Grey Marketing-Reasons, illustrations and How to reduce Grey Products Marketing

 

Grey Marketing

Definition:

Parallel markets using unauthorized channels to sell a company's products are called ‘Grey marketing’ 

Reasons for Grey markets

• Grey marketing exists due to inefficiencies in the supply chain
• The price of the product is cheaper in one country than the other and leads to parallel imports. For example: Indian consumers buy TV sets in Singapore due to price differences.
• Refurbished products are sold at cheaper prices in developing countries.
• Importing products are unavailable in a local market.
• Intermediaries ran out of stock genuinely and artificially so that a customer purchased the product in the grey market for a higher price.

Grey market illustrations:

1.     Japanese cars are sold in Russia and Australia.

2.     Range rovers were imported by US consumers before 1987.

3.     Indian consumers find websites to watch IPL on mobile by passing hotstar requirements.

4.     Purchasing products on online portals like eBay meant for some other countries.

5.     The UK government put a restriction on milk powder purchased by their consumers as a few of them purchase heavily and supplied it to Chinese markets.

6. Books published in developing countries are cheaper compared to developed countries. Therefore customers carry books in Airlines to other countries.

How to reduce Grey Products Marketing

• Take a legal action on unauthorized distribution. For example Levis stopped TESCO in the UK from selling their products by taking a legal route.
• Ask marketplace like eBay to remove products not meant for a particular country.
• Stop supplying to intermediaries who are creating scarcity.
• Reject warranties and Guarantees.
• Provide different names for the product. This will help the company to detect the grey market.
• Make alliance with other companies to stop grey markets.

Advantages of Grey marketing

1.     Grey marketing is beneficial to consumers due to reduced prices.

2.     Grey market increases product availability to retailers.

3.     Grey market brings down channel costs.

Disadvantages of Grey marketing.

• It affects big brands.
• The resources put on brand development are wasted and profit is taken by a grey marketer who has not invested in the brand.
• Brand equity will be suffered heavily as the post sales service is not given by the grey marketers.
• Grey marketers do not provide warranties and guarantees on products sold.
• Grey market leads to channel conflict and trust erosion between manufacturers and intermediaries.