INDUSTRIAL GOODS CLASSIFICATION
Industrial goods can be classified in terms of how they enter the production process and their relative costliness. We can distinguish three groups of industrial goods: materials and parts, capital items, supplies and business services. Materials and parts are goods that enter the manufacturerâ€™s product completely. They fall into two classes namely raw materials and manufactured materials and parts.
Raw materials fall into two major groups: farm products (e.g. wheat, cotton, livestock, fruits, and vegetables) and natural products (e.g. fish, lumber, crude petroleum, iron ore). Farm products are supplied by many producers, who turn them over to marketing intermediaries, who provide assembly, grading, storage, transportation, and selling services. Their perishable and seasonal nature gives rise to special marketing practices. Their commodity character results in relatively little advertising and promotional activity, with some exceptions. At times, commodity groups will launch campaigns to promote their product—-potatoes, cheese, and beef. Some producers brand their products—Dole salads, Mottâ€™s apples, and Chiquita bananas.
Natural products are limited in supply. They usually have great bulk and low unit value and must be moved from producer to user. Fewer and larger producer often market them directly to industrial users. Because the users depend on these depend on these materials, long-term supply contracts are common. The homogeneity of natural material limits the amount of demand creation activity. Price and delivery reliability are the major factors influencing the selection of suppliers.
Manufactured materials and parts fall into two categories: component materials (iron, yarn, cement, Wires) and component parts (small motors, tires, castings). Component materials are usually fabricated further— pig iron is made into steel, and yarn is woven into cloth.
The standardized nature of component materials usually means that price and supplier reliability are key purchase factors. Component parts enter the finished product with no further change in form, e.g. when small motors are put into vacuum cleaners, and tires are put on automobiles. Most manufactured materials and parts are sold directly to industrial users. Price and service are major marketing considerations, and branding and advertising tend to be less important.
Capital items are long-lasting goods that facilitate developing or managing the finished product. They include two groups: installations and equipment. Installations consist of building (factories, offices) and heavy equipment (generators, drill presses, mainframe computers, elevators). Installations are major purchases. They are usually bought directly from the producer, with the typical sale preceded by a long negotiation period. The producerâ€™s sales force includes technical personnel. Producers have to be willing to design to specification and to supply post sale services. Advertising is much less important than personal selling.
Equipment comprises portable factory equipment and tools (Hand Tools, Lift trucks) and office equipment (personal computers, desks). These types of equipment do not become part of a finished product. They have a shorter life than installations but a longer life than operating supplies. Although some equipment manufacturers sell direct, more often they use intermediaries, because the market is geographically dispersed, the buyers are numerous, and the orders are small. Quality, features, price and service are major considerations. The sales force tends to be more important than advertising, although the latter can be used effectively.
Supplies and business services are short-term goods and services that facilitate developing or managing the finished product. Supplies are of two kinds: maintenance and repair items (paint, nails, brooms), and operating supplies (lubricants, coal, writing paper, pencils). Together, they go under the name of MRO goods. Supplies are the equivalent of convenience goods; they are usually purchased with minimum effort on a straight re-buy basis. They are normally marketed through intermediaries because of their low unit value and the great number and geographic dispersion of customers. Price and service are important considerations, because suppliers are standardized and brand preference is not high.
Business services include maintenance and repair services (window cleaning, copier repair) and business advisory services (legal, management consulting, and advertising). Maintenance and repair services are usually supplied under contract by small producers or are available from the manufacturers of the original equipment. Business advisory services are usually purchased on the basis of the supplierâ€™s reputation and staff.