Unit 3
Product and Service
Management for the
School Based
Enterprise
Small Business Operations
Business-to-Business Marketing
 Business-to-business marketing
is the exchange of products and
services between businesses.
Marketing, 3e, page 330
 Businesses may purchase products
for direct resale to customers.
Example: clothing, shoes
 Businesses may also purchase raw
materials that are then processed
by the business into finished
products for sale to customers.
Example: coffee beans, steamed milk,
chocolate syrup
Frameworks 3.1
Purchasing
Purchasing
includes determining
the products and
services needed,
identifying the best
sources to obtain
them, and
completing the
activities necessary
to obtain them.
Marketing, 3e, page 331
Small business owners will frequently travel
to a central market - a location where people
bring products to be sold or exchanged.
Marketing, 3e, page 13
Frameworks 3.1
Categories of Business Purchases
 Capitol Goods – The building and major equipment.
 Operating Equipment – Equipment used in the daily
operation of the small business.
 Supplies – Consumable materials used in the
operation of the small business.
 Raw Materials – Unprocessed materials that are
incorporated into products.
 Services – Tasks performed for the business to
support production, sale, or maintenance of the small
businesses products or services.
Marketing, 3e,
page 331
Bartering
Bartering
occurs when
small business
owners decide
to exchange
products or
services,
rather than
purchasing
with cash.
Marketing, 3e, page 12
Frameworks 3.1
Acquiring Product Knowledge
 A product is anything
tangible offered to a
market by a business
to satisfy customer
needs. Marketing, 3e, page 276
 A service is an
activity that is
intangible and
consumed at the time
of production. Marketing,
3e, page 308
Customers of a specialty coffee shop
purchase a tangible product, such as the
latte picture above, but they also
purchase the service associated with the
creation and presentation of the product.
Frameworks 3.2
Products: DECA’s House of Grounds
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Most beverages are offered in two sizes, Small 12 oz and Regular 16 oz
Brewed Coffee - Ethiopian, or Costa Rican (decaf if demand exists)
Café Latte - Espresso with steamed milk
Cappuccino - Espresso with steamed milk, capped with milk foam
Café Mocha - A chocolate Café Latte
Café Au Lait - Brewed coffee with steamed milk, equal parts
Flavored Café Latte - Café Latte with a shot of flavored syrup – vanilla, sugar
free vanilla, caramel, hazelnut, raspberry, etc.
Hot Chocolate - Chocolate syrup and steamed milk
Steamers - Choice of syrup and steamed milk
Bottled Water
Frozen Milk Chocolate Mocha – One scoop powder mix, ice, and water
blended together - 12 oz. size only
Italian Soda – Flavored syrup mixed with club soda - 12 oz. size only
Frozen Italian Soda – Flavored syrup, ice, and regular water blended together
- 12 oz. size only
Frameworks 3.2.1
Inventory Management
 The term inventory refers to the
assortment of products maintained by a
business. Marketing, 3e, page 349
 Just-in-time (JIT) inventory management
means that the inventory level is kept low
and resupplied just as it is needed. Marketing,
3e, page 348
– This reduces the amount of money the
business will need to invest in its inventory.
– The amount of storage space, or holding
space, is reduced also saving the business
money.
– JIT helps ensures that fresh products will
be available for purchase by customers.
Frameworks 3.3.1
Inventory Management
 A vendor is a
business that offers
products for sale to
other businesses.
Marketing, 3e, pages 343
 The invoice is an
itemized billing
statement with the
terms of payment for
the order. Marketing, 3e, page
350
Frameworks 3.3.1
Vendor List: DECA’s House of Grounds
Clark Office Products
116 North Walnut Street
Harrison, AR 72601
Espresso Supply
1123 NW 51st Street
Seattle, Washington, 98107
Food Service Equipment Brokers
1000 Pat Nash Drive, B-1, Building 6
Branson, MO 65616
Pippin Wholesale Company
512 Highway 62-65
Harrison, AR 72601
POS Core Technologies, Inc.
9624 153rd Avenue NE
Redmond, WA 98052
Quill Corporation
P.O. Box 94080
Palatine, IL 60094-4080
Specialty Beverages of Arkansas
Kim and Ellen Schreyer
2715 Bowman Lane
Conway, AR 72034
Wal-Mart Supercenter
1417 Highway 62 65 North
Harrison, AR 72601
Determining the Retail Price
 The selling price is the amount of money a customer must pay for
a product or service. Marketing, 3e, page 401
 A markup is an amount added to the cost of a product to
determine its selling price. Marketing, 3e, page 411
– If a 2 GB flash drive costs the business $9 and it is marked up
by $1, this is a 10% markup as a percentage of the selling price
of $10. (This is a very small gross margin.)
 A markdown is a reduction from the original selling price.
Marketing,
3e, page 412
 Gross margin or gross profit is the difference between the cost
of the product and the selling price. Marketing, 3e, page 410
 Net profit is the difference between the selling price and ALL
costs and operating expenses associated with producing the
product. Marketing, 3e, page 411
Frameworks 3.3.2
Receiving Procedures
 The vendor fills orders and sends it to the buyer with a
packing list, an itemized listing of all of the products
included in the shipment. Marketing, 3e, page 350
 When the merchandise is received by the buyer, it should be unpacked and
compared to the invoice or the packing slip.
 The merchandise should be inspected for damage and spoilage.
Frameworks 3.4.1
Services
A service is an
activity that is
intangible,
exchanged
directly from the
producer to
consumer, and
consumed at the
time of
production.
Marketing, 3e, page 308
The services offered by a physician
(diagnosis and advice) is usually
provided at the time of examination.
Frameworks 3.5
The characteristics of Services
• Intangible means that the service cannot be
touched, seen, tasted, heard, or felt.
• Inseparable means that the service is produced
and consumed at the same time.
• Perishable means that services unused in one
time period cannot be stored for use in the
future.
• Heterogeneous means there are differences
between services.
Marketing, 3e, pages 309-312
Frameworks 3.5.1
Services: Perishable
Services: Perishable
Services: Intangible
Services: Inseparable
Most customers associate their real estate agent with the service they provide.
Most customers
view the quality of
the hair cut or style
they receive
directly with the
stylist who
provided that
service.
Service: Heterogeneous
The quality of a service can vary from
business to business. Have you ever
had a bad haircut?
Marketing Information System
• A marketing
information system is
an organized method
of collecting, storing,
analyzing, and
retrieving information
to improve the
effectiveness and
efficiency of marketing
decisions. Marketing, 3e, page 131
The point of sale system (POS) is an
effective tool for gathering sales and
product information for use in
decision making.
Frameworks 3.6
Marketing Research
 Marketing research is a procedure designed to
identify solutions to a specific marketing problem
through the use of scientific problem solving.
Consider the following steps:
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Define the problem
Analyze the situation
Develop a data collection procedure
Gather and study information
Propose a solution
Marketing, 3e, pages 136-137
Frameworks 3.6
Marketing Research: Collecting Data
 After carefully and clearly defining the problem
and analyzing the situation, the marketing
research project should collect data relevant to
the study.
– Secondary data is information that has already been
collected for another purpose that can be used to
solve the current problem.
– Primary data is information collected for the first time
to solve the problem being studied.
Marketing, 3e, pages 137-138
Frameworks 3.6
Marketing Research: Primary Data
 A survey is a planned set of questions to which individuals or
groups of people respond.
 Closed ended questions offer two or more choices.
 Open ended questions allow respondents to develop their own
answers.
 A focus group is a small number of people brought together to discuss
identified elements of an issue or problem.
 The observation method collects information by recording the
actions of customers without interacting with or communicating
with them.
 A test market is a geographic area in which a new product or
service is tested in order to gather information about customer
reaction to the tested product or service.
Marketing, 3e, pages 144-148
Frameworks 3.6
Focus Group
A focus group can provide valuable information to a business.
Test Marketing
KFC recently test marketed their new Double Down Sandwich.
Instead of bread, you get two pieces of fried chicken, which hold the
real contents of the sandwich: two types of cheese, bacon, and a new
special Colonel’s sauce.
The sandwich was first tested in Providence, Rhode Island and
Omaha, Nebraska before it was introduced to the rest of the country.
Conduct a Research Project
• Conduct a research project to determine the
feasibility of adding a new product to the current
product offerings of the SBE.
• Collect secondary and primary data.
• Conduct a focus group
• Conduct a survey with open ended and closed
ended questions.
• Consider conducting a test market of the
proposed new product.
• Observe customer behavior.
Frameworks 3.6.1
End of Unit 3
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 Open the Subjects folder “Small Business Operations.”
 Study the flashcards.
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