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 259

air bags in cars, and Briggs and Stratton’s engines for lawn mowers are examples.

Component materialsare items such as wire, plastic, textiles, or cement. They have

already been processed but must be processed further before becoming part of the

final product. Since components become part of the firm’s own product, quality is

extremely important.

Components are often produced in large quantity to meet standard specifications.

However, some components are custom-made. Then teamwork between the buyer

and seller may be needed to arrive at the right specifications. So a buyer may find

it attractive to develop a close partnership with a dependable supplier. And top

management may be involved if the price is high or the component is extremely

important to the final product. In contrast, standardized component materials are

more likely to be purchased online using a competitive bidding system.

Since component parts go into finished products, a replacement market often

develops. This after marketcan be both large and very profitable. Car tires and bat-

teries are two examples of components originally sold in the OEM (original equipment

market)that become consumer products in the after market. The target markets are

different—and different marketing mixes are usually necessary.^8

Suppliesare expense items that do not become part of a finished product. Buy-

ers may treat these items less seriously. When a firm cuts its budget, orders for

supplies may be the first to go. Supplies can be divided into three types: (1) main-

tenance, (2) repair, and (3) operating supplies—giving them their common name:

MRO supplies.

Maintenance and small operating supplies are like convenience products. The

item will be ordered because it is needed—but buyers won’t spend much time on

it. Branding may become important because it makes buying easier for such “nui-

sance” purchases. Breadth of assortment and the seller’s dependability are also

important. Middlemen usually handle the many supply items, and now they are

often purchased via online catalog sites.^9

If operating supplies are needed regularly, and in large amounts, they receive spe-

cial treatment. Many companies buy coal and fuel oil in railroad-car quantities.

Usually there are several sources for such commodity products—and large volumes

may be purchased at global exchanges on the Internet.

Supplies for

maintenance, repair,

and operations

The ability to arrange a lease or good financial terms is often important in the purchase of a business aircraft or other capital

installation. By contrast, component parts become part of a firm’s product and are paid for when the expense occurs.