Classifying Products Strategically - HEC

Patrick E. Murphy & Ben M. Enis

Classifying Products Strategically This article proposes an integrated product classification scheme. It is argued that, in view of the 1985 definition of marketing, one classification for all products-goods, services, and ideas-is sufficient. This classification adds "preference" products to the conventional convenience, shopping, and specialty categories. These categories are defined in terms of the effort and risk dimensions of price-as perceived by both organizational and ultimate consumers.

THE new official AMA definition of marketing is:

Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives ("AMA Board" 1985).

There are four major differences between this definition and the previous AMA definition developed in 1960. First, this definition stresses, via planning and executing, the strategic nature of marketing. Second, it identifies products as goods, services, and ideas. Third, the definition takes a broadened view (Kotler and Levy 1969), i.e., by not limiting marketing to business activities. Fourth, it recognizes the central role of exchanges that provide satisfaction for both parties (Bagozzi 1974, 1975, 1978; Kotler 1972a).

Marketing, therefore, involves exchanges of products (for payment) that result in mutual satisfaction of the differing objectives of the seller and buyer. Mar-

Patrick E. Murphy is an Associate Professor of Marketing, University of Notre Dame. Ben M. Enis is Professor of Marketing, University of South- ern California. The authors would like to thank Mark G. Dunn, Michael J. Etzel, Gary L. Frazier, Gene R. Laczniak, Michael P. Mokwa, Kent B. Monroe, and anonymous JM reviewers for their helpful comments on earlier drafts of this article.

keting strategy, then, is the set of organizational activities that (1) determines the benefits which will satisfy the consumer in a given situation and (2) offers the

product which provides those benefits. The exchange must be mutually beneficial: benefits expected must be equal to or greater than the price paid by the consumer, and vice versa for the marketer. Products can be seen as a bundle of benefits and costs-two sides of the same exchange transaction.

The purpose of this article is to present the mar-

keting discipline with a unified product taxonomy. That is, the article contains an argument for a single classification which covers services and ideas in addition to tangible goods. Based on the new definition of

marketing, this taxonomy offers strategic guidelines for managers and researchers by relating products to

prices paid by consumers. Price is expanded here to include nonmonetary as well as monetary elements

(Berry 1979; Guiltinan 1976; Jacoby, Szybillo, and

Bering 1976; Peter and Tarpey 1975). The article is organized into four parts. First, the

classification is outlined. Then the rationale for the classification is explained via a literature review and

synthesis in the two areas that constitute an exchange: product taxonomies and price dimensions. We con- clude with managerial and academic research implications.

Journal of Marketing Vol. 50 (July 1986), 24-42. 24 / Journal of Marketing, July 1986

The Proposed Product Classification

Following Levitt (1975, 1980) and Kotler (1984), any product is perceived by the buyer to be a combination or bundle of utilities-qualities, processes, and/or capabilities (goods, services, and ideas) that is expected to provide satisfaction (Enis and Roering 1980). For example, American steel companies sell their cus- tomers rolled steel, advice on the proper applications for it, and the philosophy of "Buy American." Sim- ilarly, organized religions offer the idea of salvation, regular prayer services, and religious books and ar- tifacts.

The consumer assesses satisfaction in terms of benefits expected minus costs incurred. These costs should be conceptualized on two independent dimensions-effort and risk. Effort is the amount of money, time, and energy the buyer is willing to expend to acquire a given product. It is an objective measure of the value the consumer places on the product. In the buyer's mind, this is an expectation of future value. Therefore, effort must be multiplied by the likelihood of buying error. There is risk, in other words, that the product will not deliver the benefits sought. The subsequent detailed discussion recognizes five types of possible risk: financial, psychological, physical, functional, and social.

This definition of product benefits and the two dimensions of price permit a four-category classification of products. It is not necessary to have different classifications for goods, services, or ideas. From the buyer's perspective, it is benefits, not product fea- tures, that the individual or organization desires. For example, the need for a good night's sleep could be satisfied by a sleeping pill (good), exercise class (service), or meditation (idea). Moreover, from a competitive standpoint, the marketer of a good, such as an automobile, may be trying to sell to the same consumer as is a services marketer, e.g., an auto leasing firm. In view of the new AMA definition of marketing, it seems appropriate to develop one product taxonomy for all types of products (consumer and industrial, profit and nonprofit).

Figure 1 illustrates our approach. Four categories of products-convenience, preference, shopping, and specialty-are defined in terms of the buyer's evaluation of price. In explaining these products, two points shown in the figure should be stressed. First, increas- ing price permits the marketer to broaden the scope of marketing strategy (shown by the widening arrow). That is, a wider variety of marketing mix combina- tions can be used to gain a differential advantage for shopping and specialty products than for convenience and preference ones. For example, in marketing preference products, the marketer is usually limited to

FIGURE 1 A Strategic Classification of Products

Risk

Effort Low

> Widening arrow indicates broadened scope of marketing mix differentiating factors

Shaded area indicates low buyer involvement

with these types of products

branding, packaging, and promotional changes, while for the products higher on the strategy arrow, channel of distribution and pricing modifications may be used in addition to product and promotion alterations. Sec- ond, the concept of high and low product involvement (Krugman 1965) is incorporated into this classification, depicted by the shaded area representing low involvement. Rothschild (1975, 1979a) and Assael (1984) have shown that different marketing strategies are required for low involvement products.

Convenience Products

As shown in Figure 1, convenience products are defined as lowest in terms of both effort and risk. That is, the consumer will not spend much money or time in purchasing these products, nor does he/she perceive significant levels of risk in making a selection. They are commonly illustrated by commodities, "un- sought" (emergency) items, and impulse products.

Examples of consumer goods that fall into the convenience category include fresh produce and gro- cery staples, umbrellas, gum, and batteries. Supplies (Fern and Brown 1984) and raw materials which are commodities could be classified as convenience items for industrial buyers. In fact, some firms like DuPont label their new chemicals as commodity products (Billon and Robinson 1970). Commodities purchased in bulk (e.g., a trainload of chemicals) become shop-

Classifying Products Strategically / 25

ping goods, however, and are often the subject of in- tense buyer/seller negotiation, particularly over price. Convenience services may encompass taxi or mass transit for end consumers and garbage pickup for organizational consumers. Convenience ideas would be antilitter campaigns or police/security protection. Preference Products The second category shown in Figure 1 is termed preference products (Holbrook and Howard 1977). These products are slightly higher on the effort dimension and much higher on risk. In fact, the distinction between convenience and preference products is primarily one of buyer perceived risk. The reason that the consumer perceives this higher level of risk is often through the efforts of the marketer, particularly branding and advertising. Some companies have been successful in convincing consumers that their brands of low priced products convey greater benefits (e.g., Bayer aspirin) than competing ones.

The most prominent examples of preference products are in the consumer package goods industry (e.g., beer, soft drinks, toothpaste, etc.). Consumers may "prefer" the taste and image of Diet Coke, based on advertising appeals or brand preference. However, they are likely to substitute Diet Pepsi or perhaps a low calorie brand of iced tea or even beer if the monetary or time effort is too large.

Industrial preference goods would be business magazines (some executives prefer Business Week over Fortune) or particular brands of typewriter ribbons or work gloves. Such things as television networks/pro- grams, hair styling, and appliance repair also fall into this category, where consumers have preferences for

specific providers but are willing to make substitu- tions, if necessary. In the industrial field, travel provides the best services examples of preference products: airlines, hotels, and rental cars are preference products for most buyers. Preference ideas might be patronizing the arts for consumers and the choice of a computerized data base used by business firms.

More corporations appear to be developing a conscious strategy of moving their products into the preference category. Clorox (bleach, Kingsford charcoal, and salad dressings) and Hyponex (lawn and garden care) corporations have taken a number of presumed convenience products and differentiated them, thereby moving them into the preference group. The following statements reflect their strategy:

Take a relatively low priced commodity product and, by deft packaging and marketing, sell it at a premium price under well-advertised brand names ("Clorox" 1984, p. 113). We're changing from a commodity to a consumer packaged-goods company by stressing branding, packaging, distribution capability through inventory control and customer service ("Firm Adopts" 1985, p. 12).

Shopping Products

Copeland's (1923) original conceptualization (see full description in Table 1) clearly explains shopping products. The name implies much about the characteristics of these products. Buyers are willing to spend a significant amount of time and money in searching for and evaluating these products. Increased levels of risk are also perceived by consumers for these high involvement products.

Examples of shopping goods are automobiles,

TABLE 1 Approaches to Classifying Products

Buyer or Generalizability Author and Seller Benefit

Year Classification Dimensions Orientationa Useb Sector' Typed Bundle'

Convenience goods are those cus- tomarily purchased at easily acces- sible stores; examples are canned soup, tobacco products, electric light bulbs, safety razor blades, shoe polish, . . . and toothpaste. . . .The unit price for most articles in this class is too small to justify the consumer's going far out of his way or incurring the expense of a streetcar fare in order to procure a special brand (p. 282).

Shopping goods are those for which the consumer desires to compare prices, quality, and style at the time of purchase. Usually the consumer wishes to make this comparison in several stores. Typi- cal shopping goods are gingham cloth, women's gloves, chinaware, and novelty articles (p. 283).

Specialty goods are those which have some particular attraction for

Travel effort, brand comparison effort, degree of brand insistence

Buyer C P G no

26 / Journal of Marketing, July 1986

Goods Copeland 1923

TABLE 1 (continued) Approaches to Classifying Products

Buyer or Generalizability Author and Seller Benefit

Year Classification Dimensions Orientation' Useb Sectorc Typed Bundle"

the consumer, other than price, which induces him to put forth special effort to visit the store in which they are sold and to make the purchase without shopping. . . . Ex- amples of specialty goods are men's clothing, men's shoes, high grade furniture, vacuum cleaners, and phonographs (p. 284).

Installations are major equipment of a plant. Accessory equipment is auxiliary or supplemental equipment of a plant. Operating supplies are materials that facilitate the op- eration of a plant. Fabricating materials and parts are manufactured products that are used for further manufacture by becoming parts of the final product. Primary materials are crude, new materials.

Uses to which goods are put, whether they become part of the finished product

Seller I P G no

Bourne 1956 Product-plus, brand-minus (instant coffee); product-minus, brand-plus (clothes); product-minus, brand-minus (soup) (reference group influence)

Holton 1958 Convenience, shopping

Specialty

Luck 1959 Convenience, shopping, specialty

Aspinwall 1961 Red goods, orange goods, yellow goods (continuous scale)

Bucklin 1963 Convenience, shopping, specialty (shopping-nonshopping)

Dommermuth Number of retail outlets shopped, 1965 number of brands examined (shop-

ping matrix)

Miracle 1965 Group I-candy bars Group II-groceries Group Ill-TVs Group IV--cars Group V-electronic office equip-

ment

Kaish 1967 Convenience, shopping, specialty

Mayer, Mason, and Gee 1971

Convenience store-convenience goods, convenience store-shopping goods, convenience store-specialty goods, shopping store-shopping goods, specialty store-specialty goods

Kotler 1972b Goods entering product completely -raw materials-farm and natural

products -manufactured materials and parts

Degree of social and brand conspic- uousness

Distinction between convenience & shopping, gain resulting from price and quality comparisons relative to searching costs of individual consumer

Necessity of making special purchase effort due to limited market demand

Article directed at Holton (1958) and specialty good argument, consumer is willing to make special purchase effort for special brand

Replacement rate, gross margin, adjustment, time of consumption, searching time

Degree of shopping effort, degree of prepurchase preference formation

Allows detection of differences within product classifications

Product characteristics: unit value; significance of each individual purchase to consumer; time and effort spent purchasing by consumer; rate of technological change; tech- nical complexity; consumer need for services; frequency of purchase; extent of usage

Two types of effort identified: physical and mental

Locational convenience, merchandise suitability, value for price, sales effort and store service, con- genialty of store, post-transaction satisfaction

How they enter the production process, cost structure of the produc- ers

Buyer C P G no

Buyer C P G no

Buyer C P G no

Buyer B P G no

Buyer C P G no

Buyer C P G no

Buyer B P G no

Buyer C P G no

Buyer C P G no

Seller I P G,S no


Copeland 1924

TABLE 1 (continued) Buyer or Generalizability

Author and Seller Benefit Year Classification Dimensions Orientationa Useb Sectorc Typed Bundlee

Goods entering the product partly -installations-buildings and land

rights, and fixed equipment -accessory equipment-portable

factory equipment and office equipment

Goods not entering the product -supplies-operating and mainte-

nance and repair supplies -business services-maintenance

and repair and business advisory services (p. 141).

Raymond and Assael 1974

Psychophysical

Distributive velocity, mental velocity

Bucklin 1976 Convenience, specialty, shopping (low intensity), shopping (high intensity)

Jolson and Proia (Searching behavior continuum)- 1976 classification of a good subjectively

tied to consumer's "comparative shopping"

Shapiro 1977 Proprietary and catalog items, custom-built items, custom-designed items, industrial services

Holbrook and Convenience, preference, shopping, Howard 1977 specialty

Enis and Roering Convenience, preference, shopping, 1980 specialty

Nature of service act Customer relationships

Customization and judgment Demand relative to supply

Service delivery method

Tangible product, service, idea, issue (cause)

Number of rewards product provides, our knowledge of how to deliver these rewards

Consumer: stimulus, intervening variables, response. Product: market, distributive

Degree of brand similarity, degree of consumer uncertainty in making a choice

Related to consumer's product awareness, comprehension, product importance, standard of taste

Uniqueness of the good, whether it is part of finished product

Product characteristics (magnitude of purchase and clarity of characteristics), consumer characteristics (ego involvement and specific self- confidence), consumer responses (physical shopping and mental effort)

Product is "total bundle of benefits" as seen by the buyer, marketer's strategy matches marketing mix decisions to buyer's perception of desired benefits

People-things, tangibility Formal-informal, continuous-dis- crete delivery High-low Wide-narrow fluctuations, con- straints on supply Multiple-single site, interaction

Tangibility, profit-nonprofit

Buyer C P G no

Buyer C P G no

Buyer C P G no

Seller I P G,S no

Buyer C P G no

Buyer B P G,S yes

Seller C P S no

Buyer P,N G,S,I no

Lovelock and Physical goods, services, social be- Tangibility, marketer characteristics, Weinberg 1984 haviors customer characteristics

Buyer N G,S,I

aMeasures whether the product classification focuses on buyer needs (buyer orientation) or product characteristics (seller orientation). bThe use of the classification refers to whether consumer (C), industrial (I) or both (B) applications of the product are emphasized. CPertains to whether the product is offered by profit (P) or nonprofit (N) organizations. dGoods (G), services (S) or ideas (I). eRecognizes that buyers purchase a bundle of benefits in the selection of a product. fFor a summary of previous services classification typologies, see Lovelock (1983, p.11).

clothing, and furniture for end consumers, and equipment and components parts for industrial users. Con- sumer services that could be classified in the shopping category are insurance, medical and dental care, and

apartment rental. Industrial shopping services include the accounting audit. Shopping ideas are education for individuals and conducting marketing research studies for industrial buyers.


Services Lovelock 1983f

Ideas Fine 1981b

no

Specialty Products As the arrowhead in Figure 1 shows, marketing managers can attempt to move their shopping products into the specialty category. This means that consumers will no longer "shop" for alternatives but accept only one brand. For example, Maytag, the Boston Celtics, and Stanford University are organizations whose brands now seem to be specialty products for many buyers.

Those products that are defined to be highest on both the risk and effort dimensions of Figure 1 are called specialty products. The major distinction between shopping and specialty products is on the basis of effort, not risk. The monetary price is usually higher, as is the time. Comments such as, [I would] "search high and low," "wait for weeks," and "not settle for anything less" are good indicators of the time effort that distinguishes specialty products. At the limit, the buyer will accept no substitutes.

Examples of specialty goods include vintage im- ported wines, expensive sports cars, and paintings by well-known artists. Specialty services for consumers might be those offered by the noted heart surgeon, Dr. Peter De Vries, or the best trial attorney in any com- munity. A specialty idea would be to join a select do- nor club for a charity or museum. In the industrial product sector, installations (buildings) would be specialty products because their location, cost, and fur- nishings require great organizational effort and risk. A consultant like McKinsey Company would be an illustration of a specialty service for organizations, and the type of basic research supported by the firm is a specialty idea.

Reaching the specialty product category is a major objective of many marketing managers. Therefore, it appears at the end of the marketing strategy arrow in Figure 1. This position is often difficult if not im- possible to reach. Few specialty products retain their status over time.

Value of Proposed Classification The value of this refinement to the commonly accepted classification of products is its universality and integration. It can account for goods, services, and ideas products. The industrial and consumer dichotomy that is sometimes overemphasized in marketing (cf. Fern and Brown 1984) is also minimized using this typology. Further, nonprofit products can be classified, since marketing in this sector is not "uniquely different" from business firms (Lovelock and Wein- berg 1984, p. 31). Most importantly, it anchors marketing strategy in the buyer's evaluation of the price of the exchange.

The fact that this is a general classification of

products needs to be recognized. Exceptions do exist. For instance, a millionaire may not perceive that certain products are specialty because of his/her financial

status. Furthermore, it is possible for a few products to become specialty ones even though they are not extremely high in risk and effort. The strength of the brand loyalty to Coca-Cola Classic is a recent illus- trative case (Fisher 1985). However, marketing is predicated on finding and filling the needs of significant segments of buyers and this classification is intended to achieve that goal.

Subsequent sections of the article develop this taxonomy in detail. Earlier product classifications are examined and evaluated to demonstrate the value of one synthesis. The dimensions of price are reviewed, and differences in the four categories of products along these dimensions are explored in more depth. Finally, managerial and research implications are discussed.

Product Classification Approaches Table I depicts the major past research in classifying consumer and industrial products. Each of these classification systems is evaluated on the following criteria: (1) buyer vs. seller orientation; (2) generalizability across users (consumer-industrial), sectors (profit- nonprofit), and types (goods, services, and ideas); and (3) the recognition that consumers purchase bundles of benefits when selecting products. These criteria appear in the three right columns of the table.

Classifying Goods

Every treatment of goods classifications must begin with Copeland's (1923) widely acclaimed article di- viding goods into convenience, shopping, and specialty categories. The definitions for each are given in the table. Copeland (1924) also coined the standard classification of industrial goods.

Bucklin (1963) clarified the original Copeland consumer goods conceptualization by suggesting that the underlying dimensions were shopping effort and degree of prepurchase preference formation. In an update, Bucklin (1976) divided shopping goods into low and high intensity categories. Kaish (1967) noted the distinction between physical (shopping) and mental (brand insistence) effort.

Holbrook and Howard (1977) made a major con- tribution to the study of goods classification by pro- posing a fourth category, preference goods, which is adopted here. They stated that these goods involve low shopping effort and low ego involvement but high brand preference. Hence, they used the term preference to describe this situation and gave TV dinners and ready- to-heat pies as examples. Holbrook and Howard ar-

gued that:

It appears that an increasingly large number of consumer nondurables are falling into this category and that a great deal of advertising effort is invested in attempting to move a good from one side of this preference distinction to another (p. 214).


Classifying Services The greatest advances toward classifying services have been made by Lovelock (1979, 1980, 1983, 1984). His first article proposed the approach taken here, and by AMA, of categorizing products as physical goods, services, and social behaviors (ideas). He used a three- dimensional framework to classify these offerings (Lovelock's alternative to the term product) according to marketer (business, government, or nonprofit sector) or consumer (individual and household or organizational) characteristics. The 1980 article detailed 12 approaches to classifying services divided into three groups-basic demand characteristics, service content and benefit, and service delivery procedures.

Lovelock (1983) refined his 1980 conceptualiza- tions and proposed classifying services in five different ways (see Table 1). His stated purpose in developing this taxonomy was "helping managers in service businesses do a better job of developing and marketing their products" (p. 19). A final classification scheme (Lovelock 1984) dealt with understanding the characteristics of the services product, that is, the extent to which equipment/facility-based vs. people-based attributes form the product.

Since the bulk of other conceptual development in services marketing (Berry 1980; Shostack 1977; Zeithaml, Parasuraman, and Berry 1985) has been concentrated in the last several years, the services classification literature is not as well developed. How- ever, considerable recent energy has been expended in gaining a better understanding of classifying service products (Ahtola 1985; Gilly and Dean 1985; Sil- pakit and Fisk 1985). With one exception (Davis, Guiltinan, and Jones, 1979), the tendency has been to create new conceptual classes for services.

In fact, almost no work has attempted to classify industrial services. The texts in the field lump all business services into one category (Haas 1986; Hill, Alexander, and Cross 1975; Hutt and Speh 1985). Kotler (1972b, see Table 1) did differentiate among services but listed them under goods.

Classifying Ideas Of the three types of products, ideas have received the least attention from a classification standpoint. Fine's book (1981b) is the only one devoted entirely to the marketing of ideas. He proposed a "broadened" typology of products using tangibility (good, service, idea, and issue or cause) and profit/nonprofit as the dimensions (pp. 28-29). In Fine's view, causes or issues are different from and more intangible than ideas. For example, family planning is an idea, while pop- ulation control is a cause.

Lovelock and Weinberg (1984) classify social behaviors, "the end product of organizations that pro-

mote or advocate ideas and social causes" (p. 283), by the marketer and customer characteristics as earlier proposed by Lovelock (1979). These social behaviors are recognized as being difficult to define but a major growth area for marketing. Marketing of ideas by industrial finns, such as those popularized by Mobil Oil's "advertorials," is being practiced but is more likely to be discussed in an advertising (Heath and Nelson 1985; Sethi 1979) rather than a product context.

Evaluating Earlier Classification Approaches The goods, services, and ideas classification schema shown in Table 1 all meet some of the criteria set out at the beginning of this section. For example, consumer goods classification approaches are buyer oriented and partially generalizable. However, they do not recognize the benefit bundle criterion. Industrial goods and Lovelock's services classifications are seller oriented and also only somewhat generalizable. Past ideas classifications tended to concentrate primarily on nonprofit consumers, while ideas are increasingly being marketed by both for-profit and nonprofit marketers.

The product classification system proposed here is superior to those above for four reasons. First, and perhaps most important, it is buyer oriented. Second, it is generalizable across all users, sectors, and product types. Third, the new classification recognizes the central role of the benefit/cost bundle. Finally, it has the advantage of using familiar terminology, building on the work of Copeland and of Holbrook and How- ard. Products can be classified in many ways. The most useful classification for developing marketing strategy focuses on benefits demanded by buyers.

A key to the new taxonomy is explicit recognition that its categories are defined by the buyer's evaluation of the price to be surrendered in order to consume a given product. As the following section demon- strates, price is conceptualized in two dimensions.

Dimensions of Price The literature reviewed above on classifying products uses a number of dimensions. Among the most prev- alent is effort, usually interpreted as being shopping effort. Holbrook and Howard (1977) introduced the importance of risk in their classification typology (Ta- ble 1). In addition, Lovelock (1980) identified both time and risk as elements in his classification of services.

Table 2 shows the two dimensions of price-effort and risk-divided by monetary and nonmonetary aspects. Recognition that price includes nonmonetary elements has come from a number of sources sup- porting the "broadened" view of marketing. Kotler and Zaltman (1971) stated that "Price includes money costs,


opportunity costs, energy costs, and psychic costs" (p. 9). Shapiro (1973) also indicated that consumers of nonprofit products expend resources beyond cash. Furthermore, Fine (198 1a) used "social price"-made up of time, effort, psyche, and lifestyle-to describe exchange transactions.

Effort is defined as the objective amount of money and time it takes to purchase a product. That is, effort can be measured in quantifiable terms-dollars and units of time. There is growing support for the view that time is a relevant price in purchasing commercial products (Berry 1979; Venkatesan and Anderson 1985; Voss and Blackwell 1979) and possibly most important for many nonprofit products (Rothschild 1979b).

Risk is the buyer's subjective feeling about the

monetary and nonmonetary price of the product; more

precisely, risk is the buyer's subjective assessment of

the consequences of making a purchasing mistake. The various types of risk are defined in Table 2 and explained below. Perceived risk has been mentioned in the context of prices that end and industrial consumers pay (Bettman 1973; Guiltinan 1976; Lambert 1972).

Monetary Effort

A substantial amount of academic marketing research has been devoted to the study of pricing. Most of it has emphasized the cash or equivalent price (credit, countertrade, etc.) paid by consumers (Table 2). Top- ics examined in the pricing field include the price- quality relationship, reference pricing, contextual influences, and price consciousness.

The general conclusion of the majority of such research is that perception of product quality is posi- tively related to price (for reviews, see Monroe 1973;

TABLE 2 Dimensions and Definitions of Price

Dimensions Effort

Monetary:

Nonmonetary:

Financial cash credit countertrade

Time travel shopping waiting performance

Risk Financial

personal organizational

Consequences social psychological physical functional

Effort Financial price

cash credit countertrade

Travel timea

Shopping timeb

Waiting timec

Performance timed

Monitoring timed

Risk Financial riske

Psychological riske

Physical riske

Functional riske

Social riske

Definitions

Currency, checks, drafts, debit cards Credit cards, charge accounts, line of credit, accounts payable Barter, swap, or trade products The time it takes to physically get to the store (seller's location)

The time it takes buyer to search for and evaluate a product The time it takes a buyer to get checked out of a store, waited on by a salesperson,

waited on in a service firm, or to wait for ordered products The time it takes to use a product or carry out a certain action

The time it takes to remember to carry out a certain action

The risk that the product will not be worth the financial price The risk that a poor product choice will harm a consumer's ego The risk to the buyer's or others' safety in using products The risk that the product will not perform as expected The risk that a product choice may result in embarrassment before one's friends/family/

work group "Cherlow (1981) bBerry (1979) 'Jacoby, Szybillo, and Berning (1976) dFox (1980) eJacoby and Kaplan (1972)


Monroe and Krishnan 1984; Olson 1977) and that high quality and commensurate high prices is an excellent marketing strategy (Hatten 1982; Peters and Austin 1985). Work by Reisz (1979, 1980) and Gerstner (1985), however, has called into question the strength of the price-quality relationship for inexpensive products.

Reference pricing has been studied by Monroe (1973) and others (Emery 1970; Jacoby and Olson 1977; Kamen and Toman 1970). This means that consumers have in memory some price level that serves as a point of reference for any price cue. Monroe and Petroshius (1981) state that the reference price is not necessarily an exact price but a range of prices for similar products. Reference pricing has recently been applied to the pricing of professional services (Zeithaml 1982; Zeithaml and Graham 1983).

Contextual or situational influences also affect consumers' views of the price. Monroe (1977) examined objective and subjective contextual influences by applying the psychological concepts of adaptation level and assimilation contrast effects to pricing. Monroe, Della Bitta, and Downey (1977) empirically verified that intended use or purpose of the purchase affects how individuals evaluate prices.

In a major review of the literature, Zeithaml (1984) concluded that the domain of price consciousness is not clearly specified. Whether price consciousness is an overall hypothetical construct or a single response

is unclear. The pragmatic fact is that marketers know certain consumers are more price conscious than others. Moreover, price conscious buyers appear to be a growing market segment, evidenced by the popularity of discount shopping malls and off-price chains.

The other two subcategories of monetary effort- credit and countertrade-have received much less study by marketers. The use of credit by many U.S. consumers has been on the rise. The price a consumer is willing to pay is sometimes dictated more by credit (e.g., MasterCard or VISA) than income or a product's monetary price. Countertrade is also growing in use as a tool in international marketing. Companies are increasingly swapping products rather than money because of exchange rate problems and lack of liquid assets (Dizard 1983; Kaikati 1982; Martin and Ricks 1985; Weigand 1977).

Nonmonetary Effort (Time) Recognition of time as a price that consumers must pay for products has recently received serious attention by scholars and practitioners. The quotes listed in Table 3(a) stress the importance of time prices. At- tempting to classify goods, some earlier researchers also mentioned time as part of the "effort" expended by consumers (see Aspinwall 1961 and Miracle 1965 in Table 1).

Time was identified over 20 years ago as a cost of consumption (Bender 1964; Downs 1961). Fur-

TABLE 3 Importance of Time and Risk Prices

(a) Time Prices

Time is both an antecedent to and a consequence of purchase. Consumers not only spend time and money to acquire products and services but also often use time as a substitute for money and vice versa (Jacoby, Szybillo, and Berning 1976, p. 320).

Consumption requires an expenditure of both money and time (Berry 1979, p. 65).

Time, unlike money, vanishes automatically, involuntarily, constantly, sequentially, and irreversibly. It cannot be stockpiled and is generally pooled through precise and intricate timing, often requiring direct personal cooperation . . .one can never stop the clock, turn it back, or change its pace. Finally, an hour in the morning may have to be used completely differently from an hour in the afternoon (Felson 1979, pp. 40-41).

Consumer behavior has been enriched in the 1970s by a significant conceptual advance. It is now recognized that consumers seek satisfactions through spending both money and time resources. Similarly, goods and services are seen as having time and money prices (Voss and Blackwell 1979, p. 297).

(b) Risk Prices

When it comes to the purchase of large ticket items, the perception of risk can become traumatic (Bauer 1960, p. 290). These findings suggest that perceived risk is a product-specific phenomenon, and that the content and composition of perceived risk can best be understood in terms of the specific product category involved (Cunningham 1967, p. 108). The products are ordered in terms of mean overall perceived risk value. The ranking tends to be consistent with what would be expected if the products were ordered simply by price alone .... It would seem that similar types of products have similar risk component hierarchies (Jacoby and Kaplan 1972, p. 384).


thermore, Schary (1971) stated that the value of time could be ascertained from a study of opportunity costs and that marketers should recognize consumers' time limitations in product development. More recently Berry (1979) examined the "time-buying consumer" who lacks adequate discretionary time and, therefore, is inter- ested in minimizing the time spent in purchasing products. Blackwell and Talarzyk (1983) stated that there is a lifestyle of "time poverty" for two-income fam- ilies. Thus, demand for time-saving products is growing.

Time has been studied from a number of other perspectives besides marketing-economics, sociology, home economics, psychology, and cultural anthro- pology (Becker 1965; Graham 1981; Jacoby, Szybillo, and Bering 1976). Consumer researchers have also expended much energy in gaining a better understanding of the time variable in recent years (Hawes 1979, 1980-relationship between time and consumer behavior/theories; Feldman and Horik 1981-conceptual model of time use; Hendrix and his colleagues 1980, 1981, 1983, 1985-time use and expenditures). Settle (1980) summarized the status of research on time as being in the "interest" stage of the hier- archy of effects model.

The types of time prices used to make up the nonmonetary part of effort are listed in Table 2. There are five-travel, shopping, waiting, performance, and monitoring-that have been developed from the literature. Most of the past research has tended to view time as a single construct. It is defined here as mul- tidimensional and objectively measurable. As Gronau (1975) states, there is no unique value placed on time by all consumers:

The value of time varies among individuals according to their income, wage rate, age, education, and family composition. Even for the same individual, the value of time may vary with the purpose and ur- gency of the trip, the time of day, and the season (P. 5).

This statement parallels the notion that consumers also place different values on objectively measured monetary prices.

Travel time has been the subject of much research in the transportation field. Cherlow (1981) examined possible methods to estimate values of travel time savings. Consumers do make trade-offs between location of marketers and cost savings. Convenience of location is crucial for retailers and many services marketers. On the other hand, discount houses and catalog showrooms, because of their inconvenient locations, have appealed to consumers willing to trade off travel time with monetary price savings.

Shopping time tends to concentrate on the search and evaluation of alternative stages in the decision- making process (Engel, Blackwell, and Miniard 1986).

Within the marketing literature, Amdt and Gronmo (1977), Berry (1979), and Holman and Wilson (1980) have specifically identified shopping time as having implications for consumers. Product rating sources, such as Consumer Reports and consultation with family and friends, are mechanisms used to reduce shopping time.

Waiting time is defined in four ways (see Table 2). Three relate to on-premises purchasing, while the last is relevant for direct marketing and for industrial products. The general finding regarding waiting time is that consumers usually overestimate the time they will have to wait (Cottle 1976; Horik 1984). Offer- ing consumers fast service (e.g., fast food chains) or express check-in by airlines is recognition that waiting time is important to large segments of consumers.

The last two types of time in Table 2, performance and monitoring, were suggested by Fox (1980) as especially pertinent to social marketers. Performance time can be equated to consumption time, which has been recognized by other writers (Becker 1965; Crompton and Lamb 1986). Regarding monitoring time, individuals often "forget" to buy a product, such as making an appointment with the dentist or physician. These time prices seem equally relevant for commercial marketers. For example, time-saving products and re- minder advertising directly appeal to performance and monitoring times.

Time as a dimension of price is also crucial for industrial and organizational marketers, even though it has rarely been mentioned by researchers (Sheth 1973). For example, travel time may inhibit dealing with certain suppliers. Furthermore, shopping time may take many months for certain industrial products if the needed specifications cannot be met. The search for low cost suppliers to compete with Japanese and other foreign manufacturers has required U.S. firms to shop throughout the world. The introduction of the just-in- time inventory method illustrates that reduction in waiting time is critical for many companies. Like- wise, finding products and processes to reduce performance time has always been an organizational objective, and remembering to order inexpensive supplies continually plagues firms.

Risk Prices

The second major dimension of price is perceived risk. In fact, risk is not based on objective criteria, but, rather, what the consumer feels or perceives. Since Bauer's (1960) seminal article, much attention has been devoted to this construct. The importance of risk as a useful discriminator of consumers' evaluation of products is stressed in the quotations shown in Table 3(b).

Although perceived risk has been investigated by a number of researchers (Bettman 1973; Horton 1979;


Locander and Hermann 1979; Sheth and Venkatesan 1968), comprehensive studies of the types of risk listed in Table 2 were made by relatively few scholars. Bauer (1960) only mentioned in passing the types of risk. Cunningham (1967) identified the risk resulting from poor performance, danger, health hazards, and costs. Roselius (1971) defined four types of losses that related to the types of risk: time, hazard, ego, and money; Perry and Hamm (1969) looked at "socioeconomic" aspects of risk; and Peter and Tarpey (1975) specified several types of risk related to comparisons of automobile brands.

Jacoby and Kaplan (1972) were the first to ex- amine the five types of risk listed in Table 2. They found that overall, perceived risk can be predicted from the various types. In a validation study, Kaplan, Szybillo, and Jacoby (1974) confirmed "that similar types of products possess similar risk-consequences hierarchies" (p. 290).

The five risk types-financial, psychological, physical, functional, and social-encompass the subjective view of buyers concerning the price of any product. Financial risk is not the same as financial price. Certain consumers' perceptions of the price of a product do not have as strong a relationship to the dollar price as one may think. Financial risk is ac- counted for by paying more for a product than is necessary to achieve an equivalent amount of utility. Alternately, consumers lower their financial risk by engaging in comparison shopping or by relying on known brands or sources (vendors).

Psychological and social risk relate to the individual's ego and reference group influence. Many products must overcome perpetual biases consumers have about them. For instance, Peter and Tarpey (1975) concluded that the congruence of an automobile brand with a buyer's self-image and reference group image is crucial. Branding and positioning of products from brokerage services to stereo components appear intended to minimize these two types of perceived risk.

Functional (performance) and physical risk are the final types of risk listed in Table 2. Virtually all studies of perceived risk indicate that functional risk ranks as the most important. This finding is not surprising because how a product functions is usually the major reason for purchase. Physical risk was generally thought to be of greatest concern for complex products. How- ever, the additives and nutritional characteristics of relatively low cost food products is of growing importance to a larger group of consumers (Morris 1985).

Relationship of Product Categories with Price Dimensions

Now that the monetary and nonmonetary aspects of the effort and risk dimensions in Table 2 have been

reviewed, a more complete explanation of the product classification categories shown in Figure 1 is possible. Since convenience and preference products are low in involvement, and shopping and specialty products are high in involvement, similarities and differences between the pairs are provided. Support for making the high and low involvement distinction is provided by a recent empirical investigation (Park, Assael, and Chaiy 1984) that found autos highest and salt lowest in involvement of 15 products studied.

The difference between convenience and preference products is largely one of risk. The types of risk that tend to be higher are social or psychological. There are usually not appreciable differences in financial, functional, or physical risk, but the risk to one's ego or to one's peer group or family status is higher for these products. For example, ordering a low priced regional brand of beer in a social setting may lead to ridicule by the group. Similarly, the purchasing agent may prefer a certain type of office supplies because of the compliments received from other company per- sonnel.

Both effort and risk are much higher for shopping products than convenience and preference (see Figure 1). The monetary price for these products is substan- tially greater. Shopping and travel times, especially, delineate these products from low involvement ones. This point has been supported in the literature (Dommermuth 1965; Kleimenhagen 1966-67). Be- cause of the monetary and time stake in shopping products, financial, functional, and physical risk are often much more important considerations. For example, consumers perceive much higher levels of these risks in purchasing an automobile than a laundry de- tergent. Moreover, social and psychological risk is often heightened because of the conspicuous nature of many shopping products. Bettman (1973) called this higher "inherent" risk.

The risk dimension is slightly more important for consumers of specialty products than shopping ones in Figure 1. However, there is not any one type of risk that is consistently more critical. Effort, on the other hand, is what distinguishes shopping from specialty products. Since the buyer is almost completely brand loyal to a particular product, travel, shopping, waiting, and performance times are likely to be much higher for the individual or organizational buyer. Monitoring time may be an exception because the buyer will probably remember to purchase this preferred product. Furthermore, the financial price is often another differentiator between shopping and specialty products because the aforementioned price-quality relationship is strong for many buyers.

There are many sophisticated tools available to the manager for determining the financial price of products (see Gould and Sen 1984; Rao 1984). However,


the time and risk aspects are not as well understood. This more complete view of price which is built on buyers' objective and subjective evaluation of products further complicates the managerial task.

The use of perceived risk and time categories en- riches the concept of price. As the literature reviewed here shows, these nonmonetary elements of price have been examined by researchers and implicitly taken into account by marketing managers. We now turn our attention to marketing strategies that can be utilized for convenience, preference, shopping, and specialty products.

Managerial Implications One purpose of any product classification scheme is to guide managerial decision making. A comprehensive and consistent marketing strategy should be based

upon product characteristics as perceived by buyers. The product classification suggested here provides a

managerial road map for strategy development: buyers' perceptions, marketers' objectives and basic strat-

egy, and specific strategies for each element of the

marketing mix. Table 4 outlines the discussion of each of these managerial implications.

Buyers' Perceptions A buyer views a given product as a "bundle of satisfactions" to be obtained in return for certain price

considerations-classified as effort and risk. Thus, for convenience products, the buyer perceives the product as being worth only low effort and is subject to only low risk, so his/her behavior evolves into largely habit- or impulse-driven (for industrial buyers-automatic reorder). For preference products, the buyer perceives low effort but medium risk, so the behavior becomes "routine" or "straight rebuy" with brand loyalty for industrial products.

Shopping products are perceived to be worthy of moderate to high levels of effort and risk. The re-

sulting behavior is thus "limited problem solving" for consumers or an industrial "modified rebuy." Finally, specialty products are high in both effort and risk, so the behavior is "extensive problem solving" or an industrial "new task."

Marketers' Objectives and Basic Strategy

The convenience product marketer is in an unenviable

position. His/her product is difficult to differentiate:

buyer loyalty is virtually nonexistent because these

products are perceived to be homogeneous, and com-

petitors will quickly copy any significant improve- ment in the product or other mix element. The preferred objective is to move the product to another category- to preference via brand loyalty development for most consumer products, or to shopping via source loyalty for industrial distribution or retail store assortment.

TABLE 4 Managerial Implications of Classifying Products Strategically

Managerial focus

Buyer's perception of price

Buyer behavior

Marketer's objective

Marketer's basic strategy

Product strategy

Price strategy

monetary nonmonetary

Place strategy Promotion strategy

Convenience low effort, low risk

impulse or habit (auto reorder)

move to pref. or shop., or dominate via low cost

high volume, cost minimization, or move product standard grades and quantities, quality control, innovations copied quickly market

minimize time and risk

saturation distribution

point-of purchase, some sales promotion

Product Cateqory Preference St

low effort, medium high effc risk risk

routine (straight rebuy) brand loyalty

high volume, brand identity, differentiation

standard grades and quantities, quality control, some R&D

market

minimize time, warrant risk

intensive distribution

mass advertising, sales promotion, some personal selling

hopping ort, medium

limited (modified rebuy) source or store loyalty

high volume or high margin, segmentation

standard base, many options, much R&D, warranties

bundled or negotiated

accommodate time, warrant risk

selective distribution

personal selling, some advertising

Specialty high effort, high risk

extensive (new task)

absolute (source and brand) loyalty

high margin, limited volume, market "niche"

custom design, much R&D, warranties, personalized service

negotiated

pamper for time and risk

exclusive distribution

publicity, personal selling, testimony


, , ,

Totes umbrellas, Morton salt, Duracell batteries, Yel- low taxis, 3M abrasives, and, most recently, the branding of tomatoes and other produce using bio- technology (Ecklund 1985; Hall 1985) represent il- lustrations of this strategy.

The alternative objective is market dominance via low cost (Porter 1980, 1985). This objective generally downplays the importance of marketing strategy relative to operations strategy, and, therefore, is less likely to be favored by the marketing manager.

The marketer's objective for preference products is to develop buyer brand loyalty. The basic strategy is brand identification of high volume, low cost stan- dardized products. The consumer will express a preference for a given brand but will not expend much effort to acquire that brand if it is not conveniently available. For food, Chiquita, Sunkist, and Dole are trying to develop retailer as well as consumer brand loyalty.

For shopping products, the marketer strives for loyalty to source or store; that is, the buyer's perceived bundle encompasses more than simply the basic product. Loyalty can be based upon tangible and/ or intangible product characteristics and any number of other factors, e.g., upon a superior value-to-cost ratio, better service, a location advantage, more ad- vantageous payment terms, etc. In reality, source (or store) loyalty is usually based upon a combination of factors. The basic strategy, therefore, can take many forms, generally involving some form of market segmentation. For example, IBM offers many bundles of hardware configurations, software packages, and an- cillary support systems to segments ranging from individual users to the largest corporations.

One ideal for marketers is attainment of specialty status. Here, buyer loyalty is absolute; the marketer in effect has monopoly, at least with respect to this one consumer. If enough buyers perceive the product as a specialty, the marketer is well on the way to achieving his/her organization's overall goals. The basic strategy is one of careful segmentation, or "niching," and pampering buyers in that niche.

Managers should consider stressing the risk dimension. In fact, the following quote emphasizes the elite and risky nature of specialty products.

Hence, if the marketer has a high price, he may wish to emphasize the riskiness of the product class by stressing importance and a small number of accept- able brands, while at the same time promoting the quality of his own brand (Bettman 1973, p. 189).

Strategy Guidelines for Each Mix Element Specific strategies for product management, pricing, channels and distribution, and promotion derive from the objectives and basic marketing strategy. The product classification framework suggested here can help to coordinate these often disparate decisions.

Product strategy. For convenience products, the emphasis must be on high volume production of stan- dardized products. Quality control is essential for emergency and impulse items. If the firm is unable to differentiate its product, research and development rarely pays off because innovations can be quickly copied. Thus, little advantage results from superior product strategy, but inferior production can lead to buyer dissatisfaction. Since loyalty is nonexistent, dissatisfaction quickly results in lost sales.

For preference product strategy, R&D, which pro- duces a slight differentiable factor that can be ex- ploited via mass advertising, can be quite valuable. Developing a strong preference often hinges on a strong, distinctive, and benefit-oriented name (i.e., L'eggs, Lectric Shave, and Watchman protective services). The range of differentiating factors is considerably wider for shopping products, since the higher unit cost af- fords greater opportunities for product differentiation. In addition to many models (variations) of the product, warranties, service contracts, and financing packages are especially popular differentiators. For specialty products, the name of the game in product strategy is customization-tailoring each product to the needs of a particular segment or even individual buyer.

Pricing strategy. As noted above, price must be considered in terms of both effort and risk. For convenience products, both must be minimized; the buyer simply will not be willing to expend much effort nor expect to perceive much risk. He/she does not have to, since other marketers offer essentially the same bundle of benefits. Thus, the marketplace sets the monetary price and dictates the other mix decisions.

Preference products also face a market-determined monetary price but are perceived to be somewhat risky. This perceived risk is handled via mass advertised as- surance that many other buyers are satisfied with the product and/or by emphasizing the reputation of the well-known brand name. In other words, the pricing strategy for preference products involves acknowledg- ing a risk when purchasing, and then assuring the buyer that the risk can be minimized by purchasing this particular brand.

Pricing is particularly important for shopping products. Both dimensions must be carefully considered. The buyer's effort can be accommodated by combining all aspects of the benefit bundle into one monetary price-buying an existing home, for example. Conversely, each aspect can be negotiated separately, e.g., in building a new home, or different benefit bundles can be packaged and the buyer can negotiate for a given bundle, as in a new equipment purchase. The value the buyer places upon time is also a significant determinant.


The risk aspect of shopping product pricing is also complex. Because there are many product options and many monetary pricing alternatives, the risk of making a wrong purchasing decision is not trivial. This risk is often handled via warranty and other assur- ances that this source (store) is reliable and trustwor- thy.

Pricing for specialty products is individualized- negotiation is the rule for monetary prices, and pampering, literally, is required for the nonmonetary aspects. The latter is more important than the former in many cases. Since specialty buyers expect to spend considerable money and perceive high levels of risk, they expect to be well treated.

Place strategy. The channels literature (Bucklin 1963; Stern and El Ansary 1982) has developed very specific strategies for each type of product: complete saturation for convenience products, intensive distribution of preference products, selective distribution of shopping products, and exclusive distribution of specialty products. Rarely does it make strategic sense to deviate from this generalization.

Promotion strategy. Here is perhaps the greatest variance in strategies among products and the greatest need for coordination with other mix strategies. For convenience products, point-of-purchase (POP) is the most often used promotion device, along with sales

promotions, such as cents-off coupons and rebates. Only the market leader can usually afford mass advertising.

Preference products are created and nurtured by promotion; the basic product, its price, and its distribution do not differ too much from convenience products. Mass advertising is the hallmark of the preference product (Krugman 1965), and significant resources are also devoted to sales promotion and POP. Also, personal selling to wholesalers and retailers in the channel, often overlooked in academic discussions of consumer preference products, is essential to preference product promotion. For example, the beer in-

dustry effectively uses all these types of promotion in

promoting their preference products, and the recent

promotion of the Beatrice corporate name is probably intended to influence consumers, retailers, and inves- tors.

Shopping products, which fall into the high involvement category, rely much more heavily on personal selling in the promotion mix than do convenience or preference products. This situation holds whether the product is a good (furniture), service (ad agency selection), or an idea (college education). Fur- thermore, both consumer and industrial products utilize personal selling as the focal point of their promotional strategy. Advertising generally emphasizes information because of the shopping status and loyalty

to store (retailer) or source (manufacturer). Because the buyer's loyalty to specialty products

is nearly absolute, the promotion mix requires a different emphasis. The most unique products can often rely on publicity. For instance, the idea of artificial heart surgery needs the services of a well-known and respected surgeon and the artificial heart itself. The publicity surrounding these events and subsequent testimony by patients is an excellent example of the bundle of satisfactions provided by a specialty product. Some personal selling may be required, but it is sec- ondary to the others. Advertising should reinforce consumer choice and attempt to reduce the high levels of risk associated with specialty products.

In summary, the product classification offered in this article provides a framework to guide managerial decision making. The key points are (1) recognizing that having such a framework is not a substitute for careful analysis of a given strategic situation; (2) de- riving the marketing objective, basic strategy, and marketing strategy for each mix element from the buyer's perception of the product's expected benefits and costs; and (3) coordinating strategic decisions so that all elements contribute to the basic strategy and overall objectives.

Academic Research Implications For academic research, taxonomies are useful in sum- marizing existing knowledge and in providing direc- tions for further investigation. General taxonomies advance the discipline. Two classic examples are Kotler's (1972a) generic concept of marketing and Hunt's (1976) three-dichotomies model of the domain of marketing. For marketing practice we subscribe to the view that there is nothing so practical as a good theory.

For marketing managers to utilize the product classification taxonomy to the fullest extent, additional conceptual and empirical research needs to be done. Five areas where additional research would prove especially fruitful are: operationalization of the dimensions, determining the relative importance of monetary and nonmonetary subcategories, examina- tion of the markets for which these products are intended, empirical study of the proposed product classification system, and further investigation of buyer involvement.

Operationalization The dimensions of risk and effort need to be quantified so that researchers and managers can better understand them. The work of Jacoby and Kaplan (1972) and Peter and Tarpey (1975) provides good measure- ment tools for the types of risk shown in Table 2. Future research should expand to a broader selection


of products that appear to fall into each of the four categories. Furthermore, the student samples used in these earlier studies were appropriate for the products they examined but would not be especially useful for a broad-scale test.

The effort dimension has also been operational- ized in a number of price elasticity and price consciousness studies (Zeithaml 1984). Certain time prices have been quantified (Cherlow 1981), but Jacoby, Szybillo, and Bering (1976, p. 332) accurately point out that there is a need "for a time-related terminology suitable for studying consumer behavior." The definitions listed in Table 2 and explained here represent an initial attempt at operationalization of relevant time prices. In fact, there may be other equally important time prices. For example, choice time (Berlyne 1957) may be an additional time price that is separate and distinct from shopping time. Furthermore, the research of Hendrix and his coauthors (1980, 1981, 1983) in time use is also pertinent to a fuller understanding of time prices.

Relative Importance The relative importance of nonmonetary and monetary aspects of these two dimensions of price needs further study. Buyers implicitly make trade-offs between the dollar price and the types of risk they perceive and the time they expect to spend. To date, these relationships are not well understood. For example, do consumers expect to make time expenditures for shopping products commensurate with the monetary price they are willing to pay? Or do they look to familiar brands and outlets to minimize travel and shopping time while realizing that this means monetary price is higher?

Within the types of time and risk shown in Table 2, what happens as one moves from a convenience to a specialty product? Do all risks increase, or, as pos- ited earlier, are social and psychological risks the most relevant for some preference products, while functional and physical risks are more pertinent at the shopping and specialty end? The relationships among the time prices also need more thorough study. Wait- ing time would usually be high for specialty products, but what about the other time prices? Does shopping time decrease as waiting time increases?

Markets

One of the values of this taxonomy is that it seems relevant for consumer, industrial, and nonprofit products. This should be empirically verified by researchers studying marketing by these organizations. While much research has been conducted on the consumer market regarding time and risk issues, we know rel-

atively little about the industrial marketplace. What risks are most important for industrial users of pref-

erence products? In fact, is risk quantified by the purchasing agent or organizational consumer? How do nonprofit consumers quantify the high time prices often associated with these products?

Products This product classification scheme appears to have face validity. More investigation of goods, services, and ideas that possess the characteristics associated with the four categories of products is necessary. One study (Guseman 1981) found that consumers perceived higher levels of risk for services than goods. Whether this relationship holds for goods and services both in preference or any other category is not clear. Recent research conducted for an airline found that consumers perceive relatively high levels of risk with airline choice. Surprisingly, physical risk was perceived to be lower than social and psychological risk (Jamieson 1985).

If services and ideas can be integrated using this well-known and accepted classification (with the addition of preference), researchers can study buyer behavior and product selection processes that can be used by marketers of these products. Large-scale empirical investigation, possibly jointly conducted by academia and the business sector, would help to gain more in- sight into the generalizability of product concepts.

Buyer Involvement Level

The type of product classification system posed here has potential value in integrating the notion of consumer learning and involvement level with marketing strategy. Furthermore, the notion of product importance developed by Bloch and Richins (1983) seems analogous with involvement level. If the strategic relationship proposed in Figure 1 holds, implications relate to the type of research conducted on products and the strategies that companies may find useful. For example, certain organizations may want to actively pursue the low cost and commodity approach (Porter 1985) and keep their products in the convenience or shopping categories. On the other hand, firms may want to consciously move up the strategy arrow by attempting to make their products either preference or specialty ones. Work by academics in studying strategic implications of marketing decision making is needed.

Conclusion Classification schemes have contributed much to the study and practice of marketing. This article offers one unified product classification notion. The classification is buyer oriented, generalizable across all users (consumer-industrial), sectors (profit-nonprofit), and

product types (goods, services, and ideas), and rec-


ognizes the central role of the benefit/cost bundle. The value of this classification lies in its integra-

tion of marketing mix decisions for strategy formulation and the founding of this strategy upon consistent

notions of buyer behavior with respect to different types of products. The classification should aid both the manager in formulating marketing strategy and the re- searcher in identifying areas for further study.

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