Demarketing - An approach to transformation - Change is King - Almost all of the entrepreneurs, managers and marketing managers surveyed answered this question intuitively with "ja“, and thus systematically misjudge negative impact of adverse customer relationships. Presence, importance and impact of unwanted customers hardly anyone is aware of. At least it's not talked about. And yet studies show that almost every company across all industries is affected. Often massively affected!
The customer is king! Demarketing – approach to transformation
It is also not surprising if the topic "Dealing with unwanted customers“ has hardly found its way into the brand management, marketing and sales management practiced in the company to this day and is strongly taboo in corporate practice. After all, the customer is king! Always and everywhere!! But what happens when customers consciously or unconsciously become very expensive kings?
Many companies with free service hotlines had to and still have to experience this painfully when a number of customers greatly overstimulate the free offer and thus lead to very negative profit margins. Unfortunately, the phenomenon cannot be limited to one service or one industry. Any company that B. also sells products online, knows how quickly a high number of returns can melt away the profits made.
However, negative indirect spillover effects, e.g. B. on the brand, as impressive as the traditional brand Lonsdale nearly drove them to economic ruin. Demarketing – approach to transformation.
The great popularity of the brand among right-wing extremist customers led to rapidly declining sales figures for the actual target customers and the withdrawal of important sponsors. A customer or a group of customers can therefore trigger massively undesirable effects, even if they are highly profitable when viewed in isolation. On the other hand, there are situations in which it is worthwhile to cross-subsidize unprofitable customer relationships if they are expected to have a particularly positive impact in terms of brand messages.
Deficient customers in terms of demarketing
Deficient customers in the sense of selective demarketing are on the one hand unprofitable, strategically insignificant customers and on the other hand originally profitable but strategically insignificant customers who, taking into account their derivative negative spillover effects, are also unprofitable and at the same time strategically insignificant. Demarketing – approach to transformation. Learn more about ours here Approach.
The central negative effects of loss-making customers in terms of selective demarketing include:
- Negative effects on the brand image and possibly on the profitable target segments with the consequence that profitable customers turn away or potential customers no longer shortlist the brand.
- Loss of control over your own image design, because unwanted customers are usually also dissatisfied and show this to the outside world.
- Unwanted influence on strategy development, because unwanted customers tie up a disproportionate amount of resources, which are then no longer available for targeted design.
- Negative effects on employee satisfaction because employees have to deal with "difficult" customers and are frustrated.
- Waste of resources because unwanted customers block channels that are no longer available for desired customers (e.g. service lines), which may result in desired customers leaving.
- Potentially promising customer relationships go unused because resources are tied up with undesirable ones.
- Disruption of internal process structures that were planned in such a way that negative customers were not assumed.
- Negative effects on the corporate culture (Code of Conduct: every customer is important to us vs. reality: we have to separate from the customers somehow, no matter how)
As shown, the causes of unwanted customers can be very diverse and, in addition to loss of brand value, negative contribution margins, can also have a very negative impact on employee satisfaction.
Why do companies end customer relationships - Demarketing - Approach to transformation
Because relationships terminated unilaterally by the provider can trigger a strong feeling of injustice in the customer and boycotts and shitstorms are often the result. Marketing departments are afraid of negative reviews on internet portals. There is often an irrational hope that the customer relationship will be “good” again. One is afraid of playing into the hands of the competitor if the customer goes there. And much more.
Selective demarketing specializes in solving this dilemma. This involves the targeted exclusion of loss-making customers with the use of marketing tools while avoiding negative consequences for the company. An approach that was already presented in the 1970s, but which has only been penetrated scientifically and methodologically in projects in recent years to such an extent that we were able to develop a management process based on it. Also read our article on the subject selective demarketing.
What is selective demarketing? Demarketing – approach to transformation
Essentially, in selective demarketing, an analysis of the existing customer portfolio is first carried out. Marketing activities are checked to see if they are addressing "wrong customers".
Based on these findings, concrete demarketing and marketing goals are defined and a strategy is developed that includes the instrumental and procedural modifications to ward off unwanted customers.
It goes without saying that each individual phase is accompanied by an ethical/legal reflection, which ensures that all demarketing activities are carried out in accordance with the law and the company's mission statement. Demarketing – approach to transformation.
Selective demarketing is part of business transformation
Transformation means change through critical reflection to START NEW, CHANGE the STATUS QUO and EXPAND the BUSINESS.
Selective demarketing is not just an approach to transforming customer centricity – away from the “customer is king” broad-spectrum antiseptic and towards the radical “the trusting and valuable customer is king” philosophy.
But selective demarketing is much more than that. It not only focuses attention on the desired customers, it sharpens brand awareness, it increases the importance of business and marketing ethics, it focuses on employees (employees first, customer second), it frees up resources and creates freedom for the Change. Have you read our article about damage to image had read?
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