Classification of industrial products

CLASSIFICATION OF INDUSTRIAL PRODUCTS

&INDUSTRIAL MARKETING

ENVIRONMENT

“Individuals and organizations that acquire goods and services to be used, directly or indirectly, in the production of other goods and services or to be resold.”

INDUSTRIAL PRODUCTS

Classification is done on the basis of three broad groups:

• Material and Parts

• Capital Items

• Supplies and Services

1. MATERIAL AND PARTS Goods that enter the product directly. The cost of

these items are treated by the purchasing company as the part of manufacturing cost. Material and parts are further segregated into three parts that are:

Raw Materials Manufacturing Materials Component Parts

Raw Material: These are the basic products which enter into the production process with little or no alterations. They may be marked to user customers or OEMs (Original Equipment Manufactures). Such as iron ore, crude oil, vegetables.

Manufactured Materials: That also includes those raw materials that are subjected to some amount of processing before entering the production process. Such as acids, fuel oil, steel and chemicals.

Component parts: These are the semi finished parts that can installed directly into the products with little or no additional change. Such as small motors, batteries and tires.

2. CAPITAL ITEMS Capital items are those which are used in the

production process. They are normally treated as user customers. Capital items are classified into three groups:

Heavy equipments Light Equipments Plant and Buildings

Heavy Equipments: These are the major and long term investments such as general purpose and special purpose machines, turbines, generators and earth moving equipments.

Light Equipments: Light equipments and tools which have lower purchase prices and are not considered as the part of heavy equipment such as typewriters, computers and small electric motors.

Plants and Buildings: These are the real estate property of the company. It includes the firm offices, plant, warehouses, warehouses and parking lots.

3. SUPPLIES AND SERVICES

Supplies and services support the operations of the purchasing organization. They are not consider as the part of the finished goods. They are further segregated into two parts:

Supplies Services

Supplies: These items are generally standardized and are marketed to a wide cross section of industrial users. Such as paints, oils, greases, pencils, stationary etc.

Services: Company needs a wide range of services like building maintenance services, auditing services, legal services, courier services and many more.

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Materials and parts

1. Raw materials ( natural gas, HDPE etc.)2. Manufactured materials ( copper wire, steel sheets )3. Component parts ( switches, motors or customized gears )

Characteristics : Normally large custom made orders are sold By the manufacturers & standard products by industrial distributors.

Organizational Customer

Based on Type of products purchased

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Capital Items

1. Installations ( buildings, computers, machinery etc.)2. Accessories ( PC, Office furniture)

Characteristics: Normally major installations, because ofextensive interaction required and long negotiation time required,the manufacturers deal directly with the customer & accessories are

sold by industrial. distributors.

Organizational Customer

Based on Type of products purchased

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Supplies and services

1. Supplies ( soaps, stationery etc.)2. Services ( maintenance, canteen etc.)

Characteristics : Normally industrial distributors are used & services are provided by the individual contractors ).

Organizational Customer

Based on Type of products purchased

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Industrial Market Vs Consumer MarketMarket Structure

Industrial Market

Geographically concentratedFewer buyers (relatively)Big buyers( small number of large buyers)

Consumer Markets

Geographically dispersedMass marketsFree Market(large number of buyers)

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Industrial Market Vs Consumer MarketBuyer Behavior

Industrial Market

*Evaluated for functionalityrational/task motive to buying.*Purchasers are experts & focusis more on performance/service.*Higher interaction with thesupplier. * Formal processes.

Consumer Market

*Social / psychological factors are important.*Family involvement & focusmore on product per se.*Nor personal relationshipwith the supplier.* Less of formal processes.

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Industrial Market Vs Consumer MarketProducts

Industrial Market

* Technical complexity and customized.* Service, delivery and availability is very important.

Customer Markets

* Standardized.

*. Service, delivery and availability is somewhat important.

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Industrial Market Vs Consumer MarketDistribution channel characteristics

Industrial Markets

* Shorter, more direct & fewer linkages between seller and buyers.

Consumer Markets

* Indirect and multiple linkages

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Industrial Market Vs Consumer MarketPromotion

Industrial Markets

* Emphasis on personal selling or one to one dealing.

Example : Selling fridgeswith new technology.You go and dealwith Coke or Pepsi H.O.

Consumer Markets

* Emphasis on mass market promotion.

Example : You plan an adv.campaign to highlight decafcoffee

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Industrial Market Vs Consumer MarketPricing

Industrial Markets

* Competitive bidding & multistage negotiation.

* Sharing of cost data & budgeting of acceptable profits in many cases.

Consumer Markets

* Normally MRP & MOQ

* Concept of list price & its implementation.

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Industrial Marketing Environment

BuyerSellerInterface

Publics

Macro Environment

Govt. influences