What is a Business Product: Definition for Marketers – Video & Lesson Transcript | Study.com

Producers and Resellers

Postmaster Joe’s biggest customers are the local producers in town. Producers are organizations that purchase goods and services to produce other products, to incorporate into other products, or to facilitate the daily operation of the company. Another name for producers is OEMs, or original equipment manufacturers. Joe’s favorite producer customers are the local construction and transportation companies in town.

Imagine owning a business where you do not make or produce any product! The entire business model would be to buy finished products and then resell them for a profit. This is the purpose of a reseller. Postmaster Joe deals primarily with wholesale resellers. His biggest customer is JNG Wholesalers, and they supply local schools with educational products such as pencils, books, and desks.

Governments and Institutions

Although Postmaster Joe works for a government institution, he also has other government offices as his business customer. Businesses rely heavily on government sales in order to maintain their revenue. In fact, the United States Federal Government is considered the world’s largest customer with over 600 million purchases made a year. The different segments are county, municipal, state, and federal government institutions.

The smallest of Postmaster Joe’s business customers consist of institutions. His customer list consists of churches, libraries, hospitals, unions, clubs, and foundations.

Types of Business Products

The first type of business product is called major equipment. This type of business product includes capital goods such as large machines, mainframe computers, and buildings. Postmaster Joe explains that major equipment’s marketing strategy contains personal selling, as the product is generally very expensive, custom-made, and a high-risk purchase.

The next type of business product is called accessory equipment. These products are less expensive, and examples include copy machines or power tools. The marketing of these types of products consists of a standardized product offering and good business advertising. Postmaster Joe sells accessory products such as large mailing machines to his big corporate clients.

Raw materials is the third type of business product. Examples of the product include unprocessed or agricultural products such as corn, fruit, veggies, and fish. According to Postmaster Joe, most companies that purchase large amounts of raw materials are the local mills. The marketing implication of selling raw materials is that there are few suppliers, so price is fixed.

Postmaster Joe explains that the fourth type of business product is called component parts. This product consists of finished items (or products close to being finished) that are used to make other products. An easy example of a component part would be car tires for automobile manufacturing. The U.S. Postal Service buys replacement tires for most of their mail trucks every month. Most component parts do wear out, so there is a replacement market.

Processed material is another type of business product. These products are used in manufacturing other products but need to undergo some type of processing. Examples include corn syrup and plastics. The marketing strategy of selling processed material consists of high quality, price, and excellent service.

Another type of business product would be supplies. Postmaster Joe sells supplies, such as mailing tape, boxes, and stamps, to local businesses. Other examples would be paper towels, pencils, paper, and staples. These products are usually inexpensive and need to be purchased frequently. There are a lot of suppliers and many competitors, so price is very important in the marketing strategy.

Postmaster Joe also sells the last type of business product. Business services are expense items that usually do not end up as part of the final product. Examples of this product would be consulting, marketing, legal, and janitorial services. Postmaster Joe sells his business service of packaging, mailing, and delivering for his local business clients.

Lesson Summary

Business marketing is the marketing of goods and services to individuals and companies for reasons other than personal consumption. The four types of business categories are producers, resellers, governments, and institutions. The seven types of business products are major equipment, accessory equipment, raw materials, component parts, processed material, supplies, and business services.

The main difference of a product being classified as a business product instead of a consumer product is the end user. If a consumer buys a pencil for their child for school from a mass merchandiser, the pencil is classified as a consumer product. If that same consumer at work buys pencils for the entire company from a supplier, then the pencil is a business product.

Learning Outcomes

After watching this lesson, you should be able to:

• Discuss the difference between a business product and a consumer product
• Identify and explain the four types of business categories and seven types of business products