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

Elements of Product Planning for Goods and Services 257

business expense in the year it’s purchased. A capital itemis a long-lasting product

that can be used and depreciated for many years. Often it’s very expensive. Cus-

tomers pay for the capital item when they buy it, but for tax purposes the cost is

spread over a number of years. This may reduce the cash available for other purchases.

Business product classes are based on how buyers see products and how the products

will be used.The classes of business products are (1) installations, (2) accessories,

(3) raw materials, (4) components, (5) supplies, and (6) professional services.

Exhibit 9-4 relates these product classes to marketing mix planning.

Installations—such as buildings, land rights, and major equipment—are impor-

tant capital items. One-of-a-kind installations—like office buildings and custom-

made machines—generally require special negotiations for each sale. Standardized

major equipment is treated more routinely. Even so, negotiations for installations

often involve top management and can stretch over months or even years.

Installations are a boom-or-bust business. When sales are high, businesses want

to expand capacity rapidly. And if the potential return on a new investment is very

attractive, firms may accept any reasonable price. But during a downswing, buyers

have little or no need for new installations and sales fall off sharply.^7

Installations—a boom-

or-bust business

Exhibit 9-4 Business Product Classes and Marketing Mix Planning

Installations Usually requires skillful personal selling Multiple buying influence (including top

by producer, including technical management) and new-task buying are

contacts, and/or understanding of common; infrequent purchase, long

applications; leasing and specialized decision period, and boom-or-bust

support services may be required. demand are typical.

Accessory equipment Need fairly widespread distribution and Purchasing and operating personnel

numerous contacts by experienced typically make decisions; shorter

and sometimes technically trained decision period than for installations;

personnel; price competition is often Internet sourcing.

intense, but quality is important.

Raw materials Grading is important, and transportation Long-term contract may be required to

and storing can be crucial because of ensure supply; online auctions.

seasonal production and/or perishable

products; markets tend to be very

competitive.

Component parts and Product quality and delivery reliability Multiple buying influence is common;

materials are usually extremely important; online competitive bids used to

negotiation and technical selling encourage competitive pricing.

typical on less-standardized items;

replacement after market may require

different strategies.

Maintenance, repair, and Typically require widespread distribution Often handled as straight rebuys,

operating (MRO) supplies or fast delivery (repair items); except important operating supplies

arrangements with appropriate may be treated much more seriously

middlemen may be crucial. and involve multiple buying influence.

Professional services Services customized to buyer’s need; Customer may compare outside service

personal selling very important; inelastic with what internal people could provide;

demand often supports high prices. needs may be very specialized.

Business Product

Classes Marketing Mix Considerations Buying Behavior

Business Product Classes—How They Are Defined