[Opinion] Novel Coronavirus and Demarketing

Seoyonggu, Dean of the Graduate School of Business at Sookmyung Women's University

[Asia Economy Reporter Minyoung Cha] Since early 2020, all Korean citizens have been struggling with the fear of the novel coronavirus infection (COVID-19) originating from China. This incident has begun to inflict additional damage on our economy, which has already seen consumer sentiment severely depressed over the past two years. The distribution and tourism industries, such as duty-free shops and department stores catering to Chinese visitors, have taken a direct hit, and now manufacturing is also starting to suffer due to parts procurement disruptions. This epidemic, which broke out amid the US-China trade dispute and the Hong Kong democracy movement, is adversely affecting China's 'national credibility' and its 'economy.' If the situation worsens, it could pose a significant threat to Xi Jinping's one-man regime maintenance.

China is Korea's largest trading partner, accounting for 25% of Korean exports and 34% of foreign tourists visiting Korea. Due to the strong interconnection with our economy, many hypotheses are circulating about the consequences of the emergence and spread of the 'Made in China' coronavirus. How should we respond to this situation?

The author proposes China demarketing. Demarketing is a compound word of 'Decrease' and 'Marketing.' It is a marketing method where companies or individuals intentionally reduce the demand for the products and services they sell. The world's top companies systematically implement demarketing. Paradoxically, to preserve brand value and achieve sustainable growth, it is necessary to appropriately manage demand by reducing supply or raising product prices to reduce customer demand.

Patagonia, known as the epitome of premium outdoor market brands, is executing innovative demarketing. The brand slogan is 'Don't Buy this Jacket.' It raises consumer awareness about environmental pollution and natural destruction caused during the clothing manufacturing process, encouraging consumers to restrain consumption and conveying the message that 'you should buy expensive but good clothes and wear them for a long time.' As a result, Patagonia has grown into a world-class brand with a price premium and an eco-friendly corporate image through this demarketing strategy.

When a boycott campaign arose claiming that fast food is harmful to health, McDonald's France made efforts to be recognized as a socially responsible franchise company through an advertisement saying, 'Children should only eat here once a week,' and as a result, regained trust. Marlboro, the world's number one preferred tobacco brand, emphasizes social responsibility by prominently displaying the phrase 'Smoking Kills' on cigarette packs, thereby enhancing corporate credibility.

China has played an important growth engine role in our economy for the past 30 years. However, now China is emerging more as a threat than an opportunity. Through the 'Manufacturing 2025' plan, China announced its intention to surpass Korea by 2025 and has already overtaken us in many manufacturing sectors. However, recent excessive corporate debt and economic growth slowdown have increased the 'China risk,' and doubts about the Chinese government's management capabilities are growing. Some analyses suggest that the Korean economy missed the timing for manufacturing innovation due to China's economic boom. However, this incident can be an opportunity to more actively promote Korean products and premium marketing targeting Chinese consumers.

The Made in Korea KF 94 mask reportedly sells for 290,000 won in China. Korean products, which lead in quality and reliability, can widen the gap with Chinese products through demarketing. Korea also needs to attempt a premium Korea strategy as an eco-friendly and clean image country.

The absolute volume of trade with China must increase. However, meticulous demarketing is urgently needed to reduce China's share to below 20% of Korean exports and below 25% of Chinese visitors among foreign tourists visiting Korea. While rapidly implementing the long-delayed tasks of 'manufacturing innovation' and 'premiumization of the service industry,' Korea should diversify its business partner countries by enhancing cooperation with Russia, India, and the 10 ASEAN countries.