the classification of products

3.1 The Nature of Marketing – Consumer and Industrial Marketing

Learning Objective

Students will be able to:

• Explain the role of marketing and how marketing objectives support corporate goals.
• Analyse demand and supply, including price elasticity.
• Identify and differentiate the various market types, orientations and growth measures.
• Compare consumer (B2C) and industrial (B2B) markets.
• Distinguish between mass and niche marketing and apply the STP process.
• Classify products (consumer & industrial) and link the classification to the 4 Ps of the marketing mix.

1. Role of Marketing and Its Link to Corporate Objectives

• Purpose of marketing: create, communicate and deliver value to customers and manage relationships that benefit the organisation.
• Typical marketing objectives (examples):
  • Increase market share by 5 % in two years.
  • Achieve sales growth of £2 m per annum.
  • Enhance brand equity (measured by brand‑awareness score).
  • Maximise profit margin to 12 %.
  • Build long‑term customer loyalty (repeat‑purchase rate ≥ 30 %).
• SMART criteria – objectives should be Specific, Measurable, Achievable, Relevant and Time‑bound.
• Link to corporate objectives: marketing objectives translate broad corporate goals (e.g., profitability, sustainability, market leadership) into measurable actions such as launching a new product line, entering a new market, or improving customer retention.

2. Demand, Supply and Price Elasticity

2.1 Demand and Supply

• Demand factors: income & wealth, tastes & preferences, price of the product and of substitutes/complements, advertising & perceived quality, population size & demographics.
• Supply factors: cost of raw materials & labour, technology & productivity, taxes, subsidies & regulations, number of suppliers, capacity utilisation.
• Price interaction: when demand > supply → price rises; when supply > demand → price falls. (Insert demand‑supply diagram.)

2.2 Price Elasticity

• Price elasticity of demand (PED) = % Δ Quantity demanded ÷ % Δ Price.
  ‑ Elastic (|PED| > 1): small price change causes a large change in quantity.
  ‑ Inelastic (|PED| < 1): quantity changes little.
• Income elasticity of demand (YED) = % Δ Quantity ÷ % Δ Income. Positive for normal goods, negative for inferior goods.
• Cross‑price elasticity of demand (XED) = % Δ Quantity of Good A ÷ % Δ Price of Good B. Positive for substitutes, negative for complements.
• Implications for pricing: highly elastic products require competitive pricing; inelastic products allow higher margins.

3. Types of Markets

3.1 Consumer (B2C) vs. Industrial (B2B) Markets

3.2 Geographical Markets

3.3 Market Orientation

3.4 Market Share and Market Growth

• Market share = (Company’s sales ÷ Total market sales) × 100 %.
• Market growth rate = ((Current period sales – Previous period sales) ÷ Previous period sales) × 100 %.
• Strategic implications (BCG matrix):
  • High share + high growth → “Stars”.
  • High share + low growth → “Cash Cows”.
  • Low share + high growth → “Question Marks”.
  • Low share + low growth → “Dogs”.

4. Mass Marketing vs. Niche Marketing

5. Market Segmentation, Targeting and Positioning (STP)

1. Segmentation criteria
   • Geographic – region, climate, urban/rural.
   • Demographic – age, gender, income, education.
   • Psychographic – lifestyle, personality, values.
   • Behavioural – usage rate, loyalty, benefit sought.
2. Targeting strategies
   • Undifferentiated (mass) – one offer for the whole market.
   • Differentiated – separate offers for several segments.
   • Concentrated (niche) – focus on a single segment.
   • Micromarketing – tailor to individuals or localities.
3. Positioning
   • Define the product’s unique place in the consumer’s mind.
   • Tools: positioning statement, perceptual map (insert diagram placeholder).

6. Classification of Products

6.1 Consumer Products

Classified according to the buying behaviour they provoke.

6.2 Industrial Products

Purchased by organisations for production, resale or operational purposes.

6.3 Additional Classification Criteria

• Durability: Durable goods (e.g., cars, washing machines) vs. non‑durable goods (e.g., food, cosmetics).
• Tangibility: Tangible goods (physical) vs. intangible services (consultancy, SaaS).
• Usage: Consumer‑oriented vs. industrial‑oriented.
• Price range: Low‑price (price‑sensitive) vs. high‑price (premium) items.
• Purchase frequency: Frequent (e.g., groceries) vs. infrequent (e.g., furniture).

7. Applying Product Classification to the Marketing Mix (4 Ps)

• Promotion
  • Convenience – mass‑media advertising, point‑of‑sale displays.
  • Shopping – comparative advertising, sales promotions, selective personal selling.
  • Specialty – high‑budget advertising, sponsorship, limited‑edition releases.
  • Unsought – personal selling, direct mail, intensive public relations.
  • Industrial – personal selling, trade shows, technical literature, online B2B platforms.
• Place (Distribution)
  • Convenience – intensive distribution (many outlets).
  • Shopping – selective distribution (chosen retailers).
  • Specialty – exclusive distribution (single or few outlets).
  • Industrial – direct sales force, specialised distributors, online B2B portals.
• Price
  • Convenience – price competition, discounting, everyday low price.
  • Shopping – value‑based pricing, occasional discounts.
  • Specialty – premium pricing, price skimming.
  • Unsought – negotiated pricing, bundling with related services.
  • Industrial – contract pricing, volume‑based discounts, total cost of ownership considerations.
• Product
  • Convenience – standardised, low‑cost packaging, minimal features.
  • Shopping – differentiated features, quality emphasis, wider range of choices.
  • Specialty – unique design, high‑quality materials, after‑sales service, brand prestige.
  • Unsought – functional design, clear benefit communication.
  • Industrial – technical specifications, reliability, after‑sales support, customisation options.

8. Summary

Product classification provides a systematic framework for analysing buying behaviour, selecting the appropriate marketing mix, and aligning marketing activities with corporate objectives. By understanding the distinctions between consumer and industrial markets, the various market types, orientations, growth rates, and segmentation strategies, students can design coherent, evidence‑based marketing programmes that satisfy customer needs while achieving organisational goals.