Retail distribution business model
What is the Push and Pull model?
Push and pull strategies are promotional routes to market. Either by the product being pushed towards customers or your customers pulling the product through the retail chain towards them.
It was traditionally used in supply management by manufacturers, then adopted for marketers to help with their promotional strategies – here are the tactics associated with each:
How to use the Push and Pull model
There are many advantages and disadvantages of both models, as it depends on your business. For instance, manufacturers tend to use a push strategy for finding distributors to promote their products.
For example, Mars who manufacture chocolate bars, sell via distributors. It would impossible to manage requests to buy single bars of chocolate! They have a large product portfolio and sell ranges into their distributors.
For a service business, they often use pull strategies, for example, Intel, the computer chip company created ‘Intel Inside’ their brand ingredient programme by persuading manufacturers that their computers would have higher perceived value if they featured Intel in their own marketing, resulting in customers wanting to know if the PC they were buying included an Intel chip.
A good tip is to look at your competitors: What are they doing? Push or pull? Look at overseas competitors too as they may have introduced other ideas.
Pros and Cons of the Push and Pull Strategy
As would be expected, there are advantages and disadvantages to both push and pull strategies:
Advantages of the Push Strategy
- Useful for manufacturers seeking distributor for product promotion.
- Useful for those manufacturing or those selling low value items as a distribution who is likely to place bulk items.
- Creates product exposure in potentially large retail environments.
- Good way to test new products in the market.
Disadvantages of the Push Strategy
- The distributor may source alternative products (cheaper, faster delivery) once your product has established the market need.
- Distributors may not organise a formal contract, so no guarantee of regular orders.
- Distributors may demand financial contribution towards promotion.
- Distributors may demand lower prices to fit in with their promotional campaign.
- Distributors can establish dependence and then request price reductions
- Distributors can demand lengthy credit terms.
Advantages of the Pull Strategy
- Direct contact with customers.
- Instant payment as customers do not have credit facilities and pay online or in store at the checkout.
- Greater margins as no discount needed.
- Customers can generate ideas for new product development.
- Ideal for premium priced products.
Disadvantages of the Pull Strategy
- Greater administration required in-house to fulfil customers’ orders.
- Many smaller and one-off orders.
An example of the Push and Pull model
How does your business operate right now? If you only sell via retailers, you have a push strategy. If you sell to merchants like supermarkets or major retailers, the challenge is often when your product establishes sufficient demand; the merchant may wish to replace your product with its own alternative. If you only sell direct to customers, that’s a pull strategy.