Consumer and Business Products
CONSUMER AND BUSINESS PRODUCTS
The classification of products and services is essential to business because it provides one of the factors for determining the strategies needed to move them through the marketing system. The two major classes are consumer products and business products.
Consumer products are products purchased for personal, family, or household use. They are often grouped into four subcategories on the basis of consumer buying habits: convenience products, shopping products, specialty products and unsought products.
Consumer products can also be differentiated on the basis of durability. Durable products are products that have a long life, such as furniture and garden tools. Non-durable products are those that are quickly used up or worn out, or that become outdated, such as food, school supplies, and disposable cameras.
Convenience products are items that buyers want to purchase with the least amount of effort, that is, as conveniently as possible. Most are non-durable products of low value that are frequently purchased in small quantities. These products can be further divided into three subcategories: staple, impulse, and emergency items.
Staple convenience products are basic items that buyers plan to buy before they enter a store, and include milk, bread, and toilet paper. Impulse items are other convenience products that are purchased without prior planning, such as candy bars, soft drinks, and tabloid newspapers. Emergency products are those that are purchased in response to an immediate, unexpected need such as ambulance service or a fuel pump for the car.
Since convenience products are not actually sought out by consumers, producers attempt to get as wide a distribution as possible through various marketing channels—which may include different types of wholesale and retail vendors. Convenience stores, vending machines, and fast food are examples of retailer focus on convenience products. Within stores, they are placed at checkout stands and other high-traffic areas.
Shopping products are purchased only after the buyer compares the various products and brands available through different retailers before making a deliberate buying decision. These products are usually of higher value than convenience goods, bought less frequently, and are durable. Price, quality, style, and color are typically factors in the buying decision. Televisions, computers, lawn mowers, bedding, and appliances are all examples of shopping products.
Because customers are going to shop for these products, a fundamental strategy in establishing stores that specialize in shopping products is to locate near similar stores in active shopping areas. Promotion for shopping products is often done cooperatively with the manufacturers and frequently includes the heavy use of advertising in local media, including newspapers, radio, and television.
Specialty products are items that consumers seek out because of their unique characteristics or brand identification. Buyers know exactly what they want and are willing to exert considerable effort to obtain it. These products are usually, but not necessarily, of high value. This category includes both durable and non-durable products. Specialty products differ from shopping products primarily because price is not the chief consideration. Often the attributes that make them unique are brand preference (e.g., a certain make of automobile) or personal preference (e.g., a food dish prepared in a specific way). Other items that fall into this category are wedding dresses, antiques, fine jewelry, and golf clubs.
Producers and distributors of specialty products prefer to place their products only in selected retail outlets. These outlets are chosen on the basis of their willingness and ability to provide an image of status, targeted advertising, and personal selling for the product. Consistency of image between the product and the store is also important.
Unsought products are those products that consumers are either unaware of or have little interest in actively pursuing. Examples are new innovations, life insurance, and preplanned funeral services. Because of the lack of awareness of these products or the need for them, heavy promotion is often required.
The distinction among convenience, shopping, specialty, and unsought products is not always clear. As noted earlier, these classifications are based on consumers' buying habits. Consequently, a given item may be a convenience good for one person, a shopping good for another, and a specialty good for a third, depending on the situation and the demographics and attitudes of the consumer.
Business products are products and services that companies purchase to produce their own products or to operate their business. Unlike consumer products, business products are classified on the basis of their use rather than customer buying habits. These products are divided into six subcategories: installations; accessory equipment; raw materials; component parts and processed materials; maintenance, repair, and operating supplies; and business services.
Business products also carry designations related to their durability. Durable business products that cost large sums of money are referred to as capital items. Nondurable products that are used up within a year are called expense items.
Installations are major capital items that are typically used directly in the production process of products. Some installations, such as conveyor systems, robotics equipment, and machine tools, are designed and built for specialized situations. Other installations, such as stamping machines, large commercial ovens, and computerized axial tomography scan machines, are built to a standard design but can be modified to meet individual requirements.
The purchase of installations requires extensive research and careful decision making on the part of the buyer. Manufacturers of installations can make their availability known through advertising. Actual sale of installations, however, requires the technical knowledge and assistance that can best be provided by personal selling.
Products that fall into the subcategory of accessory equipment are less expensive and have shorter lives than installations. Examples include hand tools, computers, desk calculators, and forklifts. While some types of accessory equipment, such as hand tools, are involved directly in the production process, most are only indirectly involved.
The relatively low unit value of accessory equipment, combined with a market made up of buyers from several different types of businesses, dictates a broad marketing strategy. Sellers rely heavily on advertisements in trade publications and mailings to purchasing agents and other business buyers. When personal selling is needed, it is usually done by intermediaries, such as wholesalers.
Raw materials are products that are purchased in their raw state for the purpose of processing them into consumer or business products. Examples are iron ore, crude oil, diamonds, copper, timber, wheat, and leather. Some (e.g., wheat) may be converted directly into another consumer product (cereal). Others (e.g., timber) may be converted into an intermediate product (lumber) to be resold for use in another industry (construction).
Most raw materials are graded according to quality so that there is some assurance of consistency within each grade. There is, however, little difference between offerings within a grade. Consequently, sales negotiations focus on price, delivery, and credit terms. This negotiation, and because raw materials are ordinarily sold in large quantities, makes personal selling the principal marketing approach for these goods.
Component Parts and Processed Materials
Component parts are items that are purchased to be placed in the final product without further processing. Processed materials, on the other hand, require additional processing before being placed in the end product. Many industries, including the auto industry, rely heavily on component parts. Automakers use such component parts as batteries, sunroofs, windshields, and spark plugs. They also use several processed materials, including steel and upholstery fabric.
Buyers of component parts and processed materials have well-defined specifications for their needs. They may work closely with a company in designing the components or materials they require, or they may invite bids from several companies. In either case, in order to be in a position to get the business, personal contact must be maintained with the buyers over time. Here again, personal selling is a key component in the marketing strategy.
Maintenance, Repair, and Operating Supplies
Maintenance, repair, and operating (MRO) supplies are frequently purchased expense items. They contribute indirectly to the production of the end product or to the operations of the business. MRO supplies include computer paper, light bulbs, lubrication oil, cleaning supplies, and office supplies.
Buyers of MRO supplies do not spend a great deal of time on their purchasing decisions unless they are ordering large quantities. As a result, companies marketing supplies place their emphasis on advertising, particularly in the form of catalogs, to business buyers. When large orders are at stake, sales representatives may be used.
Business services refer to the services purchased by companies to assist in the operation of the firm. They include financial, marketing research, promotional, legal, lawn care, and janitorial services. The decision to hire an outside business to perform needed services is often predicated on how frequently the service is needed, the specialized knowledge required, and the relative costs of providing the service internally versus contracting with an outside firm.
It is not always clear whether a product is a consumer product or a business product. The key to differentiating them is to identify the use the buyer intends to make of the product. Products that are in their final form and are ready to be purchased and consumed by individuals or households for their personal satisfaction are classified as consumer products. On the other hand, if they are bought by a business for its own use, they are considered business products. Some items, such as flour and pickup trucks, can fall into either classification, depending on how they are used. Flour purchased by a supermarket for resale is classified as a consumer good, but flour purchased by a bakery to make pastries is classified as a business product. A pickup truck bought for personal use is a consumer product; if purchased to transport lawn mowers for a lawn service, it is a business product.
see also Business Marketing
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Thomas R. Baird
Earl C. Meyer
Sharon K. Slick
"Consumer and Business Products." Encyclopedia of Business and Finance, 2nd ed.. . Encyclopedia.com. (May 11, 2019). https://www.encyclopedia.com/finance/finance-and-accounting-magazines/consumer-and-business-products
"Consumer and Business Products." Encyclopedia of Business and Finance, 2nd ed.. . Retrieved May 11, 2019 from Encyclopedia.com: https://www.encyclopedia.com/finance/finance-and-accounting-magazines/consumer-and-business-products
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