B2B Products: Categories and Marketing / Sales Processes
Business to Business marketing (B2B marketing) is all about the marketing of goods and services to various commercial enterprises, institutions, and governments for consumption, use, incorporation or for resale.
Buyers (~consumers) in industrial markets (B2B) buy goods such as machinery, raw materials, equipment, etc. But they also buy products such as office supplies, which are usually bought in the consumer market (B2C).
B2B goods and services are classified according to their use which buyers have such as where and how the product will be used in the business of the consumer.
One way of categorizing industrial goods is classifying them into entering goods, foundation goods, and facilitating goods
- Entering Goods/Services: As the name suggests, these are the goods which are used by the buyer in the early stages of the product of the buyer. This means these products become a part of the buyer's final product. These goods include RAW MATERIALS such as farm products or minerals from which the final product will be made. These also include various COMPONENTS manufactured by other companies which can be included in the production line of the buyer such as electrical wires, tires for automobiles, etc.
- Foundation Goods/Services: These are products that are also used to make the end product but do not become a part of the end product (like the entering goods and services). These include the INSTALLATIONS such as BUILDINGS, FIXED EQUIPMENT like a conveyor belt or a large crane, LAND RIGHTS, etc. and ACCESSORY EQUIPMENT such as LIGHT FACTORY EQUIPMENT like a hammer, OFFICE EQUIPMENT like pencils, etc.
- Facilitating Goods/Services: These goods and services help an organization achieve its goals. They facilitate the business of the buyer's organization. But they neither part of the product nor part of the the production process. These include REPAIR AND MAINTENANCE SERVICES, MARKET RESEARCH SERVICES, BUSINESS ADVISORY SERVICES, etc.
Rangan and Isaacson suggest another, more detailed classification of the goods and services sold in the B2B market
into 8 general categories as follows:
- Major Equipment: These consist of heavy equipment and are often affixed to the plant of the buyer. The SALES PROCESS IS QUITE LONG AND COMPLEX. The seller companies typically use a DEDICATED SALES FORCE depending on the conditions. These involve diesel engines, air compressors, radiology machines, etc. These involve a large investment from the buyer side and the cost of underperformance or failure of the machine is high. So, the buyers need to be convinced that the investment is justified and the risk is manageable.
- Minor Equipment: Light equipment involves various hand tools, computers, portable air compressors, etc. These require a smaller investment than the major equipment hence these are affordable to a larger customer base. Sellers use MASS MARKETING TECHNIQUES that focus on a larger customer base to reach the potential buyer. So, DISTRIBUTORS are used by the manufacturers of the minor equipment to sell the products rather than a dedicated sales force.
- Raw Materials: Raw materials include goods such as iron ore, cotton fiber, etc. These are usually sold as commodities which means the competing sellers will offer comparable price range and quality. The buyers usually prefer the sellers which give them a lower price as the quality differentiation is low in raw materials. COST EFFICIENCY is the main factor while buying raw material hence low-cost intermediaries such as BROKERS are used in the selling process of raw materials or buyers and sellers may even prefer spot transaction.
- Processed Materials and Chemicals: These are the products that are somewhat processed than the raw materials and hence cost differentiation is possible in such goods as QUALITY MAY DIFFER A LOT from seller to seller. These include fabric, plastic polymers, rolled steel, paper, etc. These serve as the primary input in the production process such as fabric will be used to make garments and the quality of the fabric used will vary according to the seller. Sellers can add various features and improve the quality and add more value to the product. The sales of these goods are usually done through DISTRIBUTORS.
- Components: Components are used in the end products of the buyer. These components include motors, engines, keyboards, etc. Components are used as-is in the end product in the same form as they were purchased from the seller. Some components are a crucial part of the end product, such as the disk drive of a personal computer, so good relationships with the business partners are needed. Typically a DEDICATED SALES FORCE is used by the seller.
- Systems: These usually include a central system with some side peripherals which provide the necessary environment for the end-user. The solution that the system delivers is of utmost importance. The system itself is of secondary importance. For example, if a customer is buying an Management Information System (MIS), the networking capabilities and the functions it can provide are more important than the hardware where it runs on (the computers). As there is more emphasis on the solution rather than the equipment side, many players are involved in the buying process making it a complex and lengthy process. Typically a DEDICATED SALES FORCE is used by the seller.
- Consumable Supplies: These are the supplies that are used on a day to day basis in business operations. These may include coolants, lubricants, adhesive solutions, etc. Some of these supplies are important for every operation so a regular inflow is needed so an important criterion while buying is the ability to get regular reorders. But some of the consumable supplies used in maintenance and repair we would want the criteria to be ease of availability as it will be difficult to predict the breakdown of the systems. Depending on the volumes, a DEDICATED SALES FORCE can be used by the seller.
- Industrial Services: These are the services that external service providers provide such as management consulting, market research, engineering services, etc. Sometimes the logistics activities handled by various external agencies can also be considered a part of industrial services. Typically a DEDICATED SALES FORCE is used by the seller.
Having some of knowledge about these classification, the various categories of products and the way they are being marketed and sold is useful to understand in industrial and B2B markets.
⇨ I will appreciate it a lot if you could add more insights. Thank you.
Rangan, V.K., & Isaacson. (1994), "What is Industrial Marketing?", Harvard Business Review.
Maximillian Claessens (2016), "Types of B2B Products", Marketing-Insider.
Maximillian Claessens (2016), "Detailed Classification of B2B Products", Marketing-Insider