Posts Tagged ‘marketing strategy’

Push and Pull Marketing Strategies

November 2nd, 2009 No comments

Our startup is at the point where we are ready to start offering our product to the larger market, and realizing revenue (at least via advertisements). As a consequence, I’ve been keeping an eye on where the revenues are likely to accrue from.

As part of my research, I’ve realized that there are actually two distinct strategies that startups can take to revenue (and you do need revenue to keep the lights on in your firm; no exceptions). They are known as the ‘push’ and ‘pull’ strategy by people who invest (and also us startup types who want to succeed at what we’re doing). Obviously, there are other strategies available as well, involving VC funding etc, but for bootstrapping (which is our preferred approach), you’ve got these two options.

A ‘push’ model relates to an entrepreneur who launches their startup because they believe that they can develop a product or service that combines market appeal with a competitive advantage over competition, as such it is eventually pushed to the customer via sales. Alternatively, the ‘pull’ model is based on some certain knowledge that a customer, whether current or potential, is interested in buying a particular product, and the entrepreneur develops it with that specific buyer in mind, and essentially the product is ’pulled to market’ by the customer.

Both have their pros and cons. The advantage of the ‘pull’ model is that as soon as the development phase is complete, you have a revenue stream from the client who ‘pulled’ this product. The disadvantage is that you may be inadvertently subsidizing the R&D function of this client, and the product may be so specific that you cannot actually attract any other customers.

This risk factor is the primary reason we developed our product using the ‘push’ model, as this gives our startup the opportunity to sell our product to as wide of a market as possible, and the products we’ve produced can have extensive potential applications.

Thus the risk with the ‘pull’ model are long-term (what if we’re building too specific a product that no one else wants), while those associated with the ‘push’ model are more short-term (what if we run out of cash before we have a product that the market wants).

What will work best for you ultimately depends on your risk tolerance, your network of contacts, and your access to differentiators that can allow you to create a successful product. If you have low risk tolerance, a good network of contacts, a buyer with a need that only you can fulfill, the pull model would work for you.

I attempted to follow the ‘pull’ strategy with two products that I’ve developed in the past around XML extraction from PDF (which inferred structure via OCR-like pattern recognition) and again with natural language generation intelligent methods for game content development. The problem with both was that they were too specific and filled the needs of a single organization perfectly, and as soon as they decided that they had other priorities in place, we lost that customers and found that it would take as much (or more effort) to continue this effort with another customer (whom we still had to find). You may be able to go and knock on the door of the competitor of the last organization you worked with, however keep an eye on any clauses in your contract that could cause problems later.

It may seem counterintuitive to start from scratch when you have something developed and well on the road to maturity already, but sometimes you need to make these hard decision. We decided to start anew with a green field.