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Summary of Chapter 12
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Summary of Chapter 12
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CHAPTER 12A product is everything one receives in an exchange, including all
tangible and intangible attributes and expected benefits. A product Product: everything
may be a good, a service or an idea. A good is a real, physical thing one receives in an
that we can touch. A service is the result of applying human or exchange, including all
mechanical effort to a person or thing. An idea may take the form tangible and intangible
attributes and
of philosophies, lessons, concepts or advice. expected benefits; it
may be a good, a
service, or an idea
CLASSIFICATION OF PRODUCTS Consumer product:
a product purchased
Products can be grouped into two general categories: consumer to satisfy personal and
and business. A product purchased to satisfy personal and family family needs
needs is a consumer product. A product bought for resale, for
making other products or for use in a firm’s operations is a Business product: a
business product. product bought for
resale, for making
other products, or for
CONSUMER PRODUCT CLASSIFICATIONS
use in a firm’s
operations
The traditional and most widely accepted system of classifying
consumer products consists of three categories: convenience, Convenience
shopping and specialty products. product: a relatively
inexpensive,
A convenience product is a relatively inexpensive, frequently frequently purchased
purchased item for which buyers want to exert only minimal effort. item for which buyers
The buyer spends little time in planning the purchase or in want to exert only
comparing available brands or sellers. E.g., bread, newspapers, or minimal effort
gas.
Shopping product:
A shopping product is an item for which buyers are willing to an item for which
extend considerable effort on planning and making the purchase. buyers are willing to
Buyers allocate ample time for comparing stores and brands with expend considerable
respect to prices, product features, qualities, services, and perhaps effort on planning and
warranties. These products are expected to last for a fairly long making the purchase
time and are purchased less frequently than convenience products.
E.g., cell phones and appliances. Specialty product:
an item that possesses
A specialty product possesses one or more unique characteristics one or more unique
for which a group of buyers is willing to expend considerable characteristics for
purchasing effort. Buyers plan the purchase, know exactly what which a significant
they want and will not accept a substitute. Purchasers do not
compare alternatives. E.g., sports cars.
, BUSINESS PRODUCT CLASSFICATIONS Raw material: a basic
material that actually
Based on their characteristics and intended uses, business becomes part of a
products can be classified into the following categories: raw physical product; usually
materials, major equipment, accessory equipment, component comes from mines,
parts, process materials, supplies and services. forests, oceans, or
recycled solid wastes
A raw material is a basic material that actually becomes part
of a physical product. They are usually bought and sold Major equipment:
according to grades and specifications. large tools and machines
used for production
Major equipment includes large tools and machines used for purposes
production purposes’. e.g. cranes. accessory equipment:
standardized equipment
Accessory equipment is standardized equipment used in a used in a firm's
firm’s production or office activities. They are usually less production or office
expensive and are purchased routinely with less negotiation. activities
E.g., fax machines.
Component part an
A component part becomes part of a physical product and is item that becomes part
either a finished item ready for assembly or a product that of a physical product
needs little processing before assembly. It can be identified and is either a finished
easily. E.g. computer chips, clocks, tires. item ready for assembly
or a product that needs
A process material is used directly in the production of little processing before
another product. It is not easily identifiable in the finished assembly
product. E.g. industrial glue and food preservatives.
Process material: a
A supply facilitates production and operations but does not material that is used
become part of a finished product. E.g. paper, pencils, oils and directly in the production
cleaning agents. of another product but is
not readily identifiable in
the finished product
A business service is an intangible product that an
organization uses in its operations. Purchasers must decide
Supply: an item that
whether to provide their own services internally or to hire
facilitates production
them from outside the organization. E.g. financial, legal and
and operations but does
marketing services.
not become part of a
finished product
THE PRODUCT LIFE-CYCLE
Business service: an
A product life-cycle is a series of stages in which a product’s intangible product that
sales revenue and profit increase, reach a peak, and then an organization uses in
decline. its operations
Product life-cycle: a
series of stages in which
a product's sales
revenue and profit
increase, reach a peak,
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