Murphy Enis86 1

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PatrickE. Murphy& Ben M. Enis

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

THE new official AMA definition of marketing is:Marketings the processof planningandexecutingtheconception,pricing, promotion,anddistributionof ideas,goods,and services o createexchanges hatsatisfyndividual ndorganizationalbjectives"AMABoard" 1985).

There are four major differences between this defi-nition and the previous AMA definition developed in1960. First, this definition stresses, via planning andexecuting, the strategic nature of marketing. Second,it identifies products as goods, services, and ideas.Third, the definition takes a broadened view (Kotlerand Levy 1969), i.e., by not limiting marketing tobusiness activities. Fourth, it recognizes the centralrole of exchanges that provide satisfaction for bothparties (Bagozzi 1974, 1975, 1978; Kotler 1972a).Marketing, therefore, involves exchanges of prod-ucts (for payment) that result in mutual satisfaction ofthe differing objectives of the seller and buyer. Mar-

Patrick.MurphysanAssociaterofessorfMarketing,niversityfNotre ame. enM.Eniss ProfessorfMarketing,niversityfSouth-ernCalifornia.heauthors ouldike othankMark .Dunn,MichaelJ.Etzel,Gary .Frazier,eneR.Laczniak,ichael.Mokwa, entB.Monroe,ndanonymousMreviewersor heirhelpfulommentsnearlierraftsfthisarticle.

keting strategy, then, is the set of organizational ac-tivities that (1) determinesthe benefits which will satisfythe consumer in a given situation and (2) offers theproduct which provides those benefits. The exchangemust be mutually beneficial: benefits expected mustbe equal to or greater than the price paid by the con-sumer, and vice versa for the marketer. Products canbe seen as a bundle of benefits and costs-two sidesof the same exchange transaction.The purpose of this article is to present the mar-keting discipline with a unified producttaxonomy. Thatis, the article contains an argument for a single clas-sification which covers services and ideas in additionto tangible goods. Based on the new definition ofmarketing, this taxonomy offers strategic guidelinesfor managers and researchers by relating products toprices paid by consumers. Price is expanded here toinclude nonmonetary as well as monetary elements(Berry 1979; Guiltinan 1976; Jacoby, Szybillo, andBering 1976; Peter and Tarpey 1975).The article is organized into four parts. First, theclassification is outlined. Then the rationale for theclassification is explained via a literature review andsynthesis in the two areas that constitute an exchange:product taxonomies and price dimensions. We con-clude with managerial and academic research impli-cations.

Journal of MarketingVol. 50 (July 1986), 24-42.24 / Journalf Marketing,uly1986


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The Proposed ProductClassificationFollowingLevitt(1975, 1980) and Kotler(1984), anyproduct s perceived by the buyerto be a combinationor bundle of utilities-qualities, processes, and/orcapabilities(goods, services, and ideas) that is ex-pected o providesatisfactionEnisandRoering1980).Forexample,Americansteel companiessell theircus-tomers rolled steel, advice on the properapplicationsfor it, and the philosophyof "Buy American." Sim-ilarly, organizedreligions offer the idea of salvation,regular prayerservices, and religious books and ar-tifacts.The consumer assesses satisfaction in terms ofbenefits expected minus costs incurred.These costsshould be conceptualizedon two independentdimen-sions-effort and risk. Effort s the amountof money,time, and energy the buyer is willing to expend toacquirea given product.It is an objectivemeasureofthe value the consumerplaces on the product.In thebuyer's mind, this is an expectationof futurevalue.Therefore,effort mustbe multipliedby the likelihoodof buyingerror.Thereis risk, in otherwords, thattheproductwill not deliverthe benefits sought. The sub-sequentdetailed discussion recognizes five types ofpossiblerisk:financial,psychological, physical, func-tional, and social.This definitionof productbenefits and the two di-mensions of price permit a four-categoryclassifica-tion of products.It is not necessaryto have differentclassifications or goods, services, or ideas. Fromthebuyer's perspective, it is benefits, not productfea-tures, thatthe individual or organizationdesires. Forexample, the need for a good night's sleep could besatisfiedby a sleepingpill (good), exercise class (ser-vice), or meditation(idea). Moreover, from a com-petitive standpoint,the marketerof a good, such asan automobile,may be tryingto sell to the same con-sumer as is a services marketer,e.g., an auto leasingfirm. In view of the new AMA definitionof market-ing, it seems appropriateo develop one producttax-onomy for all types of products(consumer and in-dustrial,profitand nonprofit).Figure 1 illustratesour approach.Fourcategoriesof products-convenience, preference,shopping,andspecialty-are defined in terms of the buyer's eval-uationof price.Inexplaining heseproducts, wo pointsshown in the figureshould be stressed.First, increas-ing price permitsthe marketer o broaden the scopeof marketing trategy shownby the wideningarrow).That is, a wider varietyof marketingmix combina-tions can be used to gain a differentialadvantageforshoppingandspecialtyproducts hanfor convenienceandpreferenceones. Forexample, in marketingpref-erence products, the marketeris usually limited to

FIGUREA Strategic Classification of ProductsRisk

EffortLow

> Widening arrow indicates broadened scope of marketingmix differentiating factors

Shaded area indicates low buyer involvementwith these types of products

branding,packaging,andpromotional hanges, whilefor the productshigheron the strategyarrow,channelof distribution ndpricingmodificationsmay be usedin addition o productandpromotionalterations.Sec-ond, theconceptof highandlow product nvolvement(Krugman1965) is incorporatednto this classifica-tion, depictedby the shadedarearepresentingow in-volvement.Rothschild1975, 1979a)and Assael (1984)have shown thatdifferentmarketing trategiesare re-quiredfor low involvementproducts.Convenience ProductsAs shown in Figure 1, convenience productsare de-fined as lowest in termsof both effort and risk. Thatis, the consumerwill not spendmuch money or timein purchasingthese products, nor does he/she per-ceive significantlevels of risk in makinga selection.They arecommonlyillustratedby commodities, "un-sought"(emergency)items, and impulse products.Examples of consumer goods that fall into theconveniencecategory includefresh produceand gro-cery staples, umbrellas,gum, and batteries.Supplies(Fernand Brown 1984) and raw materialswhich arecommoditiescouldbe classified as convenience itemsfor industrialbuyers. In fact, some firms like DuPontlabel their new chemicals as commodity products(Billon and Robinson 1970). Commoditiespurchasedin bulk(e.g., a trainloadof chemicals)become shop-

Classifyingroductstrategically25


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ping goods, however, and are often the subjectof in-tensebuyer/sellernegotiation, particularly verprice.Convenience services may encompass taxi or masstransit or end consumers and garbagepickupfor or-ganizational onsumers.Convenienceideas would beantilitter ampaignsor police/security protection.Preference ProductsThe second category shown in Figure 1 is termedpreferenceproducts (Holbrook and Howard 1977).These productsare slightly higher on the effort di-mension and much higher on risk. In fact, the dis-tinctionbetweenconvenience andpreferenceproductsis primarilyone of buyerperceivedrisk. The reasonthat the consumerperceives this higher level of riskis often throughthe efforts of the marketer,particu-larlybrandingandadvertising.Some companieshavebeen successful in convincing consumers that theirbrandsof low priced productsconvey greaterbenefits(e.g., Bayer aspirin)thancompetingones.The mostprominent xamplesof preferenceprod-ucts arein the consumerpackagegoods industry e.g.,beer, soft drinks, toothpaste,etc.). Consumersmay"prefer" he taste and image of Diet Coke, based onadvertisingppealsor brandpreference.However,theyare likely to substitute Diet Pepsi or perhapsa lowcalorie brandof iced tea or even beer if the monetaryor time effort is too large.Industrialpreference goods would be businessmagazines someexecutivespreferBusiness WeekoverFortune)or particularbrandsof typewriterribbonsorworkgloves. Such thingsas television networks/pro-grams,hairstyling, andappliancerepairalso fall intothis category, where consumershave preferencesfor

specific providersbut are willing to make substitu-tions, if necessary. In the industrial ield, travelpro-vides the best services examples of preferenceprod-ucts: airlines, hotels, and rental cars are preferenceproductsfor most buyers. Preference deas might bepatronizing he arts for consumers and the choice ofa computerizeddatabase used by business firms.Morecorporationsappear o be developinga con-scious strategyof movingtheirproducts nto the pref-erencecategory.Clorox (bleach, Kingsfordcharcoal,and salad dressings) and Hyponex (lawn and gardencare)corporationshave taken a numberof presumedconvenienceproductsand differentiatedhem, therebymoving them into the preferencegroup. The follow-ing statementsreflect their strategy:Take a relatively low priced commodity product and,by deft packaging and marketing, sell it at a premiumprice under well-advertised brand names ("Clorox"1984, p. 113).We're changing from a commodity to a consumerpackaged-goods company by stressing branding,packaging, distributioncapability through inventorycontrol and customer service ("Firm Adopts" 1985,p. 12).

Shopping ProductsCopeland's(1923) original conceptualization see fulldescription in Table 1) clearly explains shoppingproducts.The name implies much about the charac-teristicsof theseproducts.Buyersarewilling to spenda significantamount of time and money in searchingfor andevaluatingthese products.Increased evels ofrisk are also perceived by consumers for these highinvolvementproducts.Examples of shopping goods are automobiles,

TABLEApproaches to Classifying ProductsBuyeror GeneralizabilityAuthorand Seller BenefitYear Classification Dimensions OrientationaUseb Sector' Typed Bundle'

Conveniencegoods are those cus-tomarilypurchasedat easily acces-sible stores; examples are cannedsoup, tobacco products,electriclightbulbs, safety razorblades,shoe polish, . . . and toothpaste.. . .The unitpricefor most articlesin this class is too small to justifythe consumer'sgoing farout of hisway or incurringhe expense of astreetcar are in orderto procureaspecial brand(p. 282).Shoppinggoods are those forwhichthe consumerdesires tocompareprices,quality,and styleat the time of purchase.Usually heconsumerwishes to makethiscomparison n several stores. Typi-cal shopping goods are ginghamcloth,women's gloves, chinaware,and noveltyarticles(p. 283).Specialtygoods are those whichhave some particular ttraction or

Traveleffort,brandcomparisonef-fort,degree of brand nsistence Buyer C P Gno

26 / JournalfMarketing,uly1986

GoodsCopeland1923


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TABLE (continued)Approaches o ClassifyingProductsBuyer or GeneralizabilityAuthor and Seller BenefitYear Classification Dimensions Orientation' Useb Sectorc Typed Bundle"

the consumer, other than price,which induces him to put forth spe-cial effort to visit the store in whichthey are sold and to make the pur-chase without shopping. . . . Ex-amples of specialty goods aremen's clothing, men's shoes, highgrade furniture, vacuum cleaners,and phonographs (p. 284).Installations are major equipmentof a plant. Accessory equipment isauxiliary or supplemental equip-ment of a plant. Operating suppliesare materials that facilitate the op-eration of a plant. Fabricating mate-rials and parts are manufacturedproducts that are used for furthermanufacture by becoming parts ofthe final product. Primary materialsare crude, new materials.

Uses to which goods are put,whether they become part of thefinished productSeller I P G no

Bourne 1956 Product-plus, brand-minus (instantcoffee); product-minus, brand-plus(clothes); product-minus, brand-mi-nus (soup) (reference group influ-ence)

Holton 1958 Convenience, shopping

Specialty

Luck 1959 Convenience, shopping, specialty

Aspinwall 1961 Red goods, orange goods, yellowgoods (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 barsGroup II-groceriesGroup Ill-TVsGroup IV--carsGroup V-electronic office equip-ment

Kaish 1967 Convenience, shopping, specialtyMayer, Mason,and Gee 1971 Convenience store-conveniencegoods, convenience store-shoppinggoods, convenience store-specialtygoods, shopping store-shoppinggoods, specialty store-specialtygoodsKotler 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 priceand quality comparisons relative tosearching costs of individual con-sumerNecessity of making special pur-chase effort due to limited marketdemandArticle directed at Holton (1958)and specialty good argument, con-sumer is willing to make specialpurchase effort for special brandReplacement rate, gross margin,adjustment, time of consumption,searching timeDegree of shopping effort, degreeof prepurchase preference forma-tionAllows detection of differenceswithin product classificationsProduct characteristics: unit value;significance of each individual pur-chase to consumer; time and effortspent purchasing by consumer;rate of technological change; tech-nical complexity; consumer needfor services; frequency of purchase;extent of usageTwo types of effort identified: phys-ical and mentalLocational convenience, merchan-dise suitability, value for price,sales effort and store service, con-genialty of store, post-transactionsatisfactionHow they enter the production pro-cess, 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


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TABLE (continued)Buyer or GeneralizabilityAuthor and Seller BenefitYear Classification Dimensions Orientationa Useb Sectorc Typed Bundlee

Goods entering the product partly-installations-buildings and landrights, and fixed equipment-accessory equipment-portablefactory equipment and officeequipmentGoods not entering the product-supplies-operating and mainte-nance and repair supplies-business services-maintenanceand repair and business advisoryservices (p. 141).

Raymond andAssael 1974 Psychophysical

Distributive velocity, mental velocity

Bucklin 1976 Convenience, specialty, shopping(low intensity), shopping (high in-tensity)Jolson and Proia (Searching behavior continuum)-1976 classification of a good subjectivelytied to consumer's "comparativeshopping"Shapiro 1977 Proprietaryand catalog items, cus-tom-built items, custom-designeditems, industrial servicesHolbrook and Convenience, preference, shopping,Howard 1977 specialty

Enis and Roering Convenience, preference, shopping,1980 specialty

Nature of service actCustomer relationshipsCustomization and judgmentDemand relative to supplyService delivery methodTangible product, service, idea, is-sue (cause)

Number of rewards product pro-vides, our knowledge of how to de-liver these rewardsConsumer: stimulus, interveningvariables, response. Product: mar-ket, distributiveDegree of brand similarity, degreeof consumer uncertainty in makinga choiceRelated to consumer's productawareness, comprehension, productimportance, standard of tasteUniqueness of the good, whether itis part of finished productProduct characteristics (magnitudeof purchase and clarity of charac-teristics), consumer characteristics(ego involvement and specific self-confidence), consumer responses(physical shopping and mental ef-fort)Product is "total bundle of bene-fits" as seen by the buyer, marke-ter's strategy matches marketingmix decisions to buyer's perceptionof desired benefitsPeople-things, tangibilityFormal-informal, continuous-dis-crete deliveryHigh-lowWide-narrow fluctuations, con-straints on supplyMultiple-single site, interactionTangibility, 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 noLovelock 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 o 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 or end consumers,andequip-mentandcomponentspartsfor industrialusers. Con-sumerservices thatcouldbe classified in the shoppingcategoryare insurance,medical and dentalcare, and

apartmentental.Industrial hoppingservices includetheaccountingaudit.Shopping deasare education orindividualsandconductingmarketing esearchstudiesfor industrialbuyers.

28 / Journal f Marketing,uly1986

ServicesLovelock 1983f

IdeasFine 1981bno


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Specialty ProductsAs the arrowheadn Figure 1 shows, marketingman-agerscan attempto move theirshoppingproductsntothe specialtycategory.This means thatconsumerswillno longer "shop"for alternativesbut acceptonly onebrand.Forexample, Maytag, the Boston Celtics, andStanfordUniversity are organizationswhose brandsnow seem to be specialtyproductsfor many buyers.Those productsthat are defined to be highest onboth the risk and effort dimensions of Figure 1 arecalled specialty products. The major distinctionbe-tween shoppingandspecialty products s on the basisof effort,notrisk. Themonetary rice s usuallyhigher,as is the time. Commentssuch as, [I would] "searchhigh and low," "wait for weeks," and "notsettle foranything ess" are good indicators of the time effortthatdistinguishesspecialtyproducts.At the limit, thebuyerwill acceptno substitutes.Examplesof specialty goods include vintage im-portedwines, expensive sportscars, andpaintingsbywell-knownartists. Specialty services for consumersmightbe those offeredby the noted heartsurgeon,Dr.PeterDe Vries, or the best trialattorney n any com-munity.A specialtyidea would be to join a select do-nor club for a charityor museum. In the industrialproduct ector, installations buildings)would be spe-cialty productsbecause their location, cost, and fur-nishingsrequiregreat organizationaleffort and risk.A consultant ike McKinsey Companywould be anillustration f a specialtyservice for organizations, ndthe type of basic researchsupportedby the firm is aspecialtyidea.Reaching he specialtyproductcategoryis a majorobjectiveof manymarketingmanagers.Therefore,itappearsat the end of the marketingstrategyarrowinFigure 1. This position is often difficult if not im-possible to reach. Few specialtyproductsretaintheirstatus over time.Value of Proposed ClassificationThe value of this refinementto the commonly ac-ceptedclassificationof products s its universalityandintegration.It can account for goods, services, andideas products.The industrialand consumerdichot-omy thatis sometimes overemphasized n marketing(cf. Fern and Brown 1984) is also minimized usingthistypology.Further,nonprofitproductscan be clas-sified, since marketing n this sector is not "uniquelydifferent" rom business firms (Lovelock and Wein-berg 1984, p. 31). Most importantly, t anchorsmar-ketingstrategy n the buyer's evaluationof the priceof the exchange.The fact that this is a general classification ofproductsneedsto be recognized.Exceptionsdo exist.Forinstance,a millionairemay not perceive thatcer-tainproductsarespecialtybecauseof his/her financial

status.Furthermore,t is possible for a few productsto become specialty ones even though they are notextremely high in risk andeffort. The strengthof thebrand oyalty to Coca-Cola Classic is a recent illus-trative case (Fisher 1985). However, marketing ispredicatedon finding and filling the needs of signif-icantsegmentsof buyersand this classification is in-tendedto achieve thatgoal.Subsequent ectionsof the articledevelopthis tax-onomyin detail. Earlierproductclassificationsare ex-aminedandevaluated o demonstratehe value of one

synthesis.The dimensionsof pricearereviewed, anddifferences in the four categories of productsalongthesedimensionsareexploredin moredepth.Finally,managerialand research mplicationsare discussed.Product Classification Approaches

Table I depictsthe majorpast research n classifyingconsumerandindustrialproducts.Each of these clas-sification systems is evaluatedon the following cri-teria: 1) buyervs. sellerorientation;2) generalizabilityacross users (consumer-industrial),sectors (profit-nonprofit),andtypes (goods, services, andideas);and(3) the recognitionthat consumerspurchasebundlesof benefitswhenselecting products.These criteriaap-pearin the threerightcolumns of the table.Classifying GoodsEvery treatmentof goods classificationsmust beginwith Copeland's(1923) widely acclaimed articledi-viding goods into convenience, shopping, and spe-cialty categories. The definitions for each are givenin the table.Copeland 1924) also coined the standardclassificationof industrialgoods.Bucklin (1963) clarified the original Copelandconsumergoods conceptualizationby suggestingthatthe underlyingdimensions were shoppingeffort anddegreeof prepurchase reference ormation.In anup-date,Bucklin(1976) dividedshoppinggoods into lowandhigh intensitycategories.Kaish(1967) noted thedistinctionbetween physical (shopping) and mental(brand nsistence)effort.Holbrook and Howard(1977) made a majorcon-tribution o the study of goods classificationby pro-posing a fourthcategory,preferencegoods, which isadoptedhere.They stated hatthesegoods involvelowshopping ffortandlow ego involvement uthighbrandpreference. Hence, they used the term preference todescribe his situationandgave TV dinnersandready-to-heatpies as examples. Holbrookand Howardar-gued that:

It appearshatan increasinglyargenumber f con-sumernondurablesrefallingintothis categoryandthata greatdeal of advertising ffort is investedinattemptingo movea goodfromonesideof thispref-erencedistinctiono another p. 214).



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ClassifyingServicesThe greatestadvances owardclassifyingserviceshavebeen made by Lovelock (1979, 1980, 1983, 1984).His firstarticleproposed he approach akenhere, andby AMA, of categorizingproductsas physical goods,services,andsocialbehaviors ideas).He used a three-dimensional framework to classify these offerings(Lovelock'salternative o the termproduct)accordingto marketer business, government,or nonprofitsec-tor) or consumer(individualand household or orga-nizational)characteristics.The 1980 article detailed12 approacheso classifyingservicesdivided ntothreegroups-basic demand characteristics,service con-tent and benefit, and service deliveryprocedures.Lovelock (1983) refined his 1980 conceptualiza-tions and proposed classifying services in five differ-ent ways (see Table 1). His statedpurposein devel-oping this taxonomywas "helpingmanagersin ser-vice businesses do a better job of developing andmarketing heirproducts"(p. 19). A final classifica-tion scheme (Lovelock 1984) dealt with understand-ing the characteristics f the services product,thatis,the extent to which equipment/facility-based s. peo-ple-basedattributes orm the product.Since the bulk of other conceptualdevelopmentin services marketing (Berry 1980; Shostack 1977;Zeithaml, Parasuraman,and Berry 1985) has beenconcentrated n the last several years, the servicesclassification iterature s notas well developed.How-ever, considerablerecent energy has been expendedin gaining a betterunderstandingof classifying ser-vice products Ahtola1985;Gilly and Dean 1985;Sil-pakit and Fisk 1985). With one exception (Davis,Guiltinan,andJones, 1979), the tendencyhas been tocreatenew conceptualclasses for services.In fact, almost no work has attempted o classifyindustrialservices. The texts in the field lump allbusiness services into one category(Haas 1986; Hill,Alexander, and Cross 1975; Hutt and Speh 1985).Kotler(1972b, see Table 1) did differentiateamongservices but listed them undergoods.ClassifyingIdeasOf the three types of products, ideas have receivedthe least attention from a classification standpoint.Fine's book (1981b) is the only one devoted entirelyto themarketing f ideas. He proposeda "broadened"typologyof productsusing tangibility(good, service,idea, and issue or cause) and profit/nonprofitas thedimensions(pp. 28-29). In Fine's view, causes or is-sues are different romandmoreintangible hanideas.For example, family planningis an idea, while pop-ulationcontrolis a cause.LovelockandWeinberg(1984) classify social be-haviors, "the end productof organizationsthat pro-

mote or advocate ideas and social causes" (p. 283),by themarketer nd customercharacteristics s earlierproposedby Lovelock (1979). These social behaviorsarerecognizedas being difficult to define buta majorgrowthareafor marketing.Marketingof ideas by in-dustrialinns, suchas thosepopularized y MobilOil's"advertorials,"s beingpracticedbut is morelikely tobe discussed n an advertisingHeathandNelson 1985;Sethi 1979) rather han a productcontext.EvaluatingEarlierClassificationApproachesThe goods, services, and ideas classification schemashown in Table 1 all meet some of the criteriaset outat the beginning of this section. For example, con-sumergoods classificationapproachesare buyerori-ented and partially generalizable.However, they donot recognize the benefit bundle criterion. Industrialgoodsand Lovelock's servicesclassifications re selleroriented and also only somewhatgeneralizable.Pastideas classifications tended to concentrateprimarilyon nonprofitconsumers,while ideas are increasinglybeing marketedby both for-profitand nonprofitmar-keters.Theproductclassificationsystemproposedhereissuperiorto those above for four reasons. First, andperhapsmost important, t is buyeroriented.Second,it is generalizableacross all users, sectors, andprod-ucttypes. Third,the new classificationrecognizesthecentralrole of the benefit/cost bundle. Finally, it hasthe advantageof using familiarterminology,buildingon the work of Copelandand of Holbrookand How-ard. Products can be classified in many ways. Themost useful classification for developing marketingstrategy ocuses on benefits demandedby buyers.A key to the new taxonomyis explicit recognitionthat its categoriesare definedby the buyer's evalua-tionof thepriceto be surrenderedn order o consumea given product. As the following section demon-strates,price is conceptualized n two dimensions.

Dimensions of PriceThe literature eviewedaboveon classifying productsuses a numberof dimensions.Among the most prev-alent is effort, usually interpretedas being shoppingeffort. Holbrook and Howard(1977) introducedtheimportance f risk in theirclassificationtypology(Ta-ble 1). In addition, Lovelock (1980) identified bothtime and risk as elements in his classificationof ser-vices.Table2 showsthe two dimensionsof price-effortand risk-divided by monetaryand nonmonetaryas-pects. Recognition that price includes nonmonetaryelements has come from a numberof sources sup-porting he "broadened"iew of marketing.KotlerandZaltman1971) stated hat"Price ncludesmoneycosts,

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opportunitycosts, energy costs, and psychic costs" (p.9). Shapiro (1973) also indicated that consumers ofnonprofit products expend resources beyond cash.Furthermore,Fine (1981a) used "social price"-madeup of time, effort, psyche, and lifestyle-to describeexchange transactions.Effort is defined as the objective amount of moneyand time it takes to purchase a product. That is, effortcan be measured in quantifiable terms-dollars andunits of time. There is growing support for the viewthat time is a relevant price in purchasing commercialproducts (Berry 1979; Venkatesan and Anderson 1985;Voss and Blackwell 1979) and possibly most impor-tant for many nonprofit products (Rothschild 1979b).Risk is the buyer's subjective feeling about themonetary and nonmonetary price of the product; moreprecisely, risk is the buyer's subjective assessment of

the consequences of making a purchasingmistake. Thevarious types of risk are defined in Table 2 and ex-plained below. Perceived risk has been mentioned inthe context of prices that end and industrial consumerspay (Bettman 1973; Guiltinan 1976; Lambert 1972).Monetary EffortA substantial amount of academic marketing researchhas been devoted to the study of pricing. Most of ithas 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 in-fluences, and price consciousness.The general conclusion of the majority of such re-search is that perception of product quality is posi-tively related to price (for reviews, see Monroe 1973;

TABLE 2Dimensions and Definitions of PriceDimensions

EffortMonetary:

Nonmonetary:

FinancialcashcreditcountertradeTimetravelshoppingwaitingperformance

RiskFinancialpersonalorganizationalConsequencessocialpsychologicalphysicalfunctional

EffortFinancialpricecashcreditcountertradeTravel timeaShopping timebWaitingtimecPerformance timedMonitoringtimed

RiskFinancial riskePsychological riskePhysical riskeFunctional riskeSocial riske

Definitions

Currency,checks, drafts, debit cardsCredit cards, charge accounts, line of credit, accounts payableBarter,swap, or trade productsThe time it takes to physically get to the store (seller's location)The time it takes buyer to search for and evaluate a productThe 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 productsThe time it takes to use a product or carry out a certain actionThe time it takes to remember to carry out a certain actionThe risk that the product will not be worth the financial priceThe risk that a poor product choice will harm a consumer's egoThe risk to the buyer's or others' safety in using productsThe risk that the product will not perform as expectedThe risk that a product choice may result in embarrassment before one's friends/family/work group

"Cherlow1981)bBerry1979)'Jacoby,Szybillo,and Berning 1976)dFox(1980)eJacoby nd Kaplan1972)

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Monroeand Krishnan1984;Olson 1977)andthathighqualityand commensuratehigh prices is an excellentmarketingstrategy(Hatten 1982; Peters and Austin1985). Work by Reisz (1979, 1980) and Gerstner(1985), however,has called intoquestionthe strengthof the price-quality elationship or inexpensive prod-ucts.Reference pricing has been studied by Monroe(1973)andothers Emery1970;JacobyandOlson1977;Kamenand Toman 1970). This meansthat consumershave in memorysome pricelevel that servesas a pointof reference or anypricecue. Monroe and Petroshius(1981) statethat the referenceprice is not necessarilyan exact price but a rangeof prices for similarprod-ucts. Referencepricing has recentlybeen applied tothe pricing of professional services (Zeithaml 1982;Zeithamland Graham1983).Contextualor situational influences also affectconsumers'views of the price. Monroe (1977) ex-aminedobjectiveandsubjectivecontextual nfluencesby applyingthe psychologicalconceptsof adaptationlevel and assimilation contrast effects to pricing.Monroe,Della Bitta, andDowney (1977) empiricallyverified thatintendeduse or purposeof the purchaseaffectshow individualsevaluateprices.In a majorreviewof the literature,Zeithaml 1984)concludedthat the domain of price consciousness isnot clearly specified. Whetherprice consciousness isan overallhypotheticalconstructor a single response

is unclear. The pragmatic act is thatmarketersknowcertainconsumersaremoreprice conscious than oth-ers. Moreover,price conscious buyersappear o be agrowingmarketsegment,evidencedby the popularityof discountshoppingmalls and off-pricechains.The other two subcategoriesof monetaryeffort-creditandcountertrade-havereceivedmuchless studyby marketers.The use of credit by many U.S. con-sumershas been on the rise. The price a consumeriswilling to pay is sometimes dictatedmore by credit(e.g., MasterCard r VISA) than income or a prod-uct's monetaryprice. Countertrades also growinginuse as a tool in internationalmarketing.Companiesareincreasinglyswappingproductsrather hanmoneybecause of exchangerateproblemsand lack of liquidassets (Dizard 1983; Kaikati1982; Martin and Ricks1985;Weigand 1977).NonmonetaryEffort(Time)Recognitionof time as a price that consumersmustpay for productshas recentlyreceived serious atten-tion by scholarsand practitioners.The quotes listedin Table3(a) stressthe importanceof time prices. At-temptingto classify goods, some earlierresearchersalso mentioned ime as partof the "effort"expendedby consumers(see Aspinwall 1961 andMiracle 1965in Table 1).Time was identifiedover 20 years ago as a costof consumption(Bender 1964; Downs 1961). Fur-

TABLEImportance 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 acquireproductsand services but also often use time as a substitute for money and vice versa (Jacoby, Szybillo, and Berning1976, 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 bestockpiled 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 beused completely differentlyfrom 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 thatconsumers seek satisfactions through spending both money and time resources. Similarly, goods and services areseen as having time and money prices (Voss and Blackwell 1979, p. 297).

(b)Risk PricesWhen 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 compositionof 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 withwhat would be expected if the products were ordered simply by price alone .... It would seem that similar typesof products have similar risk component hierarchies (Jacoby and Kaplan 1972, p. 384).



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thermore,Schary(1971) stated that the value of timecouldbe ascertained roma studyof opportunity ostsandthatmarketers houldrecognizeconsumers'timelimitationsnproduct evelopment.MorerecentlyBerry(1979)examinedhe"time-buyingonsumer"who lacksadequatediscretionary ime and, therefore, is inter-ested in minimizing hetime spentin purchasingprod-ucts. BlackwellandTalarzyk(1983) statedthat thereis a lifestyle of "timepoverty"for two-income fam-ilies. Thus, demand or time-savingproducts s grow-ing.Time hasbeen studied roma numberof otherper-spectives besides marketing-economics, sociology,home economics, psychology, and cultural anthro-pology (Becker 1965;Graham1981;Jacoby,Szybillo,and Bering 1976). Consumerresearchershave alsoexpendedmuchenergyin gaininga betterunderstand-ing of the time variable n recentyears (Hawes 1979,1980-relationship between time and consumer be-havior/theories;Feldman andHorik 1981-concep-tual model of time use; Hendrix and his colleagues1980, 1981, 1983, 1985-time use and expendi-tures).Settle(1980) summarized he statusof researchon time as being in the "interest"stage of the hier-archyof effects model.The typesof time pricesused to makeup the non-monetarypart of effort are listed in Table 2. Therearefive-travel, shopping,waiting, performance,andmonitoring-that have been developed from the lit-erature.Most of the past researchhas tended to viewtime as a single construct. It is defined here as mul-tidimensionalandobjectivelymeasurable.As Gronau(1975) states, there is no uniquevalue placedon timeby all consumers:The valueof time variesamong ndividualsaccord-ing to their ncome,wage rate,age, education,andfamilycomposition.Even for the same individual,the value of timemay varywiththe purposeandur-gency of the trip, the time of day, and the season(P. 5).This statementparallels he notionthatconsumersalsoplace differentvalues on objectively measured mon-etaryprices.Traveltime has been the subjectof muchresearchin the transportationield. Cherlow(1981) examinedpossiblemethods o estimatevaluesof travel time sav-ings. Consumersdo make trade-offsbetween locationof marketersand cost savings. Convenience of loca-tion is crucial for retailersand many services mar-keters.On the otherhand,discounthouses andcatalogshowrooms,because of their inconvenientlocations,haveappealed o consumerswilling to tradeoff traveltime with monetaryprice savings.Shoppingtime tends to concentrateon the searchand evaluationof alternativestages in the decision-makingprocess(Engel,Blackwell,andMiniard1986).

Withinthe marketing iterature,Amdt and Gronmo(1977), Berry(1979), andHolmanandWilson (1980)have specifically identified shopping time as havingimplicationsfor consumers. Productrating sources,suchas ConsumerReportsandconsultationwith fam-ily andfriends, aremechanismsused to reduceshop-ping time.Waitingtime is defined in four ways (see Table2). Threerelateto on-premisespurchasing,while thelast is relevantfor directmarketingand for industrialproducts.The generalfinding regardingwaiting timeis thatconsumersusually overestimatethe time theywill have to wait (Cottle 1976; Horik 1984). Offer-ing consumersfast service (e.g., fast food chains) orexpresscheck-inby airlines s recognition hatwaitingtime is important o large segments of consumers.The lasttwo typesof time in Table2, performanceandmonitoring,were suggested by Fox (1980) as es-peciallypertinento socialmarketers.Performanceimecan be equatedto consumption ime, which has beenrecognizedby otherwriters(Becker 1965; Cromptonand Lamb 1986). Regardingmonitoringtime, indi-vidualsoften "forget" o buy a product,such as mak-ing an appointment iththe dentistorphysician.Thesetime prices seem equally relevant for commercialmarketers.Forexample, time-saving productsandre-minderadvertisingdirectly appealto performanceandmonitoring imes.Time as a dimension of price is also crucial forindustrialand organizationalmarketers,even thoughit has rarely been mentioned by researchers(Sheth1973). For example, travel time may inhibitdealingwithcertain uppliers.Furthermore,hopping imemaytakemanymonths orcertain ndustrialproducts f theneeded specificationscannotbe met. The search forlow cost suppliers o competewithJapaneseandotherforeignmanufacturersasrequiredU.S. firms to shopthroughouthe world. The introductionof thejust-in-time inventory method illustrates that reduction inwaiting time is critical for many companies. Like-wise, finding productsand processes to reduce per-formance time has always been an organizationalobjective,andrememberingo order nexpensive sup-plies continuallyplagues firms.Risk PricesThe secondmajordimensionof priceis perceivedrisk.In fact, risk is not based on objective criteria, but,rather,what the consumerfeels or perceives. SinceBauer's 1960) seminalarticle,much attentionhasbeendevoted to this construct.The importanceof risk as auseful discriminatorof consumers' evaluation ofproducts s stressedin the quotationsshown in Table3(b).Although perceivedrisk has been investigated bya numberof researchers Bettman1973;Horton1979;



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Locanderand Hermann1979; Sheth and Venkatesan1968), comprehensivetudiesof the typesof risklistedin Table2 were madeby relatively ew scholars.Bauer(1960) only mentioned in passing the types of risk.Cunningham1967) identifiedthe risk resultingfrompoor performance,danger,healthhazards,and costs.Roselius (1971) defined four types of losses that re-lated o thetypesof risk: ime,hazard,ego, andmoney;Perryand Hamm (1969) looked at "socioeconomic"aspectsof risk;andPeter andTarpey(1975) specifiedseveraltypes of risk relatedto comparisonsof auto-mobile brands.Jacoby and Kaplan (1972) were the first to ex-amine the five types of risk listed in Table 2. Theyfoundthatoverall,perceivedriskcan be predictedromthe various types. In a validation study, Kaplan,Szybillo, and Jacoby (1974) confirmed "thatsimilartypes of productspossess similar risk-consequenceshierarchies" p. 290).The five risk types-financial, psychological,physical, functional,andsocial-encompass the sub-

jective view of buyers concerning the price of anyproduct.Financial risk is not the same as financialprice. Certainconsumers'perceptionsof the price ofa productdo not have as stronga relationship o thedollarprice as one may think. Financialrisk is ac-countedfor by payingmorefor a product hanis nec-essary to achieve an equivalent amount of utility.Alternately,consumers lower their financial risk byengaging in comparison shopping or by relying onknownbrandsor sources (vendors).Psychologicaland social riskrelate to the individ-ual's ego and referencegroupinfluence. Many prod-ucts mustovercomeperpetualbiases consumers haveabout them. For instance, Peter and Tarpey (1975)concluded hat thecongruenceof an automobilebrandwith a buyer's self-image and referencegroup imageis crucial.Brandingandpositioningof products rombrokerageservices to stereo components appear in-tendedto minimize these two types of perceivedrisk.Functional performance)andphysicalrisk are thefinal typesof risk listedin Table2. Virtuallyall stud-ies of perceivedrisk indicatethat functionalriskranksas the most important.This finding is not surprisingbecausehow a product unctionsis usually the majorreason orpurchase.Physicalrisk was generally houghtto be of greatestconcernfor complex products.How-ever, the additives and nutritionalcharacteristicsofrelativelylow cost food productsis of growing im-portanceo a largergroupof consumers Morris1985).Relationship of Product Categories withPrice DimensionsNow that the monetaryand nonmonetaryaspects ofthe effort and risk dimensions in Table 2 have been

reviewed,a morecompleteexplanationof the productclassificationcategoriesshownin Figure1 is possible.Since convenience andpreferenceproductsarelow ininvolvement,andshoppingandspecialtyproductsarehigh in involvement, similaritiesand differences be-tween the pairsareprovided.Support or makingthehigh and low involvementdistinction is provided bya recent empirical investigation (Park, Assael, andChaiy 1984) that found autos highest and salt lowestin involvement of 15 productsstudied.The difference between convenience and prefer-ence products s largelyone of risk. The types of riskthat end to be higheraresocial orpsychological.Thereare usually not appreciabledifferences in financial,functional,or physicalrisk, but the risk to one's egoor to one's peer group or family status is higher forthese products.For example, orderinga low pricedregionalbrandof beer in a social settingmay lead toridiculeby the group.Similarly,the purchasingagentmay prefera certaintype of office supplies becauseof the complimentsreceivedfromothercompany per-sonnel.Both effort andrisk are muchhigherfor shoppingproducts hanconvenienceandpreference see Figure1). The monetaryprice for these products s substan-tially greater.Shoppingand travel times, especially,delineatethese productsfrom low involvement ones.This point has been supported in the literature(Dommermuth1965; Kleimenhagen 1966-67). Be-cause of the monetaryand time stake in shoppingproducts,financial, functional, and physical risk areoften much more importantconsiderations.For ex-ample,consumersperceivemuchhigher evels of theserisks in purchasingan automobilethana laundryde-tergent.Moreover, ocialandpsychological isk s oftenheightenedbecauseof theconspicuousnatureof manyshoppingproducts.Bettman(1973) called this higher"inherent" isk.The risk dimensionis slightly more important orconsumersof specialty productsthan shoppingonesin Figure 1. However, there is not any one type ofrisk that is consistentlymore critical. Effort, on theotherhand, is what distinguishesshoppingfrom spe-cialty products.Since the buyeris almost completelybrand oyal to a particularproduct,travel, shopping,waiting,andperformanceimes are likely to be muchhigher for the individual or organizationalbuyer.Monitoringimemaybe anexceptionbecause hebuyerwill probablyrememberto purchase this preferredproduct.Furthermore,he financialprice is often an-other differentiatorbetween shopping and specialtyproductsbecausethe aforementionedprice-qualityre-lationship s strongfor manybuyers.Therearemanysophisticated ools availableto themanager or determining he financialprice of prod-ucts (see Gouldand Sen 1984; Rao 1984). However,



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the time and risk aspects are not as well understood.This more complete view of price which is built onbuyers' objective and subjective evaluation of prod-ucts further complicates the managerial task.The use of perceived risk and time categories en-riches the concept of price. As the literature reviewedhere shows, these nonmonetary elements of price havebeen examined by researchersand implicitly taken intoaccount by marketing managers. We now turn our at-tention to marketing strategies that can be utilized forconvenience, preference, shopping, and specialtyproducts.

ManagerialImplicationsOne purpose of any product classification scheme isto guide managerial decision making. A comprehen-sive and consistent marketing strategy should be basedupon product characteristics as perceived by buyers.The product classification suggested here provides amanagerial road map for strategy development: buy-ers' perceptions, marketers' objectives and basic strat-egy, and specific strategies for each element of themarketingmix. Table 4 outlines the discussion of eachof these managerial implications.Buyers' PerceptionsA buyer views a given product as a "bundle of sat-isfactions" to be obtained in return for certain price

considerations-classified as effort and risk. Thus, forconvenience products, the buyer perceives the productas being worth only low effort and is subject to onlylow risk, so his/her behavior evolves into largely habit-or impulse-driven (for industrial buyers-automaticreorder). For preference products, the buyer perceiveslow effort but medium risk, so the behavior becomes"routine" or "straight rebuy" with brand loyalty forindustrial products.Shopping products are perceived to be worthy ofmoderate to high levels of effort and risk. The re-

sulting behavior is thus "limited problem solving" forconsumers or an industrial "modified rebuy." Finally,specialty products are high in both effort and risk, sothe behavior is "extensive problem solving" or an in-dustrial "new task."Marketers' Objectives and Basic StrategyThe convenience product marketer is in an unenviableposition. His/her product is difficult to differentiate:buyer loyalty is virtually nonexistent because theseproducts are perceived to be homogeneous, and com-petitors will quickly copy any significant improve-ment in the productor other mix element. The preferredobjective is to move the product to another category-to preference via brand loyalty development for mostconsumer products, or to shopping via source loyaltyfor industrial distribution or retail store assortment.

TABLE 4Managerial Implications of Classifying Products Strategically

ManagerialfocusBuyer's perception ofpriceBuyer behaviorMarketer'sobjective

Marketer'sbasicstrategyProductstrategy

Pricestrategymonetarynonmonetary

Place strategyPromotionstrategy

Conveniencelow effort, low riskimpulse or habit(auto reorder)move to pref. orshop., or dominatevia low costhigh volume, costminimization,ormove productstandard grades andquantities, qualitycontrol, innovationscopied quicklymarket

minimize time andrisksaturation distributionpoint-of purchase,some salespromotion

Product CateqoryPreference Stlow effort, medium high effcrisk riskroutine (straightrebuy)brand loyalty

high volume, brandidentity,differentiationstandard grades andquantities, qualitycontrol, some R&Dmarket

minimize time,warrant riskintensive distributionmass advertising,sales promotion,some personal selling

hoppingort,medium

limited (modifiedrebuy)source or storeloyaltyhigh volume or highmargin, segmentationstandard base, manyoptions, much R&D,warrantiesbundled ornegotiatedaccommodate time,warrant riskselective distributionpersonal selling,some advertising

Specialtyhigh effort, high riskextensive (new task)absolute (source andbrand) loyaltyhigh margin, limitedvolume, market"niche"custom design, muchR&D,warranties,personalized servicenegotiatedpamper for time andriskexclusive distributionpublicity, personalselling, testimony


, , ,


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Totes umbrellas,Mortonsalt, Duracellbatteries,Yel-low taxis, 3M abrasives, and, most recently, thebrandingof tomatoes and other produce using bio-technology (Ecklund 1985; Hall 1985) representil-lustrationsof this strategy.The alternativeobjectiveis marketdominancevialow cost (Porter1980, 1985). This objectivegenerallydownplaysthe importanceof marketingstrategyrel-ativeto operationstrategy,and, therefore, s less likelyto be favoredby the marketingmanager.The marketer'sobjective for preference productsis to develop buyerbrand oyalty. The basic strategyis brand dentificationof high volume, low cost stan-dardizedproducts.The consumerwill expressa pref-erence for a given brandbut will not expend mucheffort to acquirethat brandif it is not convenientlyavailable.For food, Chiquita,Sunkist, and Dole aretryingto develop retaileras well as consumerbrandloyalty.For shopping products, the marketer strives forloyalty to source or store; that is, the buyer's per-ceived bundleencompassesmore thansimply the ba-sic product.Loyaltycan be basedupontangibleand/or intangibleproductcharacteristicsand any numberof other factors, e.g., upon a superiorvalue-to-costratio, betterservice, a location advantage,more ad-vantageouspaymentterms, etc. In reality, source (orstore)loyalty is usuallybased upon a combinationoffactors.The basic strategy,therefore,can take manyforms, generallyinvolving some form of marketseg-mentation.Forexample, IBM offersmanybundlesofhardware onfigurations,softwarepackages, and an-cillary supportsystems to segmentsrangingfrom in-dividualusers to the largestcorporations.One ideal for marketers s attainmentof specialtystatus. Here, buyer loyalty is absolute;the marketerin effect has monopoly, at least with respect to thisone consumer.If enoughbuyersperceive the productas a specialty, the marketer s well on the way toachieving his/her organization'soverall goals. Thebasic strategy is one of careful segmentation, or"niching,"and pamperingbuyersin that niche.Managers should consider stressing the risk di-mension.In fact, the following quote emphasizestheelite and risky natureof specialtyproducts.

Hence, f the marketer asa highprice,he maywishto emphasize he riskinessof the productclass bystressing mportance nd a smallnumberof accept-able brands,while at the same time promoting hequalityof his own brand Bettman1973, p. 189).Strategy Guidelines for Each Mix ElementSpecific strategiesfor product management, pricing,channels anddistribution,andpromotionderive fromtheobjectivesand basic marketing trategy.The prod-uct classificationframeworksuggestedhere can helpto coordinate hese often disparatedecisions.

Product strategy. For convenience products, theemphasismust be on high volume productionof stan-dardizedproducts. Quality control is essential foremergencyandimpulseitems. If the firmis unable todifferentiateits product, research and developmentrarely pays off because innovations can be quicklycopied. Thus, little advantageresults from superiorproductstrategy,but inferiorproductioncan lead tobuyer dissatisfaction. Since loyalty is nonexistent,dissatisfactionquickly results in lost sales.Forpreferenceproductstrategy,R&D, whichpro-duces a slight differentiablefactor that can be ex-ploited via mass advertising,can be quite valuable.Developinga strongpreference ftenhingeson a strong,distinctive, and benefit-orientedname (i.e., L'eggs,LectricShave,andWatchman rotective ervices).Therangeof differentiating actors is considerablywiderfor shoppingproducts, since the higher unit cost af-fordsgreateropportunitiesor productdifferentiation.In additionto many models (variations)of the prod-uct, warranties, ervicecontracts,andfinancing pack-ages are especially populardifferentiators.For spe-cialty products, the name of the game in productstrategyis customization-tailoring each producttothe needs of a particular egment or even individualbuyer.

Pricing strategy. As noted above, price must beconsidered n termsof both effort and risk. For con-venienceproducts,both mustbe minimized; he buyersimplywill not be willing to expend much effort norexpect to perceive much risk. He/she does not haveto, since other marketersoffer essentially the samebundle of benefits. Thus, the marketplacesets themonetaryprice and dictates the other mix decisions.Preferenceproductsalso face a market-determinedmonetary ricebut areperceived o be somewhatrisky.Thisperceivedrisk is handledvia mass advertisedas-surance hatmanyotherbuyersare satisfied with theproductand/or by emphasizingthe reputationof thewell-knownbrandname. In otherwords, the pricingstrategy orpreferenceproducts nvolves acknowledg-inga risk whenpurchasing, ndthenassuring hebuyerthat the risk can be minimizedby purchasing his par-ticularbrand.Pricing is particularly important for shopping

products.Both dimensionsmust be carefullyconsid-ered. The buyer's effort can be accommodatedbycombiningall aspects of the benefit bundle into onemonetary price-buying an existing home, for ex-ample. Conversely, each aspect can be negotiatedseparately,e.g., in buildinga new home, or differentbenefit bundles can be packagedand the buyer cannegotiatefor a given bundle, as in a new equipmentpurchase.The value the buyer placesupontime is alsoa significantdeterminant.

36 / Journal f Marketing,uly1986


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The riskaspectof shoppingproductpricing s alsocomplex.Becausethere aremany productoptionsandmany monetarypricingalternatives,the risk of mak-ing a wrong purchasingdecision is not trivial. Thisrisk is often handled via warrantyand other assur-ances thatthis source (store) is reliableand trustwor-thy.Pricingfor specialtyproducts s individualized-negotiation s the rule for monetaryprices, and pam-pering, literally, is required or the nonmonetaryas-pects. The latter s more important hanthe formerinmany cases. Since specialty buyers expect to spendconsiderablemoney and perceivehigh levels of risk,they expect to be well treated.Place strategy. The channels literature(Bucklin1963;SternandEl Ansary 1982) has developedveryspecific strategiesfor each type of product:completesaturationor convenience products, intensive distri-butionof preferenceproducts,selectivedistribution fshoppingproducts,and exclusive distributionof spe-

cialty products.Rarelydoes it makestrategicsense todeviatefrom this generalization.Promotionstrategy. Here is perhapsthe greatestvariance n strategiesamongproductsand the greatestneed for coordinationwith other mix strategies. Forconvenienceproducts,point-of-purchasePOP) is themost often used promotiondevice, along with salespromotions,such as cents-off coupons and rebates.Only the marketleader can usually afford mass ad-vertising.Preferenceproductsare created and nurturedbypromotion;he basic product,its price, and its distri-

butiondo notdiffertoo muchfromconvenienceprod-ucts. Mass advertising s the hallmarkof the prefer-enceproductKrugman 965), andsignificant esourcesare also devoted to sales promotionand POP. Also,personal selling to wholesalers and retailers in thechannel,often overlookedin academicdiscussionsofconsumerpreferenceproducts, is essential to prefer-ence productpromotion. For example, the beer in-dustryeffectively uses all these types of promotion npromotingtheir preferenceproducts, and the recentpromotionof the Beatricecorporatenameis probablyintended o influenceconsumers,retailers,and inves-tors.Shoppingproducts, which fall into the high in-volvementcategory, rely much moreheavily on per-sonal selling in the promotionmix than do conve-nience or preferenceproducts. This situation holdswhether he product s a good (furniture),service (adagencyselection),or anidea (college education).Fur-thermore,both consumerand industrialproductsuti-lize personalselling as the focal point of their pro-motionalstrategy. Advertisinggenerally emphasizesinformation ecauseof the shoppingstatusandloyalty

to store (retailer)or source (manufacturer).Because the buyer's loyalty to specialty productsis nearlyabsolute, the promotionmix requiresa dif-ferentemphasis.The most uniqueproductscan oftenrely on publicity. For instance, the idea of artificialheartsurgeryneeds the services of a well-known andrespected surgeon and the artificialheart itself. Thepublicitysurroundingheseevents andsubsequent es-timonyby patients s anexcellentexampleof the bun-dle of satisfactionsprovidedby a specialty product.Some personalselling may be required,but it is sec-ondary to the others. Advertising should reinforceconsumerchoice andattempt o reducethehigh levelsof risk associatedwith specialtyproducts.In summary,the productclassificationoffered inthis articleprovidesa framework o guide managerialdecision making. The key points are (1) recognizingthathaving such a framework s not a substituteforcarefulanalysisof a given strategicsituation;(2) de-riving the marketingobjective, basic strategy, andmarketingstrategy for each mix element from thebuyer's perceptionof the product'sexpected benefitsandcosts; and (3) coordinatingstrategicdecisions sothatall elements contribute o the basic strategyandoverallobjectives.

Academic Research ImplicationsFor academicresearch,taxonomiesare useful in sum-marizingexisting knowledge and in providingdirec-tions for furtherinvestigation. General taxonomiesadvance the discipline. Two classic examples areKotler's (1972a) generic concept of marketingandHunt's(1976) three-dichotomiesmodel of the domainof marketing.For marketingpracticewe subscribetothe view that there is nothing so practicalas a goodtheory.For marketingmanagers to utilize the productclassification taxonomy to the fullest extent, addi-tionalconceptualand empiricalresearchneeds to bedone.Five areaswhereadditionalesearchwouldproveespecially fruitful are: operationalizationof the di-mensions, determining the relative importance ofmonetaryand nonmonetarysubcategories,examina-tion of the marketsfor which these productsare in-tended,empiricalstudyof the proposedproductclas-sification system, and further nvestigationof buyerinvolvement.OperationalizationThe dimensionsof risk and effort need to be quanti-fied so that researchersand managerscan betterun-derstandhem.The workof JacobyandKaplan 1972)andPeterandTarpey(1975) providesgood measure-ment tools for the types of risk shown in Table 2.Futureresearchshould expandto a broaderselection



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of productsthat appearto fall into each of the fourcategories.Furthermore,he studentsamples used inthese earlierstudies were appropriateor the productstheyexamined but would not be especially useful fora broad-scale est.The effort dimension has also been operational-ized in a number of price elasticity and price con-sciousness tudies(Zeithaml1984). Certain ime priceshave been quantified (Cherlow 1981), but Jacoby,Szybillo, andBering (1976, p. 332) accuratelypointout thatthere s a need "for a time-related erminologysuitablefor studyingconsumerbehavior." The defi-nitions listed in Table 2 and explainedhere representan initialattemptatoperationalizationf relevant imeprices. In fact, theremay be otherequally importanttimeprices.Forexample, choice time (Berlyne 1957)may be an additionaltime price that is separateanddistinct from shopping time. Furthermore,the re-searchof Hendrixandhis coauthors1980, 1981, 1983)in time use is also pertinent o a fuller understandingof time prices.RelativeImportanceThe relative importanceof nonmonetaryand mone-tary aspects of these two dimensions of price needsfurtherstudy. Buyers implicitly make trade-offsbe-tween the dollarprice and the types of risk they per-ceive andthetimethey expectto spend.To date, theserelationshipsare not well understood.For example,do consumersexpect to make time expendituresforshopping productscommensuratewith the monetarypricethey are willing to pay? Or do they look to fa-miliarbrandsand outletsto minimize travelandshop-pingtimewhilerealizing hat his meansmonetary riceis higher?Withinthe types of time and risk shown in Table2, whathappensas one moves from a conveniencetoa specialty product?Do all risks increase,or, as pos-itedearlier,are social andpsychologicalrisks the mostrelevantfor some preferenceproducts, while func-tional and physical risks are more pertinentat theshoppingand specialtyend?The relationshipsamongthe time pricesalso need morethoroughstudy. Wait-ing timewouldusuallybe high for specialtyproducts,but whataboutthe othertime prices?Does shoppingtime decreaseas waitingtime increases?MarketsOne of the values of this taxonomyis that it seemsrelevant or consumer,industrial,andnonprofitprod-ucts. This shouldbe empiricallyverifiedby research-ers studyingmarketingby these organizations.Whilemuch researchhas been conductedon the consumermarketregarding ime and risk issues, we know rel-atively little about the industrialmarketplace.Whatrisks are most important or industrialusers of pref-

erenceproducts? n fact, is riskquantifiedby the pur-chasing agent or organizationalconsumer? How dononprofitonsumersquantify hehightimepricesoftenassociatedwith these products?ProductsThisproduct lassification chemeappearso have facevalidity. More investigationof goods, services, andideas that possess the characteristicsassociated withthe fourcategoriesof productss necessary.One study(Guseman1981)foundthatconsumersperceivedhigherlevels of risk for services than goods. Whetherthisrelationshipholds for goods andservices bothin pref-erenceor any othercategoryis not clear. Recent re-search conductedfor an airline found that consumersperceive relatively high levels of risk with airlinechoice. Surprisingly,physical risk was perceived tobe lower thansocial andpsychologicalrisk (Jamieson1985).If services and ideas can be integratedusing thiswell-knownand acceptedclassification(with the ad-ditionof preference),researchers an studybuyerbe-haviorandproduct electionprocesses hat can be usedby marketers f these products.Large-scaleempiricalinvestigation,possiblyjointly conductedby academiaandthe business sector, would help to gain more in-sight into the generalizabilityof productconcepts.Buyer Involvement LevelThe type of productclassificationsystem posed herehas potentialvalue in integrating he notion of con-sumer earningandinvolvementlevel with marketingstrategy.Furthermore,he notion of productimpor-tancedevelopedby Bloch and Richins (1983) seemsanalogouswith involvementlevel. If the strategicre-lationshipproposed n Figure1holds, implicationsre-lateto the type of researchconductedon productsandthe strategies hatcompaniesmay find useful. Forex-ample, certain organizationsmay want to activelypursuethe low cost and commodityapproach Porter1985) and keep theirproducts n the convenience orshoppingcategories. On the other hand, firms maywant to consciously move up the strategyarrowbyattemptingo maketheirproductseitherpreferenceorspecialtyones. Work by academicsin studyingstra-tegic implications of marketingdecision making isneeded.

ConclusionClassificationschemes have contributedmuch to thestudy and practiceof marketing.This article offersone unified productclassificationnotion. The classi-fication s buyeroriented,generalizable crossall users(consumer-industrial),ectors (profit-nonprofit),andproducttypes (goods, services, and ideas), and rec-



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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 formu-lation and the founding of this strategy upon consistent

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

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