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What is a Business Product: Definition for Marketers

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  • 0:04 Defining Business…
  • 0:52 Producers and Resellers
  • 1:49 Governments and Institutions
  • 2:32 Types of Business Products
  • 5:26 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Lombardo
In this lesson, you'll find out the difference between a consumer product and a business product. You will also learn about the different business categories and seven types of business products.

Defining Business Products and the Business Market

Quick test: If you are a postal worker and sell stamps to a consumer who comes into the post office, then you are selling a consumer product. But, if the same postal worker sells a postage machine to a local food distributor, then the product becomes a business product. Why? The difference is the end user.

Business marketing is the marketing of goods and services to individuals and companies for reasons other than personal consumption. The business market consists of four areas. Postmaster Joe has years of experience dealing with all these types of businesses, and he will take us on a local tour to explain the different segments and products.

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.

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