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About the Author ChannelCorp Workshops
3.2 Push, Pull and ChannelsMarket strategy and channel strategy discussions invariably move to the question of whether the products and/or services should be pushed or pulled. Target market and market segmentation issues resolved, analysis switches to the fundamental decisions about whether or not channel partners will have an active or passive role in the execution of the market and channel strategy. The good news is that there are general “rules of thumb” that will allow managers to be “nearly right, most of the time” regarding the nested and related decisions. The purpose of this chapter is to outline key connective concepts that relate segmentation strategy, marketing strategy, and product type. The chapter is divided into four sections: Push vs. pull Push vs. pullMarketing and channel strategies can be divided into two types: push and pull. The fundamental distinction between the two approaches is the degree to which the channel partners are active in the marketing and selling of the products and services. In the push strategy channel partners have an active role in the marketing and channel strategy. Personal selling by vendor, distributor and channel partner personnel is used to create awareness, educate partners/customers, and close sales. In the push strategy, partners have an active role in creating customer and end user demand for the product or service. Care must be taken by product marketing, channel marketing and channel management personnel to ensure that any programs or campaigns that are executed reflect the active involvement of channel partners. In the pull strategy, the channel partner assumes a passive role in the marketing and channel strategy. The channel partner’s functionality is limited to fulfillment of vendor created demand. The marketing and channel strategy is focused on maintained and growing customer demand for products and services. The growth in demand can be at the expense of the viability of the sale of the product or service for distributors and reselling organizations. The suitability of the push or pull strategy depends upon: market/channel segmentation approach
SegmentationThe previous chapter outlined three distinct approaches to market and channel segmentation: concentrated - “all the wood behind the arrow" differentiated - “different strokes for different folks" undifferentiated/mass - “one size fits all" There are clear relationships between the segmentation approach selected and the appropriate marketing and channel strategies (Figure 5). Figure 5 - Segmentation vs. strategy The push strategy is best used in conjunction with a concentrated approach to market and channel segmentation. Due to the focus of the strategy, vendors can know appropriate amounts about their channel partners to create campaigns and programs that they can be involved in. The push strategy can be effective with a differentiated approach to market and channel segmentation only if the focus on discrete segments and types of channel partners is maintained. The risk is that a differentiated strategy can disintegrate into an undifferentiated strategy that lacks the vendor demand generation resources of a pull strategy. The pull strategy is best used in conjunction with an essentially undifferentiated approach to market and channel segmentation. Major investments by vendors in brand development, media advertising and productization of products and services allows the vendor to minimize the requirement for product or service push by channel partners.
Bought vs. sold productsThe nature of products and services being marketed and sold by the channels has an impact on whether a push or a pull strategy would be most viable. The world of technology products and services can be split into “bought products” and “sold products”. Bought products are those products/services that a customer can purchase themselves, without the assistance of a salesperson in a face-to-face encounter. As consumers, we easily recognize branded products and are able to purchase them without help. Sold products are those products/services that a customer can not purchase without having at least one face-to-face encounter with another human being. The other human being in the exchange is usually a salesperson. Bought products and sold products have different attributes, as outlined in Figure 6. Figure 6 - Bought products vs. sold products Many forces combine in a marketplace to transform sold products into bought products. Figure 7 - Bought products vs. sold products Enhancements in product ease of use cause increasing numbers of consumers to trial a product. Product trial leads to one (or more) usage experiences which then become a basis of customer knowledge. As customer knowledge levels increase, levels of perceived risk (a purchase inhibitor) are reduced. Once levels of perceived risk are sufficiently reduced and price thresholds are achieved, product purchase takes place. Increases in unit sales lead to cost reductions per unit and enhancements in ease of use . . . and so on . . . and so on . . . and so on. The net effect of the process is the “technology IQ” of the market increases and transforms previously “sold products” into “bought products” (Figure 7). The internal direct sales forces of the hardware and software vendors were designed as the ultimate risk reducer for the sale of “sold products”. The sales calls, briefings, site tours and proposals were all events that eventually reduced the perceived risk associated with a purchase to tolerable levels. As more products were transformed from “sold products” to “bought products”, the flow of products through the various types of channels changed. The last ten years has seen a dramatic shift from “direct” business to channel business. The push strategy is best used in conjunction with sold products and services. The personnel selling intensity of the strategy fits well with the requirement to “reduce the risk” associated with the sale and purchase of sold products. Bought products are an excellent fit with the pull strategy. The commodity, branded, low purchase risk nature of bought products lend themselves to the demand generation focus of the pull strategy (Figure 8). Figure 8 - Bought vs. sold vs. push vs. pull Chapter summary Active channels (the push strategy) are a vendor’s best bet when: the market/channel segmentation is concentrated or differentiated (with focus) the product or service is “sold” in nature meaning that personnel selling must take place to eliminate enough perceived risk for the customer to make a purchase or repurchase the channel needs to complete the vendor’s product Passive channels (the pull strategy) are a vendor’s best bet when: the market/channel segmentation is undifferentiated the product or service is “bought” in nature meaning that the customer or end user can successfully engage in unaided purchase or repurchase the product can be purchased “off-the-shelf” with little
or no completion by the channel partner. The next chapter examines the relationship between the issues of active vs. passive channels and the need for market coverage, exposure and channel support.
ChannelCorp Consulting services ChannelCorps’s management consulting expertise is built on a solid foundation of fifteen years of researching and analyzing the evolving business models and marketing strategies of the vendor and solution providers worldwide. Suggested Reading Availability For information on republication, contact Bruce Stuart - channelcorp@telus.net Back to ChannelCorp Intelligence
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