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

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outdated, such as food, school supplies, and disposable cameras.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

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

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

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

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

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
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.

Accessory Equipment

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

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

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.

GLOBAL MARKET

Global marketing is “marketing on a worldwide scale reconciling or taking

commercial advantage of global operational differences, similarities and
opportunities in order to meet global objectives". Global marketing is also a field of
study in general business management to provide valuable products, solutions and
services to customers locally, nationally, internationally and worldwide.
According to American Marketing Association (AMA) "International marketing is
the multinational process of planning and executing the conception, pricing,
promotion and distribution of ideas, goods and services to create exchanges that
satisfy individual and organizations goals".
Many companies have been global marketers for decades—firms like Shell, Bayer,
and Toshiba have sold goods around the world for years. In luxury goods such as
jewelry, watches, and handbags, where the addressable market is relatively small, a
global profile is essential for firms like Prada, Gucci, and Louis Vuitton to profitably
grow. But global competition is intensifying in more product categories as new firms
make their mark on the international stage.

DECIDING WHETHER TO GO ABROAD

Most companies would prefer to remain domestic if their domestic market were large
enough. Managers would not need to learn other languages and laws, deal with
volatile currencies, face political and legal uncertainties, or redesign their products
to suit different customer needs and expectations. Business would be easier and
safer. Yet several factors can draw companies into the international arena:
• Some international markets present better profit opportunities than the domestic
market.
• The company needs a larger customer base to achieve economies of scale.
• The company wants to reduce its dependence on any one market.
• The company decides to counterattack global competitors in their home markets.
• Customers are going abroad and require international service.
Reflecting the power of these forces, exports accounted for roughly 13 percent of
U.S. GDP in 2008, almost double the figure 40 years ago. Before making a decision
to go abroad, the company must also weigh several risks:
• The company might not understand foreign preferences and could fail to offer a
competitively attractive product.
• The company might not understand the foreign country’s business culture.
• The company might underestimate foreign regulations and incur unexpected costs.
• The company might lack managers with international experience.
• The foreign country might change its commercial laws, devalue its currency, or
undergo a political revolution and expropriate foreign property.
Some companies don’t act until events thrust them into the international arena. The
internationalization process typically has four stages:
1. No regular export activities
2. Export via independent representatives (agents)
3. Establishment of one or more sales subsidiaries
4. Establishment of production facilities abroad
The first task is to move from stage 1 to stage 2.Most firms work with an independent
agent and enter a nearby or similar country. Later, the firm establishes an export
department to manage its agent relationships. Still later, it replaces agents with its
own sales subsidiaries in its larger export markets. This increases investment and
risk, but also earning potential. Next, to manage subsidiaries, the company replaces
the export department with an international department or division. If markets are
large and stable, or the host country requires local production, the company will
locate production facilities there. By this time, it’s operating as a multinational and
optimizing its sourcing, financing, manufacturing, and marketing as a global
organization. According to some researchers, top management begins to focus on
global opportunities when more than 15 percent of revenue comes from international
markets.

MAJOR DECISIONS IN INTERNATIONAL MARKETING

Deciding whether to go abroad?

Deciding which markets to enter?

Deciding how to enter?

Deciding on the marketing program.

Deciding on the marketing organization.

DECIDING WHICH MARKETS TO ENTER

In deciding to go abroad, the company needs to define its marketing objectives and
policies. What proportion of international to total sales will it seek? Most companies
start small when they venture abroad. Some plan to stay small; others have bigger
plans.
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