Welcome to the Age of Demarketing
Most of the commercial world spends its time trying to increase the demand for products and services. But we also need a science of “Demarketing” to help decrease the demand for certain products and services. It would be applied to decrease the demand for “vice” products such as hard drugs, cigarettes, and fatty foods. It would also be used to reduce the use of scarce resources, such as water, clean air, certain fish, and certain minerals. California doesn’t have enough water and in Beijing, 9,000 citizens are in hospitals with respiratory sickness because of the lack of clean air. For some things, the task is not marketing but demarketing.
In 1971, Sidney Levy and I published an article in the Harvard Business Review entitled “Demarketing, Yes, Demarketing.” We argued that shortages can be as much of a problem as surpluses. We defined demarketing as “. . . that aspect of marketing that deals with discouraging customers in general or a certain class of customers in particular on a temporary or permanent basis.”
Today many people are concerned about the planet’s “carrying capacity” to provide the resources on the scale needed to support the world’s growing population and the needs of this and the next generation.
The “ecological footprint” concept says that we would need the equivalent of six to eight more earths of resources if all people in the world want to achieve the level of US living standard under the current rate of resource consumption. Furthermore one generation can exploit the existing resources — oil, water, air, timber, fish — so intensely that the next generation is doomed to accept a lower standard of living. As the earth’s resources diminish, we may have to move from the Age of Marketing to the Age of Demarketing.
How does this bear on business decision making? Companies that embrace sustainability need to make some basic changes in their production and marketing strategies and practices. Paul Polman, CEO of Unilever “Our ambitions are to double our business, but to do that while reducing our environmental impact and footprint… It has to be done via more responsible consumption…”
If every company sets the goal of doubling its business, then if they succeed, sustainability will be impossible to achieve. If the less developed countries would by some miracle achieve middle-class living standards, the pollution, road and air traffic, and energy power outages would smother our quality of life. Something between a zero growth goal and a modest growth goal would make more sense.
Sustainability-driven companies need to introduce clear criteria to direct their new product development programs, invest more in reuse and recycling, and convince their stakeholders — employees, channels, suppliers, and investors — to fight waste and accept some limits to growth.
Companies will have to change their compensation package to encourage their managers to set a better balance between the goals of growth and sustainability. The CEO needs to earn a payout based on achieving the planned growth rate while reducing environmental costs by a planned percent.
Companies need to build in demarketing thinking into their demand management strategy. Demarketing is another name for demand reduction. Four situations call for demand reduction.
1. Managing an existing shortage. The Middle East is short of water and must ration it to competing users. Frequent energy blackouts in various countries require campaigns to discourage unnecessary or wasteful energy consumption.
2. Avoiding potential shortages. Overfishing must be curtailed in order to maintain the fish supply. Timber cutting must be matched by active replanting.
3. Minimizing harm to individuals. Efforts are needed to reduce cigarette smoking and hard drug use and eating foods too high in sugar, salt, and fat.
4. Minimizing harm to nature or unique resources. Discouraging many people from visiting Yellowstone National Park or other over-attended tourist areas.
What are the tools of demarketing? Let’s examine Russia’s effort to discourage its citizens from overdrinking vodka and other alcoholic beverages. Vodka dependency results in fights, marriage breakups, injuries and deaths. The 4Ps serve as an initial marketing framework to be used by the Russian government and NGOs to reduce vodka consumption:
· Product. The government would order lower production of vodka. It might also limit consumers to buying only one quart a week.
· Price. The government would substantially increase the price of vodka.
· Place. The government would limit the number of distribution outlets that sell vodka and make them difficult or inconvenient to visit.
· Promotion. The government would run advertising and news campaigns on the harm done to individuals and families by excessive vodka consumption.
There is a caution, however, when trying to reduce demand for a desired object. First, the demarketing campaign might make the product or service more desirable: banning a book or movie often has this effect. Second, it can create a criminal class that will prosper during the induced scarcity, as happened in the prohibition era in the U.S. when liquor was banned. Third, human rights advocates will complain about the government’s interference with what they consider citizens’ rights.
Demarketing efforts have been applied in a wide range of situations: to persuade legislators to limit the number of licenses for hunting and fishing, to discourage the number of visitors to overcrowded national parks, to persuade hotel guests to request fewer towels, to persuade homeowners to use less air conditioning and electricity, to persuade car buyers to purchase more fuel-efficient cars.
Demarketing poses difficult choices between individual freedom and the public good. Without demarketing, we experience the Tragedy of the Commons where everyone uses too much of a public good. With demarketing, we experience a limit on our individual freedom. Demarketing works best when there is high citizen consensus that the consumption of some good or service should be reduced.