Grey Marketing: Causes, Implications, and Strategies to Reduce it

This study evaluates the causes and implications of grey markets for brand owners. It explains the actions which an international marketer should adopt in order to reduce the likelihood of emerge of grey marketing. The paper will begin by defining the term so that a clear understanding of the term can be presented. The causes, implications, and opportunities created by grey markets are discussed. Strategies to reduce grey marketing are also presented.

GREY MARKETING
BY
VICTOR CHRISTIANA
SUBMITTED TO
THE UNIVERSITY OF NORTHAMPTON

CONTENT PAGE
Introduction 3
Overview of the term ‘grey market’ 3
Causes and implication 5
Implications of the grey market 6
Opportunities created by Grey Market 7
Actions to eliminate grey marketing 9
Conclusion 10
References 11

INTRODUCTION
The aim of the study is to present a critical analysis of the topic ‘grey marketing.' Hence, the
study will focus on evaluating the causes as well as implications of grey markets for brand
owners. The paper will additionally explain the actions which an international marketer should
adopt in order to reduce the likelihood of emerge of grey marketing. The paper will begin by
defining the term so that a clear understanding of the term can be presented. over the years, grey
marketing has become a modern phenomenon and there is quite a confusion regarding the term
which is yet to be resolved in an appropriate manner (Tiago et al. 2016). The study will thus be
intended to give an overall knowledge of term ‘grey marketing' and its related aspects.
OVERVIEW OF THE TERM “GREY MARKETING”
The term grey market alludes to the concept of purchase of legal goods or commodities through
the distribution channel that is also legal. However, those goods are not intended for sales by the
original manufacturer, it is considered as the system of sales channels for products in an
unauthorized manner (Kucharska-Stasiak 2016). The term grey market implies the idea of
procurement of lawful merchandise or items through the dispersion channel that is additionally
legitimate. Anyway, those products are not planned for deals by the first maker (Meeus and
Bhagwat 2018). It is to a great extent observed that grey market merchandise is commonly more
affordable than those items that are bought over the markets in an official appropriation way. For

instance, these products might be second hand by nature or comprised of second-hand
components that are presented as new and sometimes mixed with counterfit components. The
grey market products are original in most cases but are involved with legal disturbance due to
exploitation in terms of variations regarding cost over different parts of the country (Fang et al.
2016, Kunda and Materljan 2017). The other real preferred standpoint of grey market items is
that further backings like guarantee or updates are commonly not accessible for grey market
items.
A major problem of grey market products is that further supports like warranty or updates are
generally not available for grey market products. Hence, the term reflects some extent
ambiguous, in between complete legal products that are sold in the white market and complete
illegal goods purchased in the black market (Mackenzie and Yates 2017). Within the stock
market, grey market involves the trade of new issues of share prior to the official availability. In
this respect, it is often considered that grey markets are parallel markets. Subsequently, the term
reflects some degree questionable, in the middle of complete legitimate items that are sold in the
white market and complete illicit products bought operating at a profit advertise. Inside securities
exchange, the grey market includes the exchange of new issues of offer earlier to their official
accessibility (Kesan and Hayes 2016). In this appreciation, it is usually thought that grey markets
are parallel markets.

CAUSES OF GREY MARKETS
Approximately, products valuing $7 to 10 billion are purchased in an annual manner only in the
United States outside the channels of authorized distribution of manufacturers. Thus, having
control over the grey market seems a serious problem or issue for brand owners. However, there
is confusion regarding whether it is an issue in an actual manner or not. There are several causes
of grey markets, some of which includes:
• The primary reason for the grey market is the inequal or disparity in terms of the income level
of people all over the country. The disparity in terms of income, as well as consumption, creates
different conditions of demands for the products which results in different cost for the same
products (Leiber and Rossow 2016). The dissimilarity as far as salary just as utilization makes
distinctive states of requests for the items which results in difference in cost for the same
product.
• The above-mentioned cause which is the disparity of income in terms of the economic level is
due to the fluctuated exchange rates of goods which vary from one country to another. Hence,
the fluctuation leads to difference in price of the same product. Thus, grey marketers take
advantages of this cost disparity by buying products from the regions where the cost of the
products are less and then sell them to other regions at a highly discounted price (Zhang and
Gao, 2017). Consequently, the vacillation prompts the distinction of the cost of the same item. In

this way, to take the upsides of this cost divergence, the grey marketers frequently purchase
items from the areas where the cost of the products are less and sell them to other nations at high
limited cost.
• In relation with that, a large extent of discount on products or sale also encourages the grey
dealers.
• Another reason is that often many manufacturers emphasis on effective marketing strategies
in order to enhance profit which is considered to be encouraging grey marketing (Leiber and
Rossow 2016). The reason is that frequently numerous companies’ accentuation on powerful
advertising systems to upgrade benefit which is viewed as empowering grey promoting.
Grey markets emerge as a result of low transaction and search cost which creates room for
leakage of products from one market segment into another (Autreg & Bova, 2006)
IMPLICATIONS OF GREY MARKETS
• The very and primary impact of grey market is that it causes damages to the brand image of
the specific brand that is into the grey market (Kesan and Hayes 2016).
• Furthermore, grey marketing has an adverse effect on brand owners as it makes them face
difficulties in achieving desired profits.

• The other major impact which is brought by grey marketing is that it leads to competition
between the original product and the unauthorized products which means competition between
the same brands in the marketplace (Kunda and Materljan 2017). This occurs due to the cheaper
price of the unauthorized product in the grey markets as compared to the original products,
(Mackenzie and Yates 2017). consequently, such condition could be a major issue for brand
owners and authorized distributors because the company may lose the stable hold on the market
for a longer period.
• The other distinctive issue is the compromisation of quality, quantity as well as durability of
the product on the part of the grey marketers. The quality and other aspects for which the brand
is recognized are considered by the grey marketers, hence, customers which in some cases are
unaware of grey marketing develop dissatisfaction for the brand thus the brand damaging the
original brand image and reputation (Fang et
BENEFITS AND OPPORTUNITIES CREATED BY GREY MARKETS
Despite the numerous adverse impacts of grey markets to brand owners , it also has some
advantages. Grey Market has created several opportunities for organisation which can help the
organisation to maintain sustainability in the market (Simba et al., 2018). The Grey Markets has
eliminated middleman from the business operation; hence the organization has the opportunity to

offer product even on the lower price, as a result the organisation can attract more customers and
hence the profit margin of the organization will increase.
Grey market has also created an opportunity for the brands to enter into numerous tangible
markets, the organisation can therefore serve more market and potential customers which can
lead to increased customer base and profitability for the brand thus, (Beckert and Dewey, 2017).
Grey market provides a very vast distribution channel to the organisation which plays a very
crucial role in making products available to the potential customer on demand. If the distribution
channel is effective and efficient, the product of the organisation will be readily available in the
market for the potential customer (Mensah and Alagidede, 2017). On the other hands, if the
distribution channel is not effective and efficient, the product of the organization will not be
available in the market for the potential customer. So, with the help of vast distribution channel
provided by the Grey Market the organization can significant make its product available in the
market. It will also lead to enhancing the profitability of the organisation.
The Grey Market also provides competitive advantages to the organization through its vast
distribution channel. The organization can gain competitive advantages over its competitors by
entering into the Grey Market and outdo or outperform the competitors. Competitive advantage
helps the organization to sustain and survive in the market for a longer period of time.

HOW CAN GREY MARKETING BE REDUCED?
Since grey marketing adversely impacts brand image and the customer hold, there
are several strategies which can be adopted to counter grey marketing.
● In order to combat with grey marketing, strategic confrontation with dealers should be
strengthened with brand owners support.
● Dealers mainly indulge in grey marketing, thus low-cost inventory can be used whenever
it is necessary to cut the cost to maintain share.
● Also price cutting between manufacturer and dealers can be implemented in order to
make grey market activities less profitable.
● The dealer or the manufacturer must be interfered by the manufacturer or the dealer so
that the brokers or grey marketers can be deprived.
● Dealers and manufacturers should develop promotional activities that will clearly
differentiate the actual product from the unauthorized products (Wen and Weber, 2018).
The promotional activities will also need to focus on the low quality of unauthorized
products of the brands along with unavailability of other components like warranty and
support from the brand.
● Above all, the dealer and the broker must collaborate with each other by forming a
peaceful coexistence between them in order to prevent grey market activities.

● Another most effective strategy can be the strategy of acquisition by the dealers.
However, this is subject to non-entrance of the brokers in the grey market.
● The brand is required to focus on product differentiation as well as service
differentiation which are not possible to be offered by grey market products.
● Along with the above legal actions must be taken in order to prevent the brokers from
indulging into grey marketing as well as against the grey marketers.
● The price of the original products must be set strategically so that the grey marketers
can be deterred from grey marketing.
● the cause and effect of the grey market on the international business organization is very
wide and in order to manage these issue, brand owners must focus on developing core
competency in product differentiation and cost leadership strategy.
●
CONCLUSION
The purpose of the study was to show a basic examination of the term 'grey marketing.'
Consequently, investigations concentrated on assessing the causes and implications of grey
markets for brand owners. The paper moreover clarified the activities which worldwide
marketers should take reduce the emergence of grey marketing. it was noticed that grey

promoting has turned into a cutting edge phenomenon and there are varying perplexities with
respect to the term which are yet to be settled in a proper way.
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