Classifying business products

Just in the same way that consumer products can be classified into similar categories of products, business or industrial products can also be classed together. These classification schemes are helpful for marketers to understand the fundamental marketing challenges of the products that they manage.

In both sets of classification schemes – consumer products and business/industrial products – the different product classes can act as a helpful guide to marketing mix decisions and as a general understanding of consumer behavior.

Classifying business products

Marketing textbooks tend to classify business products into three categories, namely:

  1. Materials and parts
  2. Capital items
  3. Supplies and business services

Materials and parts

Materials and parts are that the business purchases for input into their manufacturing system. Through their manufacturing process, they transform these input products into their output products, which they sell to consumers or to wholesalers/retailers.

As a simple example, a soft drink manufacturer would require sugar, flavorings, various chemicals, glass or bottles, lids caps, cans or aluminum, labels, boxes and other packaging, and so on. These are the products that they require in order to produce the products that they sell.

Capital items

Capital items are major purchases made by a company in order to set up their manufacturing or service system. Therefore, capital items represent the organization’s production capability. The above materials and parts are processed through the firm’s collection of capital items as an overall production system.

Using the same soft drink example as above, the manufacturer would require bottling capability, labeling equipment, beverage-making facilities, packaging ability, and so on.

In terms of a service organization, store locations or retail outlets (if any) and their IT system, would represent their capital items – which allows them to produce and distribute their services.

Supplies and business services

The final category of business/industrial products is general supplies and business services. These are additional products purchased by the business in order to allow them to operate and support their manufacturing or service process.

Again, using the soft drink example, a soft drink manufacturer would be a consumer of: advertising agencies, marketing consultancy, legal advice, stationery and office supplies, rental accommodation for the office staff, and so on.

The marketing implications

Materials and parts

In most cases, consistency of production inputs and reliability of supply are highly valued by manufacturers. Therefore, they usually seek out reliable and long-term partners, with an agreed contract for performance.

For example, McDonald’s, in most countries tend to have very long-term relationships with its supplies of meat and buns.

Businesses that target these businesses will have an opportunity at times when the manufacturer decides to expand its product range or experiences significant dissatisfaction with their existing supplier.

There are some manufacturers who frequently shop around for cheaper input items, these manufacturers is usually have lower brand equity and overall product quality is not as critical.

As with much of the B2B market place, personal selling and relationships are important. Trade shows may offer some value as well, and perhaps advertising in industry-based publications.

Capital items

Due to the significant cost and durability of capital items, these are more infrequent purchases. They would be generally considered a modified rebuy or a new task purchase. This means that the organization would be willing to consider a range of new options and suppliers.

Decisions the capital items are very considered, and are usually accompanied by detailed financial analysis and an extensive comparison of the offerings. Therefore, personal selling with a long lead time is important, as well as the ability to provide quite specific and technical information to business customer.

Trade shows are probably quite important for new initiatives in technology, which might be of significant interest to existing manufacturers. Ideally, the manufacturers are looking for efficiencies, cost savings and reliability, when purchasing capital items.

Supplies and business services

These vary significantly – from buying photocopy paper, through to selecting a new advertising agency for the next three years.

The quite simple purchases are a straight rebuy, which is similar to habitual loyalty in consumers. This means that the business will generally not shop around, as there is little value in switching suppliers for relatively low-cost items.

However, for major financial and strategic commitments – such as a new advertising agency – usually a rigorous comparison of alternative suppliers is undertaken.

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