Session 4

CLASSIFICATION OF B2B PRODUCTS

Classification of B2C products
• Convenience products are consumer products and services that the
customer usually buys frequently, immediately, and with a minimum
comparison and buying effort Newspapers Candy Fast food
• Shopping products are consumer products and services that the
customer compares carefully on suitability, quality, price, and style
Furniture Cars Appliances
• Specialty products are consumer products and services with unique
characteristics or brand identification for which a significant group
of buyers is willing to make a special purchase effort Medical
services Designer clothes High-end electronics
• Unsought products are consumer products that the consumer does
not know about or knows about but does not normally think of
buying Life insurance Funeral services Blood donations
Classification of B2B products

• Standard Approach
• Alternative Approach
Classification of B2B products

• The standard approach to classifying business

products is to use a classification system that is quite
separate from the usual consumer product
classifications.
• This classification is based on the use to which the
products are put, and the extent to which they are
incorporated into the final product.
 Classification of B2B products

• This classification is based on the concept of

‘Entering into the final product’
• Office cleaning services?
• USB drive? Or Microprocessor chip? – Entering
goods

• ‘Entering’ good contributes directly to the finished

product quality and the customers business reputation
 Classification of B2B products

1. Installations
2. Accessory equipment
3. Maintenance , Repair and Operating supplies (MRO)
4. Raw materials
5. Manufactured materials and parts
6. Business services
Classification of B2B products

 Installations: Major investment items. Heavy

engineering equipment -> treated as investment items
by the customer, costs involved are depreciated over
their expected economic life.
 Such investments are planned carefully, involving use
of extensive financial analysis.
Classification of B2B products

• 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.
Classification of B2B products
• Accessory equipments : smaller items of
equipment such as hand tools. Larger items are
treated as investment items , smaller items are
treated as expense items. Economic life of
accessory items is shorter than that of installations.
• 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
Classification of B2B products

• Maintenance, Repair and Operating Supplies

• MRO supplies : individually minor items of
expenditure that are essential to the running of the
organization. Office supplies like stationery ,
lubricants and abrasives.
• 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
Classification of B2B products

• Raw materials : Unprocessed basic materials such as

crude oil, coal and metal ores. Particularly prone to
price fluctuations arising from the forces of supply
and demand.
• 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).
Classification of B2B products

• Manufactured materials and parts : raw materials that have

been processed(finished steel, prepared timber) and
component parts(computer drives and automobile
windscreens) that are ready to be incorporated directly into
the finished product.
• 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.
Classification of B2B products

• 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.
Classification of B2B products

• Business services :business advisory services, market

research services, top management consultancy.
• 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 suppliers
reputation and staff.
OEM and others classification
Classification of B2B products – the
alternative view
• Murphy and Enis argued that only one
classification system was needed for products,
consumer and business.
• Proposed a four fold classification based on
buyers evaluation of the efforts involved in
acquiring the product and of the risk of making
a poor decision.
Classification of B2B products – the
alternative view
• Effort and risk are costs incurred by the buyer when
making a decision, effort is a variable that includes
amount of money, energy and time that the buyer is
willing to expend to acquire a given product.
• Convenience, Preference, Shopping and Specialty.
Classification of B2B products – the
alternative view
• Convenience : very little effort , negligible risk.MRO
supplies.
• Preference : little more effort than convenience
products but substantially more risk. Little more
expensive than convenience product but the buyer
perceives a much greater chance of making the wrong
decision. Minor items of accessory items. Business
travel .
Classification of B2B products – the
alternative view
• Shopping : great deal more effort and perceived risk.
Include major items of accessory equipment,
manufactured materials and parts(products that enter
the final product completely), market research
services. Buyers are willing to spend considerable
amount of time and energy , because of the relative
high price and risk associated with possibly making
the wrong decision
Classification of B2B products – the
alternative view
• Specialty : highest ranked in terms of both buyer risk
and effort. Installations, highly specialized business
services( top management consultancy). Main
distinction is effort rather than risk. Buyers are
prepared to invest great amounts of time and energy in
seeking to make the right choice about high-value
purchases.
 Classification of B2B products

• Both classifications are complementary not

alternatives.
• One - nature of the product, way in which products are
used and whether they enter the final product or not.
Seller oriented classification scheme.
• Two – Buyer oriented, based on risk and effort.
rohitgidwani@yahoo.com
Thankyou