Pull marketing involves giving customers exactly what they want and telling them you’re doing just that. It’s the way of the future, argues Alan Mitchell
You’ve got to find out what your customers want and give it to them. What better way to start a new year than by re-dedicating oneself to such a marketing basic, especially when it is one that is so often ignored?
Before we throw ourselves into the fray, however, a word of caution. Such slogans have an Alice-in-Wonderland knack of being used by different people to mean different things. So let’s qualify this customer-focus rhetoric with a question: how do you intend to do it? In a “push” way, or a “pull” way?
Superficially, both approaches are the same. They use market research to identify customers’ needs and desires. They seek to build strong, vibrant brands, invest in advertising and other forms of communication, and play with price and promotion to influence demand levels. In real life, you’ll never find a pure example of either.
Nevertheless, the two approaches revolve around fundamentally different centres of gravity. “Pull” marketing places huge emphasis on supplying exactly what customers want, and uses communications to alert customers to this fact. “Push” marketers, on the other hand, try to use marketing to sell their products. For them, the focus of customer understanding is rather different – divining the best emotional-rational triggers to use to close a sale.
Push and pull marketing strategies are the product of different business models. Take the motor industry. General Motors’ (GM) – and Ford’s – core business model revolves around production capacity, volume sales and unit costs. The need to make and sell more is built into the way the system works. Rival Toyota, on the other hand, has constructed a system based on flexibility and responsiveness. It makes only what it can sell, and has developed the ability to switch production from one model to another quickly and cheaply.
A live experiment, testing the relative power of the two approaches, is now unfolding in the US. With its interest-free financing deals on car purchases, GM is engaged in one of the most aggressive push marketing exercises ever. At first sight, it’s been a great success. GM has reversed its decades-long slide in market share. Spare capacity is being put to work, transforming the economics of GM’s operations. While the incentives have cost the company an estimated $1.4bn (&£880m), volume gains have netted it an extra $3bn (&£1.9bn). So sales and profits are up. And when the cost of such incentives hurts competitors, such as Ford, more than GM, there’s an extra bonus: it shifts the balance of power within the industry.
Not everyone is pleased, however. Analysts fret about the effect on margins. A few years ago, GM’s consumer finance arm, GMAC, was paying GM $8bn (&£5bn) a year in “dividends”. Now, GM is subsidising it. And throughout the industry there’s a fear that all GM has really done is bring forward sales that were going to happen anyway, ensuring that any future downturn will be twice as vicious.
Meanwhile, Toyota is gaining share in the US (and Europe) without joining the incentives war or sacrificing its margins. In the first half of 2002, its worldwide profits were greater than GM’s, Ford’s and Chrysler’s combined.
So here’s a contention which I challenge any reader to contradict: the overall marketing trend in established industries (albeit in a two steps forward, one step back kind of way) is from push to pull.
As well as the automotive industry, you can see it in retailing, where companies such as Wal-Mart and Tesco are forging ahead on the back of responsive supply chains which enable them to order what people are buying, instead of buying lots of stock which they then have to sell. And in clothing, where companies such as H&M and Zara are using extremely short lead times to make mincemeat of slower, more cumbersome rivals. And in PCs: just look at Dell and its make-to-order system.
Pull marketers are gaining ground for good reason: they are efficient. With pull marketing, companies see marketing as a means of helping the market to shape what the company does. With push marketing, companies look to marketing to shape the market – to extend the control they exercise within their corporate boundaries to the behaviours of their customers. That’s like pushing water uphill. It hardly ever works.
Push strategies can work wonders when markets are young, and push marketing helps to create a virtuous spiral of rapid market and profit growth. But in the context of mature markets beset by overcapacity, the logic falls apart. In addition, rising media costs, media fragmentation, a growing inability to control distribution channels, and increasing customer access to information are all helping to make push strategies harder to implement.
Philip Kotler highlights these drawbacks in his latest book, Marketing Moves. He writes: “Having developed the assets and capacity to produce a million cars, an automobile company will try to produce this number and charge marketing with the task of selling this number. The disastrous result is that many cars sit in dealer lots for 70 days. And in order to move them, marketers must resort to costly rebates and incentives. Furthermore, the car company’s advertising and promotion costs amount to about ten per cent of the car’s price. Thus consumers have to pay about $2,000 [&£1,250] for a $20,000 [&£12,500] automobile, just to help the manufacturer cover its promotion costs.”
In pull companies, the marketing department often seems to lack status. That may be because marketing philosophies are embedded in day-to-day operations. With push marketing, on the other hand, “marketing” is forever slave to the organisation’s operational needs – even when those needs don’t coincide with those of customers.
Moving from push to pull is a huge corporate shift. It cannot be done by marketing departments alone. Is it right for your company? If so, how far down that road are you? Are you pushing for pull?