending tourists (in contrast to the savingsand loan example cited earlier). To accomplishthis, they will build luxury hotels and restau-rants, place their advertising in media reachingthe rich, and build a distinct image of cateringto the affluent class.

Also because of fear that the area's natural

Deraarketing

beauty will be spoiled hy congestion, officials inthe state of Oregon are demarketing to prospec-tive settlers. But the state does promote touristtrade; the governor encourages people to visitso long as they do not stay.

In the second situation, overpopularity is aproblem because management does not want thestrain of handling all of the demand. For ex-ample, there is an exceptionally fine restaurantin London that can seat only 30 persons. Word-of-mouth advertising has been so good thatthe restaurant is fully booked for months inadvance. Nevertheless, tourists without reserva-tions crowd around in the hope of cancellations.They add noise and detract from the intendedatmosphere of leisurely dining.

The two men who run the restaurant en-joyed their role as managers of a small, intimaterestaurant noted for its fine cuisine. For thisreason, they decided on demarketing. Theyadded a doorman who discouraged people fromwaiting for cancellations and from phoningabout the availahility of reservations. They alsoraised the prices. They were able to do all this

without creating increased demand as a resultof scarce resources-the reverse phenomenon tobe described later in our discussion of ostensibledemarketing.

Product elimination

Deft demarketing is called for when a companywould like to eliminate a product or servicethat some loyal customers still require or desire,e.g., a superseded model. Demand at any pointin time can be considered as temporarily ex-cessive in relation to the level at which thecompany prefers to see demand. So as not tocreate customer ill will, the company's task isnot only to reduce production and inventory assoon as possible but also to reduce demand.

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Among the demarketing strategies availahleare; informing the customer as to why the prod-uct is heing dropped, offering partial or fullcompensation to important customers who arehurt by the disappearance of the product, andmaintaining a minimal stock of the product tosatisfy the hard-core customers. These strategiesare warranted where the same customers pur-chase other items from the company and theirgoodwill must he maintained.

Selective demarketing

often an organization does not wish to containor reduce the level of total demand but rath-er the demand coming from specific segmentsof the market. These segments or customer class-es may he considered relatively unprofitable inthemselves or undesirable in terms of their im-pact on other segments of demand. The com-pany is not free to refuse sales outright, eitheras a matter of law or of public opinion. So itsearches for other means to discourage demandfrom the unwanted customers. To illustrate:

D A luxury hotel catering to middle-aged,conservative people has recently attracted richhippies who come wearing long hair and oddclothes, and who sit on the lobby floor making

a good deal of noise. This has turned off thehotel's main clientele, and the managementmust rapidly take steps to discourage furtherreservations by hippies.

• An automobile manufacturer of a luxurycar purchased mainly by affluent whites as astatus symbol has discovered that an increasingnumber of sales are going to newly rich mem-bers of the black community. As a result, af-fluent whites are switching to another well-known luxury automobile. The automobilemanufacturer has to decide whether to let the

market take its natural course, attempt to mar-ket to both groups, or to demarket to the newcustomer class,

n A small appliance manufacturer wants tokeep one of its popular brands in selective dis-tribution, but it receives continuous pressurefrom marginal channels that want to carry theproduct. Not wanting to put his product throughthese channels, the manufacturer faces the prob-lem of depriving them without alienating them.

The common problem faced by management insuch cases is that the main clientele is threat-ened by the emergence of a new clientele. Theorganization does not find it possible to main-tain both clienteles simultaneously. Gresham'sLaw seems to operate: the "cheaper" segmentappears to drive the "dearer" segment fromcirculation. For one reason or another, the or-ganization expects a higher risk and or lowerreturn (whether finaneial or psychological) fromthe new clientele. The alternative is to demarketseleetively to the new elientele.

Methods &) implications

How is this done? When a company markets toone seginent of the puhlic, it may discourageother prospects who are unresponsive to, oralienated by, the appeals employed. For instance,advertising which plays up the joys of con-ventional home life demarkets the product tosingles. In this sense, demarketing is the nega-tive of marketing.

Selective demarketing refers to (a) the deliber-ate choice of segments that are to be avoid-ed and (b) the specific means chosen to wardoff the undesired customers. Management de-creases the benefit/cost ratio which the wantedsegment receives from patronage.

In examples like those cited, the marketer istypically not free to charge a discriminatoryprice to the undesirable segment. The demarket-ing mix has to be built out of other elements.Activities like these may be pursued:

0 The company discourages hope for prod-uct availability. The hotel fears it will be outof rooms, or the automobile company indicatesthat the customer must wait a long time fordelivery.

0 The salesmen do not make calls on smallorganizations.

0 The company provides poor service to theundesirable segment. The undesirable customersreceive poorer hotel rooms, slower service, in-

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Solent treatment-all suggesting that their busi-ness is not welcome.

0 The company makes it harder for the un-desirable segment to find product channels orinformation. Auto companies are careful to lo-cate dealerships away from changing neighhor-hoods, and hotels are selective about where theyadvertise and who receives their information.

To describe these steps is not to approve them.They are cited as familiar examples of whatcompanies may do to discourage demand fromcertain classes of customers. The steps may raisethorny issues in social ethics. On the one hand,it seems understandable that an organizationshould have the right to choose or protectits major clientele, especially if its long-runprofits are at stake. On the other hand, it isunjust to discriminate against buyers who havelong hair, black skin, lower status, or smallorders. The injustice seems especially intoler-able if the discriminated buyers are left withoutequivalent alternatives. In that case demarketingbecomes entwined with the social, legal, andpolitical problems relating to unacceptable formsof discriminatory demarketing.

Ostensible demarketing

Sometimes an establishment goes through themotions of demarketing in the hope of achievingthe opposite effect. By creating the appearanceof not wanting more customers, it hopes to makethe product even more desirable to people. Themarketer works on the principle that peoplewant what may be hard to get and may evenmasochistically "enjoy" being neglected by theseller. Consider the following possibiUties:

• An artist operates a small gallery in whichhang some of his own and other artists' paint-ings. He works in the back room and seems toresent the intrusion of would-be buyers. Abuyer has to wait for the artist to emerge fromthe back room, and even then is treated brusque-ly. But the sales are good; many persons enjoyheing mistreated and buying on the artist's terms.

• An antique dealer keeps his store in relativedisarray with very good objets d'art buried indust-laden clusters of junk. Patrons often com-ment that he would attract more customers bycleaning up his store, eliminating the junk, andthus achieve better presentation. But they maybe mistaken. The owner feels he attracts morecustomers this way, reasoning that people love

Demarketinj;

a bargain and dream of discovering a Rembrandtburied among the ancient cracking canvasses ofthird-rate painters.

D A department store arranges very carefullya stock of new blouses on a counter to makesure all sizes are represented. Then, a fewminutes before the first customers arrive, thesales personnel pull the blouses out of theirboxes and mix them about in chaotic fashion,ostensibly making the goods less attractive. But

the customers spot the blouses and are attractedin large crowds to the counter in search of abargain.

D The managers of a rock concert advertiseit on the radio in a discouraging way, saying thecrowds will be too large, and that seats are prac-tically sold out. The hidden intention is to in-crease the number of attendees by attractingthose who hate to feel left out.

Questions for study

Marketers have dealt with the prohlem of in-creasing demand for so long that they haveoverlooked a host of situations where the prob-lem is to reduce demand or cope with inabilityto meet it. Whether the task is to reduee thelevel of total demand without alienating loyalcustomers, to discourage the demand comingfrom certain segments of the market that areeither unprofitable or possess the potential ofinjuring loyal buyers, or to appear to want lessdemand for the sake of actually increasing it,the need is for creative demarketing.

It is easy to assume that demarketing is onlymarketing in reverse-product, price, place, andpromotion policies can also be used to discour-dge demand. Yet the optimal demarketing mixis not obvious. First, there is the danger of over-reducing short-run demand, which can be moreserious than increasing it too much. Second,there is the danger of doing irreparable harm to

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long-run demand through indelicate handlingof current customers.

This means that there is a need for carefulresearch into the phenomenon of demarketing.Some important issues are:

1. When do companies face demarketing sit-uations? What are the major types of situationsand how extensive are they?

2. What demarketing policies and instrumentsare commonly used hy tbese companies? Howdo companies reduce total demand and selectivedemand? How do they allocate scarce products?

3. What are optimal marketing policies fordifferent demarketing situations?

4. What role is played by marketing manage-ment in advising or deciding on appropriate de-marketing policies? Does top management rec-ognize that specialized marketing skill is as es-sential in demarketing situations as in marketingsituations?

5. What are the public policy issues and needswith respect to company demarketing practices,especially discriminatory demarketing?

Research into these questions should help clar-ify the important and neglected phenomenon ofdemarketing. Of equal importance, it shouldhelp establish a more objective and realistic con-ception of marketing. Marketing's task is notblindly to engineer increases in demand; thatview came about because marketing developedduring a period of economic growth and sur-pluses, and it is too casually related to "hardsell" tactics and pervasive advertising. Rather,marketing functions to regulate the level andshape of demand so that it conforms to the or-ganization's current supply situation and to itslong-run objectives.

When this view is accepted, it is not neces-sary to contrast marketing and demarketing. Wehave used the term "demarketing" to dramatizesemantically a neglected phenomenon, but thiswould not be necessary if all marketing sit-uations were recognized. Marketing inevitablyhas a role to play in the face of excess demand:the challenge is to demarket thoughtfully andskillfully.

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