Business To Business Marketing Assignment

Q. What is the classification of different industrial products and services? What is the basis of
classification?

A. Industrial products and services are classified into three broad groups:

• Materials and Parts

• Capital items

• Supplies and services

Materials and Parts

Goods that enter the product directly consist of:

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 Raw materials

 Manufactured Materials and

 Component parts

The cost of these items are treated by the purchasing company as part of manufacturing cost.

Raw Materials: These are the basic products that enter the production process with little or no
alterations. They may be marketed to OEMs or user customers. For instance when a large bakery
purchases natural gas to fire the ovens which are used to produce cakes, it is a user customer. When
the same firm purchases sugar for processing the cakes, it is an OEM.

Manufactured Materials and Component Parts: Manufactured materials include those raw
materials that are subjected to some amount of processing before entering manufacturing process, such
as acids, fuel oil, and steel which are the basic ingredients of manufacturing activities. For instance,
aluminium extrusion unit buys aluminium billets to manufacture aluminium extruded products such as
door and window frames, by using an extrusion press. Thus, aluminium billets are called manufactured
materials.

Component parts such as electronic motors, batteries and instruments can be installed directly into
products with little or no additional changes. When these products are sold to customers who use them
in their production processes, they are marketed as OEM goods. The component parts are also sold to
the dealers and distributors who resell them to the replacement market.

Capital Items

Capital items are those which are used in the production processes and they wear out over certain time
frame. They are normally treated as “user” customers. Further, capital items are classified into three
groups;

1. Heavy equipment/installations

2. Accessories/light equipment and

3. Plant and building

Installations/Heavy equipment: These are major and long-term investment items such as general
purpose and special purpose machines, turbines, generators, furnaces, and earth moving equipment.
These items are shown in balance sheet as plant and equipment, and are fixed assets to be depreciated
over a period of years if they are purchased outright. However, if these are leased, the cost is treated
for tax purpose as expenses by the purchaser. As the unit purchase price of capital items are high, these
items are financed by borrowing money for a period of time, which is roughly equivalent to the
expected life of the fixed assets.

Accessories/Light equipment: Light equipment and tools which have lower purchase prices and are
not considered as part of heavy equipment, power operated hand tools, small electric motors, dies, jigs,

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typewriters and computer terminals. Purchases of accessories are either considered as current expenses
with purchase prices taken as operating expenses in the year purchased, or they may be considered as
fixed assets and therefore, depreciated over a period of years.

Plant and buildings: These are the real estate property of the company. It includes the firm’s offices,
plants(factories), warehouses, housing, parking lots, and so on.

Supplies and Services

They support the operation of the purchasing organisation. They do not become a part of the finished
product. They are treated as operating expenses for the periods they are consumed.

Supplies: Items such as paints, soaps, oil and greases, pencils, typewriter ribbons, stationary, and
paper clips belong to this category. These items are generally standardised and are marketed to a wide
cross-section of industrial users.

Services: Companies need a wide range off services like building maintenance services, auditing
services, legal services, courier services, marketing research services, and others.
Busine
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Sector
Classif
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FMC INDUST INDUST

-RIAL -RIAL
PROD PRODU SERVIC
U-CTS -CTS ES

INDUST-
PERSO-
RAW SUB- RIAL INDUST-
CAPITAL COMPON- FINISHED CONSUM- NAL
FMCG FMCD MATE- ASSEMBL RIAL
GOODS
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-IES
GOODS ABLES SERVIC SERVICES
ES

A product is produced by a manufacturing process. A service is offered by the utility element of

companies; you subscribe to a service in the same way as you subscribe to your gas and electricity
supplier. And this brings us to the essential of these differences; changing from one (product
approach) to the other (service offering) is very complex. Where the product is much more
standardized, the service is tailor-made. Companies differentiate in offering products and services,
but the variations between similar products of different producers are less prominent than the
variations between services.

Services marketing relates to the marketing of services, as opposed to tangible products. A service
(as opposed to a good) is typically defined as follows:

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• The use of it is inseparable from its purchase (i.e., a service is used and consumed
simultaneously)
• It does not possess material form, and thus cannot be touched, seen, heard, tasted, or
smelled.
• The use of a service is inherently subjective, meaning that several persons experiencing a
service would each experience it uniquely.

Services (compared with goods) can also be viewed as a spectrum. Not all products are pure goods,
nor are all pure services. An example would be a restaurant, where a waiter's service is intangible,
but the food is tangible.

While classifying industrial products and services in context with B2B, one should always consider
the above discussed factors.

Q. What are the parameters of forming the Relationship?

A. The industrial/organizational partnership might provide a vehicle through which supplies of

goods and services can be planned and controlled and through which innovations can be fostered to
enhance future performance, the relationship has to be perceived from the point of view of its
social and cultural nature, as well as its technical and commercial facets. Communications can take
place between a variety of representatives from different functions of both buyer and seller
organizations. Each person brings to the relationship different personal characteristics, experiences
and knowledge.

Understanding customer relationships depends on whether you are looking at a direct relationship,
such as in a business to business market, or an indirect relationship such as that in a consumer
market. Managing B2B relationships is far more personal than in consumer markets and two
companies may find themselves working hand in glove to fulfil the needs of end consumers. In
business markets, relationships form the backbone of key supplier agreements for larger companies.
Where a big company requires a regular delivery of parts or goods for its production processes, it
does not just look at the quality of goods or materials to be bought. In these key supplier deals,
elements such as delivery, flexibility, lead time and technical support are essential to the smooth
flow of products through the production cycle. The importance of quality of supply and long-term
commitment means that purchasers are looking to build strong business relationships with core
suppliers. Two parties in the process of forming healthy relationship should consider the following
parameters;

• Faith and Trust: As the relationship progresses, so expectations and behavioral patterns will
be formed. Building Business to Business relationships has become the key in marketing
and therefore trust is a very important factor in business transactions. Many market analysts
have discovered that Faith & Trust are the most important parameter in building a
relationship. The basic trust model and Trust diagram is shown below:

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The two diagrams shown above suggest that while building a trust there are several other entities
which pays major role in building a relationship.
• Comfort: Comfort in B2B is similar to the comfort in any normal relationship the only
difference is that in B2B, comfort deals with the industrial/organizational dealing of goods
and services restricted with some boundaries and mostly dependent on the trust factor
between them. If the trust between the two organizations is strong, the comfort zone of
working will be more. So comfort is indirectly related to the Trust/Faith, & bonding
between the two organizations. It brings the flexibility in the relationship.
• Bonding: In B2B relationship Bonding plays a major role in building the strong
relationship. It comes after spending period of time in the business or due to mutual
understanding between the two parties or it may be established with the best delivery or

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service & that too on time. A long lasting bonding depends on several factors like service,
product quality, delivery, time attitude towards business and personal approach etc.
• Give and Take: It is the simplest concept in terms of relationship, the two parties builds the
relationship on the two terminologies of Give & Take. The type of service or product one
will deliver similar response will be observed/returned by the other party in the relationship.
• Emotional Attachment: In B2B relationship it is very rare concept, it could be observed
very rarely when the two parties are in the relationship from a very long period of time, and
in that case if one of the party makes any mistake in terms of service delivery on time or
even if they are not delivering service or product in the quantity the other party need, then
might the other party can continues with them for a period of time or can help them
economically too.
• Sharing of Feelings: As we know that in the B2B relationship the two parties comes in
contact for a longer period of time, so, sharing of feelings may exist in such relationship, but
again a very rare case where such kind of thing exist n these type of relationship. One can
make the other person comfortable according to his/her will in this relationship by inviting
each other for parties and functions etc.
• Love & Care: The Love & Care is something which is having a very different meaning in
the B2B relationship. The two parties care each other & show their feeling until they are in
the business relationship for a very long period of time like for decades. In these condition if
one faces any economical problem then might one can show his love & care for the other
party as there will be his loss if the party is not able to deliver services or goods on time
leading to his greater loss. But a very rare case to be observed in B2B relationship.
• Responsibility: it is again a very important part of the building of a relationship in B2B. If
both the parties perform their responsibilities in proper manner then the relationship between
the two parties will be strengthen and this will help them to build their relationship in future.
Major responsibility is to fulfil the demand of each other and satisfying each other by
delivering the best quality on time. They should keep trust among each other to flourish their
business relationship.
• Understanding: Understanding in any relationship is very important. If the understanding
between the two parties is good then the boding between them will be good and this will
lead to strong trust, belief & comfort among each other in their business relationship.
• Tolerance/Adjustments: If the trust, belief, bonding, understanding is good between the
two parties in a business relationship then the tolerance of mistake or the adjustment factor
rises in the B2B relationship.

In the B2B relationship it is very important to notice that if the trust between the parties
exist is good then the relationship will run for longer period of time, leading to the strong
bonding & understanding between each other.

Submitted To
Prof. Jayant Panse

Submitted By
Disha Kothari (17) Poonam Gulati (38) Vinay Dixit (57)

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