Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic

Marketing: A

Global−Managerial

Approach, 14/e

9. Elements of Product
   Planning for Goods and
   Services

Text © The McGraw−Hill

Companies, 2002

256 Chapter 9

Many nonprofit organizations try to “sell” their unsought products. For example,

the Red Cross regularly holds blood drives to remind prospective donors of how

important it is to give blood.

We’ve been looking at product classes one at a time. But the same product might

be seen in different ways by different target markets at the same time. For example,

a product viewed as a staple by most consumers in the United States, Canada, or

some similar affluent country might be seen as a heterogeneous shopping product by

consumers in another country. The price might be much higher when considered as

a proportion of the consumer’s budget, and the available choices might be very dif-

ferent. Similarly, a convenient place to shop often means very different things in

different countries. In Japan, for example, retail stores tend to be much smaller and

carry smaller selections of products.

Business product classes are also useful for developing marketing mixes—since

business firms use a system of buying related to these product classes.

Before looking at business product differences, however, we’ll note some impor-

tant similarities that affect marketing strategy planning.

The big difference in the business products market is derived demand—the

demand for business products derives from the demand for final consumer products.

For example, car manufacturers buy about one-fifth of all steel products. But if

demand for cars drops, they’ll buy less steel. Then even the steel supplier with the

best marketing mix is likely to lose sales.^6

Total industrydemand for business products is fairly inelastic. Business firms must

buy what they need to produce their own products. Even if the cost of basic silicon

doubles, for example, Intel needs it to make computer chips. The increased cost of

the silicon won’t have much effect on the price of the final computer or on the

number of computers consumers demand. Sharp business buyers try to buy as eco-

nomically as possible. So the demand facing individual sellersmay be extremely

elastic—if similar products are available at a lower price.

How a firm’s accountants—and the tax laws—treat a purchase is also important

to business customers. An expense itemis a product whose total cost is treated as a

One demand derived
from another

Price increases
might not reduce
quantity purchased

Business Products Are Different

One product may be
seen several ways

Tax treatment affects
buying too

Businesses buy the goods and
services they need to produce
products for their own
customers, so the demand for
GE’s special plastic resins, used
to make lightweight and impact-
resistant body panels, is derived
from consumer demand for V W’s
unique car.