Marketers have classified products into two groups based on the types of customers who buy them. These two classifications are consumer products and industrial products. The consumer products are the products that people buy for personal consumption. On the other hand, industrial products are the products that are bought for further processing or for use in a business process and not for personal consumption.
The main distinction between a consumer product and an industrial product lies in the purpose for which a product is bought. Even the same product can be classified as both consumer and industrial based upon the purpose for which it was bought. If you are buying a lawnmower for your personal use then it is a consumer product but if you buy it for use in your landscaping business, it is an industrial product. The industrial products are classified into three groups which include materials and parts, capital items and sales and services.
Materials and parts:
Materials and parts are the types of industrial goods that get fully absorbed in the buyer’s product after processing or as a component of the produced goods. Materials and parts are of two types – raw materials and manufactured materials and parts.
The raw materials mainly include natural products and far products. Mainly small producers produce farm products like wheat, cotton, fruits vegetables and livestock. They sell their produce to the marketing intermediaries. The intermediaries will process them and sell them. Natural products, on the other hand, have larger bulk and low unit value ( production costs divided by the quantity produced). Moreover, they require a lot of transportation. Natural products like petroleum, iron ore, etc have to be transported from one corner of the world to another. They are produced by few and large producers. Saudi Aramco is one of the leading oil producers of the world. It markets its products to the industrial buyers directly.
Manufactured materials and parts:
The manufactured materials and parts mainly include component materials and parts. Component materials like iron or yarn are processed further like yarn is woven into clothes for sales. Component parts, on the other hand, do not need further processing but become a part of the final product. For example, a tire bought by Hyundai becomes a part of its cars. Most of the manufactured materials and parts are sold to the industrial user directly. In terms of marketing of the manufactured materials and parts, the most significant factors are price and service. Branding and advertising are not as important in their case.
The capital items are the industrial products that help the buyer with their production or operations. Installations and accessory equipment are mainly included in this category. Installations include buildings and fixed equipment. Buildings like factories, offices, and warehouses are included under installations as well as fixed equipment like lifts, generators, etc. Installations are some of the most significant purchases made by a company and therefore there may be a long decision-making period before the final purchase. Since a substantial investment goes into the purchase of installations, companies or buyers consider several factors before they make the purchase.
Moreover, buyers purchase them directly from the producers. Accessory equipment like portable factory equipment, tools, and office equipment have a shorter life as compared to installations. They do not become a part of the final product but only aid with the production process mainly. The sellers of accessory equipment depend on intermediaries like distributors and resellers for the sales of their products. It is mainly because while the buyers are geographically dispersed, they are numerous and the order sizes are generally small.
Supplies and Services:
Supplies and services are the industrial products that do not enter the product at all. Operating supplies and repair and maintenance items are included as supplies. Supplies are somewhat like convenience goods (consumer goods) which means their purchase generally does not require a lot of consideration and comparison by the buyer. Operating supplies like coal, printing paper, pencils or repair and maintenance items like nails and brooms do not require a lot of purchasing effort by the buyer.
Business services, on the other hand, include maintenance and repair services as well as business advisory services. Maintenance and repair services like office cleaning or computer and machinery maintenance services and advisory services like financial or legal advisory services are included under the category of business services. The providers of these services usually offer them under a contract. There are small businesses that offer maintenance services whereas the repair services are available from the manufacturer of the original equipment.
Other Sources: Principles of Marketing: Kotler.