Give us this day our daily bread

One afternoon, way back in 1979, I got home to find my neighbour in a dilemma. She had been to the supermarket and bought 6 loaves of bread - the news that day had warned that there was likely to be a strike across the baking industry and like countless others she rushed to the shops to stock up before the shortages happened. Unfortunately, when she got home she found that there was no room in the freezer: it was still chock-a-bloc with bread she had bought before the previous strike a few weeks earlier.

Supermarkets were learning at the time that the threat of a shortage would trigger panic buying (Hassall 1999): this is called psychological reactance, a theory which describes how when consumers are denied something they previously enjoyed, they desire it still more. The wider, more commonly known phenomenon is that of panic buying, and 'ostensible demarketing' in this case at least, describes how retailers restrict supply through rationing in order to boost demand.  

The phenomenon of profiting from an ostensible demarketing campaign is not limited to Britain of course: Gerstner et al (1987) showed how US supermarkets had profited from rationing products and from stock outage. Supermarkets in the UK were later to find that in a similar way, rationing bread during a price war boosted demand to record levels (Jury and Gregoriadis 1999). In just the same way that the threat of fuel shortages in Britain more than a decade later (threatened strikes by tanker drivers in this case) caused demand to rocket and supplies quickly to become exhausted (Milmo 2012).  

The problem with ostensible demarketing is one of motivation. There are many examples of companies benefiting from demarketing, but few where they would admit to deliberately deceiving the public. Coca-Cola, for example, rejected conspiracy theories when it bounced back after withdrawing its core product from the US market: "We are not that smart", they claimed (Clifford 2009). Supermarkets and fuel stations profited from shortages, but they surely didn't cause them.


References

Clifford, Stephanie (2009), “Coca-Cola Deleting ‘Classic’ From Coke Label”, New York Times, 31 January
Gerstner, Eitan, James Hess and Wujin Chu (1993), “Demarketing as a differentiation strategy”, Marketing Letters, 4:1, pp. 49-57
Jury, Louise and Linus Gregoriadis (1999), “7p loaf marks greatest price war since sliced bread”, The Independent, 5 February
Milmo, Dan (2012), “Petrol tanker strike averted as drivers accept deal”, The Guardian, 11 May

Sold out: BMW rations cars to protect the brand

In 1997, BMW in the UK was having a mixed year. Although its sales were up 20% on the previous year, the company was worried, and announced to the press that demand was outstripping supply (Smith and Nuki 1997).   Moreover, it was concerned about the effect its success was having on BMW, telling the Sunday Times “Exclusivity is an extremely important feature of the BMW brand," and warning that "If we sold 100,000 cars next year... we would do it at the expense of some of the values which make BMW what it is" (Nuki and Hamzic 1997).

These claims were backed up by the Sunday Times's own motoring correspondent, a certain Jeremy Clarkson, and interviews with prospective BMW owners - all of whom confirmed that the brand was losing its exclusive cachet.

As a result BMW announced that it would henceforth be restricting sales to 60,000 a year.  The rationale was sound enough: if you have an exclusive product, you need to restrict supply to keep it that way. At this point, though, psychological reactance kicked in: this theory predicts that when consumers learn that their ability to enjoy something is under threat they react by discovering just how much they value it.  

BMW was duly rewarded by an increase in sales of over 12% in the following year (Burt 1999), achieved in a shrinking market and with the added bonus of a strong pound significantly increasing the profit per vehicle sold (Duckers 1999).  Fast forward to 2012:  BMW sold nearly 180,000 cars in Britain (Russell 2013). This figure, though, includes 51,000 BMW Minis, a category which didn't exist in 1999. 

References

• Burt, Tim (1999), “Britain: BMW 's Rover offshoot suffers near-20% decline”, Financial Times 8 July
• Duckers, John (1999), “The Birmingham Post: Call For Car Firms To Drive Down Prices As Sales Fall”, The Birmingham Post, 7 December 7
• Nuki, Paul and Edin Hamzic (1997), “BMW rations cars to keep its cachet”, The Sunday Times, 9 November
• Russell, Jonathan (2013), Britain in the driving seat as car sales leap to four–year record, The Daily Telegraph, 8 JanuarySmith, David and Paul Nuki (1997), “Boom is official as the Porsche yuppie rides again”, The Sunday Times, 17 August