Unit E: Product/Service Management and Pricing
COMPETENCY: 8.00 Understand product/service management.
OBJECTIVE: 8.01 Understand product/service management as a function
A. Recognize product/service management as a function of marketing.
1. Product/service management: Concepts and procedures necessary to
develop, maintain, distribute, and improve a product or service mix in
response to market opportunities.
2. Elements of product/service management
a. New product development
b. Consumer research
c. Product research
d. Product design
e. Product production
B. Summarize product classifications.
1. Importance of product classifications
a. Products are marketed to reach specific target markets.
b. All marketing decisions are affected by the classification into which a
product is placed.
c. Common characteristics of consumer and industrial buying behaviors
serve as measures to categorize products into specific
d. The same item may not be classified the same way by different
consumers. In fact, the same item may have a different classification
by the same consumer at a different time or when purchased for a
different purpose. Examples: (1) A teenager purchasing sneakers to
wear to school might shop for the shoes as a specialty good, while
an older customer buying sneakers to wear as a utility shoe when
working in his garden might buy them merely as a convenience item.
(2) A customer buying towels for use the guest bathroom would not
shop for towels in the same way as if the towels were to be used for
washing the car.
2. Major product classifications for goods
a. Consumer goods: Products designed for personal or home use.
(1) Convenience goods: Inexpensive items that consumers
purchase without much thought.
(a) Consumers are not willing to shop around for these
(b) Marketers must make these products accessible in many
stores and convenient for purchase on a daily basis.
(c) Types of convenience goods
(i) Staple items. Examples: milk and soap
(ii) Impulse items. Examples: candy and gum
(iii) Emergency items. Examples: batteries and cold
(2) Shopping goods: Less frequently purchased products that are
usually higher in price and require more thought on the part of
(a) Consumers compare brands, features, and prices to receive
the best-perceived value.
(b) Marketers do not need exposure in as many stores for these
products, but the choice of stores and outlets must match
the products’ target market.
(c) Examples: cars, furniture, large appliances, and houses
(3) Specialty goods: Very specific products that customers insist
upon and are willing to search for.
(a) Specialty goods may be more expensive than items in other
(b) Customers may be seeking specific brand names.
(c) Some customers may insist on certain product features.
(d) Customers are usually less concerned with price.
(e) These products can be placed in fewer stores. The fact that
they are less available may make them even more desirable.
(f) Examples: designer clothing, expensive jewelry, and certain
brands of automobiles
(4) Unsought goods: Products that customers will not shop for
because they do not know about the product or do not feel a
strong need for the product.
(a) These products require direct personal selling. It is up to the
marketer to inform consumers and convince them of a need
in order to make the sale of these products.
(b) Examples: life insurance and funeral services
b. Industrial goods: Products designed for use by another business.
Examples: tires and gasoline (for use in public transportation);
computers and computer supplies (for use in schools)
(1) Raw materials: Unprocessed primary materials that come from
nature and are used to make products. Example: oil
(2) Major equipment/installations: Investment purchases of large
tools and machines that will be used to produce products or
services. Example: textile looms used in fabric production
(3) Accessory equipment: An industrial product that is used in the
operation of a business but does not become a component part
of any finished product. Examples: computers or forklifts
(4) Component parts: Items that become part of the finished
product completely with little or no additional processing.
Examples: zippers, buttons, and trims bought by garment
manufacturers for use in ready-to-wear
(5) Processed materials: Industrial products used in production that
do not become an identifiable part of the product. Example:
Precision Machine Manufacturing supplying the aviation industry
with cylinder head assemblies to then make airplane engines
(6) Consumable supplies: Items that facilitate an organization’s
production and operations but do not become part of the finished
product. Examples: rubber bands, paper clips, and computer
(7) Business-to-business services: Business assistance and/or
advice provided for a fee by one business to another business.
Examples: financial services, legal services, marketing research
services, and janitorial services