SADM Assignment: Push & Pull Strategy

A SADM Assignment of class Presentation Submitted in Partial Fulfillment of the Requirements for the Award of degree of MBA (Finance & Marketing)

2011 2013

Submitted by Manish Ranjan Singh, MBA (General), AMF -18

Submitted to Dr. M. D. Kakade

Certificate of Originality

This is to certify that the assignment report entitled Push and Pull Marketing Strategy Submitted to Dr. M. D. Kakade, in partial fulfillment of the requirement for the award of the degree of MBA (Finance & Marketing) is an original work carried out by Mr. Manish Ranjan Singh & Murari Kumar Singh, under the guidance of Mr M. D. Kakade. The matter embodied in this project is a genuine work done by Manish Ranjan Singh & Murari Kumar Singh, to the best of my knowledge and belief and has not been submitted before in the Institute Of Management & Entrepreneurship Development, Pune for the fulfillment of the requirement of any course of study.

Signature of the Student

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Signature of the Guide

Index
1. Promotional Mix Strategies 1.1.Push Strategy 1.2.Pull Strategy 2. Push Vs Pull Marketing 3. Factors influencing in deciding Push/Pull 4. Pull Tools 5. Push Tools 5.1.Disadvantages of Sales Promotion 6. Marketing examples of Pulling and pushing Strategies 7. Classifying products into Push, Pull, Push-Pull Strategies 8. Examples of Push Tactics 9. Examples of Pull Tactics 10.Characteristics of Push and Pull System 10.1. Intels Branding Strategy 11.Conclusion

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Promotional Mix Strategies

Push Vs. Pull Strategy
The business terms push and pull originated in logistic and supply chain management, but are also widely used in marketing. Wal-Mart is an example of a company that uses the push vs. pull strategy. A pushpull system in business describes the movement of a product or information between two subjects. On markets the consumers usually "pull" the goods or information they demand for their needs, while the offerers or suppliers "pushes" them toward the consumers. In logistic chains or supply chains the stages are operating normally both in push- and pull-manner. Push production is based on forecast demand and pull production is based on actual or consumed demand. The interface between these stages is called the pushpull boundary.

Push Strategy
A push promotional strategy makes use of a company's sales force and trade promotion activities to create consumer demand for a product. The producer promotes the product to wholesalers, the wholesalers promote it to retailers, and the retailers promote it to consumers. A push promotional strategy works to create customer demand for your product or service through promotion: for example, through discounts to retailers and trade promotions. Appealing package design and maintaining a reputation for reliability, value or style are also used in push strategies. A good example of "push" selling is mobile phones, where the major handset manufacturers such as Nokia promote their products via retailers such as Mobile Stores, Nokia Priority etc. Personal selling and trade promotions are often the most effective promotional tools for
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companies such as Nokia - for example offering subsidies on the handsets to encourage retailers to sell higher volumes. A "push" strategy tries to sell directly to the consumer, bypassing other distribution channels (e.g. selling insurance or holidays directly). With this type of strategy, consumer promotions and advertising are the most likely promotional tools.

Pull Strategy
A pull selling strategy is one that requires high spending on advertising and consumer promotion to build up consumer demand for a product. If the strategy is successful, consumers will ask their retailers for the product, the retailers will ask the wholesalers, and the wholesalers will ask the producers. A pull promotional strategy uses advertising to build up customer demand for a product or service. A good example of a pull is the heavy advertising and promotion of children's toys mainly on children television show. The children ask their parents for the toys, the parents ask the retailers and the retailers the order the toys from the manufacturer. Other pull strategies include sales promotions, offering discounts or two-for-one offers and building demand through social media sites such as YouTube. Consider the recent Cartoon Network promotional campaign for its new pre-school programme Pokemon. Aimed at two to Ten-year-olds, series of season and more than 500 episodes of Pokemon have been made and are featured everyday on digital children's channel Cartoon Network.

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As part of the promotional campaign, the Cartoon Network has agreed a deal with toy maker Fisher-Price to market products based on the show, which it hopes will emulate the popularity of the Pokemons. Under the terms of the deal, Fisher-Price will develop, manufacture and distribute a range of Pokemons products including soft, plastic and electronic toys for childrens.

Another example of this is the bike manufacturing company Harley Davidson. Harley Davidson only produces bikes when they have been ordered by the customers.

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Push Vs. Pull Marketing

A push-pull-system in business describes the movement of a product or information between two subjects. Consumers usually pull the goods or information they demand for their needs, while the suppliers pushes their wares toward consumers.

Factors influencing in deciding Push/Pull

Based on a set of factors mentioned below (not comprehensive) the managers decide to go for a PUSH or a PULL strategy. In practice, generally both PUSH and PULL strategies are used in combination to achieve the objective.

1. Product category 2. Consumer Behaviour in the category and the interaction 3. Competition Promotions and Marketing Spends 4. Marketing spend 5. Effectiveness of the different options in that category 6. And more

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Pull Tools: 1. Sampling in-store, events, newspaper, in-pack 2. Value Promotions, Volume Promotions 3. Continuity and Loyalty Programs 4. SLO (Self-Liquidating Offers/Premiums) 5. Point of Purchase Displays 6. Contests, Games and Sweepstakes 7. Rebates and Cash refunds 8. Utilizing Social media sites to build demand Push Tools: 1. Dealers allowances, Price-offs and discounts 2. Displays and Point of Purchase 3. Increasing trade promotions and incentives 4. Samples and Free Goods 5. Buy-Back Guarantees 6. Increasing margins and pushing it to the retailers 7. Dealer Meetings and Contests 8. Provide more credit extensions, etc
If a firm decides to use push strategy, its efforts are directed at resellers and the manufacturer becomes very dependent on their personal selling abilities and efforts. The promotional efforts are focused at pushing the product through the distribution channels; the resellers may be required to display, demonstrate and offer discounts, to sell the product. The communication to resellers is generally through trade circulars or the sales force. Push strategies are generally appropriate for:

Product categories where there is low brand loyalty Where many acceptable substitutes are available in the market

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Relatively new products are to be launched When the brand choice is often made in response to displays in the stores The product purchase is unplanned or on impulse The consumer is familiar and has reasonably adequate knowledge about the product Manufacturers, who cannot afford to engage in sustained mass advertising, often use push strategy and offer effective incentives to dealers

Example for Retailer promotion: Buy Cadburys products worth Rs.3000/- and get any 30 chocolates worth Rs.5 each free. Through this offer the company is pushing its product to the retailers and now that the retailer has enough incentive the retailer stocks more and thus it becomes essential for the retailer to push the product to the consumers. Disadvantages of Sales Promotion: 1. Increased price sensitivity Consumers wait for the promotion deals to be announced and then purchase the product. This is true even for brands where brand loyalty exists. Customers wait and time their purchases to coincide with promotional offers on their preferred brands. Thus, the routine sales at the market price are lost and the profit margin is reduced because of the discounts to be offered during saleseason. The Diwali Bonanza Offers on electronic goods. 2. Quality image may become tarnished: If the promotions in a product category have been rare, the promotions could have a negative effect about its quality image. Consumers may start suspecting that perhaps the product has not been selling well, the quality of the product is true compared to the price or the product is likely to be discontinued because it has become outdated. The Smyle Powder offer of Buy 1 and get 2 free went on and on. Ultimately people stopped asking for the product as the on-going sales promotion strategy made the customers perceive it to be a cheap and an inferior product.
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3. Merchandising support from dealers is doubtful: In many cases, the dealers do not cooperate in providing the merchandising support nor do they pass on any benefit to consumers. The retailer might not be willing to give support because he does not have the place, or the product does not sell much in his shop, or may be he thinks the effort required is more than the commission/benefit derived. 4. Short-term orientation: Sales promotions are generally for a short duration. This gives a boost to sales for a short period. This short-term orientation may sometimes have negative effects on long-term future of the organization. Promotions mostly build short-term sales volume, which is difficult to maintain. Heavy use of sales promotion, in certain product categories, may be responsible for causing brand quality image dilution. While sales promotion is a powerful and effective method to produce immediate short term positive results, it is not a cure for a bad product or bad advertising. In fact, a promotion is speed up the killing of a bad product.

How promotions may take your market share down?

Let us suppose a Pepsodent toothpaste gave a volume promotion that Buy 1 and Get1 free on a toothpaste. So, as toothpaste is a category where people dont mind to buy for future purchase (buying more than what is required today), many people may want to take advantage of this offer and they buy two packs of it, which means youre having four toothpastes for the next few months. A lot of people bought this, and the volumes shoot up increasing your volume share. A very important thing is the consumption is constant in this category. A consumer who bought four toothpastes will not suddenly start brushing his teeth four times in a day. This means though he bought four packs, his rate of consumption hasnt changed. So, this essentially means the consumer will not buy the toothpastes in the coming months. However, based on your penetration, marketers would like to see if we could bring in new consumers to use Pepsodent and are they being retained after the promotion goes off. If people buy Pepsodent only on offers
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and they dont buy normally, it becomes extremely difficult for the marketer to handle it, and may eventually have to reduce the price of Pepsodent. So, the promotion might result in the following which causes a decline in the market share in the forthcoming period.

Existing consumers did a lot of pre-buying during the promotion and will not purchase in the coming months New consumers to the brand switched back to their earlier brand Couldnt pull new consumers into the category

The whole strategy of having the right promotions programme to gain maximum share and profits is not so easy as it is on paper or written in a blog. It depends on hundreds of factors which change across cultures, and regions. Surely, there are advantages with promotions which will help you achieve your marketing objectives. But, one has to be very careful while handling brand promotions because it can easily put the brand in a worse situation than it was before the promotion.

Marketing Examples of Pulling & Pushing Strategies

Promotion is an important part of any marketing strategy. You can have the best product or service out there, but unless you promote it successfully, no one will know about it. There are three basic types of promotional strategies a push strategy, a pull strategy or a combination of the two. In general, a push strategy is sales oriented, a pull strategy is marketing-oriented and a push-pull strategy is a combination of the two. Attracting customers, even when you've identified your target market and have a quality product or service, is not necessarily an easy feat. For this reason, it's important to develop marketing strategies that inform, persuade and remind customers about your products. Push marketing strategies allow customers to find you on their own, typically online, while pull marketing strategies engage customers through online or offline direct messaging. Combine the two to maximize your brand's exposure.

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Pulling: Video Marketing

With technological advances on the rise and consumers wanting information on-demand, video marketing is increasingly becoming a pull marketing strategy used by small businesses. Unlike commercials, online videos can be filmed in the office or at home, can be as long or short as needed and cost little to nothing. A video marketing effort might show a business owner introducing a new product or service, simply saying thank you to his customers, doing a product demonstration or feature testimonials from valued customers. Share these videos through a variety of outlets including social sites such as YouTube, Twitter and Facebook and on your company's website.

Pulling: Blogging
Business blogging is steadily gaining popularity as a way for businesses to distribute information consumers can find if they're searching online for information related to what a company offers. Beside helping a business gain credibility, blogging is a pull marketing strategy that gives businesses a chance to take control and tell stories about their brands, while connecting with consumers in the comments.

Pulling: eBooks
Besides articles, links to eBooks enter consumers' search results when they use the Internet to find information. eBook links lead them to business websites where they can download information for free, either by providing their email address or for a fee. By creating eBooks on topics relevant to your target market, you can attract customers who are "pulling" for information. eBooks are typically chock-full of information that engages readers, demonstrates the company's expertise and encourages them to get in contact with the company for additional services or products.

Pushing: TV Commercials
Consumers are tuned into the television, spending at least 20 percent of their days watching it, according to Nielsen's television measurement statistics. These findings make creating and running television commercials, a paid form of advertising, for your products and services a viable push marketing strategy, if your budget permits.

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Pushing: Cold Calling

Service-oriented businesses, including consultants and home improvement companies, utilize cold calling as a push marketing strategy to solicit clients. Cold calling involves contacting customers with whom you don't have an existing relationship, explaining what your company does and determining if they have a need for what you're offering.

Pushing: Email Marketing

While email marketing is permission-based, allowing businesses to only email those customers to whom they have given permission, it's still considered a push marketing strategy. Emails sent by companies can advertise sales, introduce new products, solicit testimonials or encourage customers to spread the word about their services and products to friends and family. Companies push out these email messages weekly, bi-weekly, monthly and sometimes quarterly, depending on their marketing plans, to help increase sales and visibility.

Classifying Products into Push, Pull, Push-Pull Strategies

Soft drinks: Economies of scale is high for soft drinks and the demand uncertainty is low i.e. the demand is stable. The production focuses on cost minimization and the product risk is low. The inventory levels are also high. The supply lead time is high. Thus soft drinks can be classified under the push strategy. Cars: The demand uncertainty is very high and low economies of scale. Customization is high and the demand is created by the end consumers. The inventory levels are maintained and the product risk is high. The lead time is short. Thus cars can be classified under pull strategy.
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Pharmaceuticals: The demand is not predictable i.e. the demand uncertainty is high and the economies of scale are high. The pharmaceutical products are first pushed and then pulled by the demand of the consumers. The lead times are long. Thus pharmaceuticals can be classified under push-pull strategy.

Clothes: The demand uncertainty is high and also the economies of scale are high. The clothes are first pushed and then they are customized according to the need of the consumers. The lead times are long. Thus clothes can be classified under push-pull strategy. Umbrellas: The demand uncertainty is low and the economies of scale are also low. The production of umbrellas is based on realized demand, a pull strategy, while delivery s according to a fixed schedule, a push strategy. The supply lead time is low. Thus umbrellas can be classified under pull-push strategy.

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Examples of push tactics

"Taking the product to the customer"

Trade show promotions to encourage retailer demand Direct selling to customers in showrooms or face to face Negotiation with retailers to stock your product Efficient supply chain allowing retailers an efficient supply Packaging design to encourage purchase Point of sale displays

Examples of pull tactics

"Getting the customer to come to you"

Advertising and mass media promotion Word of mouth referrals Customer relationship management Sales promotions and discounts

Characteristics of Push and Pull System

Parameters Planning Information Flow of Information Manufacturing technique Inventory Level affected by
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Push
Forecast data

Pull Customer demand Opposite to material flow Make to order Fluctuation in customer demand

Same as material flow Make to stock Forecasting errors

Intels Branding Strategy

Intel, for instance, is the leader in processors for all types of computing needs. And it is a product that is not used directly by the end user. So, whom does Intel promote its product to and how does it stimulate demand for its products? Intels customers are computer manufacturers and the product gets embedded in the computer systems that consumers buy. Hence, is it necessary for Intel to go for direct advertising, taking its brand to the consumer who uses computers and not microprocessors? Branding Strategy: Well, Intel does go for consumer advertising and the idea is brand building. While Intels customers are definitely corporate clients, the makers of electronic devices, Intel builds a brand for itself in the consumers perceptions as being the best chip for personal computing and as being a company with different people. For a normal Pc user who may not be an expert in technology, a chip or a processor may not make much sense. But with Intels advertising and brand building exercises, the consumer would now know that it is the
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processor that makes a difference to his computing needs and it is not the pc or the laptop brand that matters, as long as there is Intel inside. The Pull Marketing Strategy: Intel creates a demand, effectively categorized as Pull Marketing Strategy, as against the traditional Push Marketing Strategy, making consumers go for PCs loaded with Intel inside, as against any other processor. And when it successfully gets to doing that, it in effect cuts off the bargaining power of other competitors and maintains a strong-hold on the PC market and PC manufacturers would think twice before they go for other brands Intel charges its brand. also a of processors. successfully premium for

When it comes to brand building, it doesnt make much difference between the customer and the consumer as long as you have Brand Power.

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Conclusion
Push strategy is appropriate where brand choice is made in store. Can be an impulse purchase and product benefits are understood. Pull strategy works best with involvement of customers, where customers look for product differences.

"Consumers are more participative and selective and the trend from Push to Pull is accelerating."

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