Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e- Elements of Product
Planning for Goods and
Services
Text © The McGraw−Hill
Companies, 2002258 Chapter 9
Suppliers sometimes include special services with an installation at no extra cost.
A firm that sells (or leases) equipment to dentists, for example, may install it and
help the dentist learn to use it.Accessoriesare short-lived capital items—tools and equipment used in produc-
tion or office activities—like Canon’s small copy machines, Rockwell’s portable
drills, and Steelcase’s filing cabinets.
Since these products cost less and last a shorter time than installations, multiple
buying influence is less important. Operating people and purchasing agents, rather
than top managers, may make the purchase decision. As with installations, some
customers may wish to lease or rent—to expense the cost.
Accessories are more standardized than installations. And they’re usually needed
by more customers. For example, IBM sells its robotics systems, which can cost over
$2 million, as custom installations to large manufacturers. But IBM’s Thinkpad com-
puters are accessory equipment for just about every type of modern business all
around the world.Raw materialsare unprocessed expense items—such as logs, iron ore, wheat, and
cotton—that are moved to the next production process with little handling. Unlike
installations and accessories, raw materials become part of a physical good and are
expense items.
We can break raw materials into two types: (1) farm products and (2) natural
products. Farm productsare grown by farmers—examples are oranges, wheat, sugar
cane, cattle, poultry, eggs, and milk. Natural productsare products that occur in
nature—such as fish and game, timber and maple syrup, and copper, zinc, iron ore,
oil, and coal.
The need for grading is one of the important differences between raw materials
and other business products. Nature produces what it will—and someone must sort
and grade raw materials to satisfy various market segments. Top-graded fruits and
vegetables may find their way into the consumer products market. Lower grades,
which are treated as business products, are used in juices, sauces, and soups.
Most buyers of raw materials want ample supplies in the right grades for specific
uses—fresh vegetables for Green Giant’s production lines or logs for Weyerhaeuser’s
paper mills. To ensure steady quantities, raw materials customers often sign long-
term contracts, sometimes at guaranteed prices.Componentsare processed expense items that become part of a finished product.
Component partsare finished (or nearly finished) items that are ready for assembly
into the final product. AT I’s graphics cards included in personal computers, TRW’sRaw materials become
part of a physical good
Component parts
and materials must
meet specifications
Business customers usually want
a convenient and low-cost way
to buy standard equipment and
supplies, so many are now
turning to vendors who sell over
the Internet.
Accessories—
important but short-
lived capital items
Specialized services
are needed as part
of the product