The 8020 Blog

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Thanks to Liz Cassidy of www.thirdsigma.com.au for the idea for this post … from which I have taken unreasonable poetic license (Liz is your go-to-gal if you have any problem leadership behaviors you want to make disappear).

If you have a “push” marketing strategy then the appropriate pricing model is to figure out your costs, add a margin and go sell it.

By way of example, I had a discussion with the Managing Director of one the worlds largest motor vehicle manufacturers about two years ago. I asked him a question about vehicle production and he stopped me and said “Tom, you don’t understand, we are not in the business of making cars, we are in the business of selling them. We have a policy of estimating market needs and we then deliberately set about to produce an excess of cars which we then push down our dealers outlets and back them by advertising special deals.”

That’s a good example of “push” marketing which normally means that you wind up competing on price which eventually, if you are not careful, becomes a zero sum game.

The other style is “pull” marketing which is where you differentiate your product and create such an interest for it, if not a demand, that people are approaching your business wanting to buy.

This type of marketing means you can price on the basis of value perceived by the client as opposed to cost (see above “push” marketing”). Consulting services - at least the smart ones - price their services on this basis.

Pull marketing means that you can charge a premium price, partly because you have all but eliminated direct competitors but mainly because you don’t base the final price on costs such as time and materials but rather on value.

Probably the worst thing you can do is have a “pull” product and charge “push”prices … if you do that you are leaving a LOT of money on the table.