INDUSTRIAL MARKETING

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2 INDUSTRIAL MARKETING Text and Cases Francis Cherunilam M.A., M.B.A., D.D.P., Ph.D. Dean, School of Management Studies, Viswajyothi College of Engineering & Technology, Muvattupurha, Kerala. (Formerly Professor and Chairman, Marketing Area, IIMK; Director, School of Management Studies, Cochin University of Science & Technology; Director, Albertian Institute of Management, Cochin; Director, Kochi Business School; Director, Mangalam Management Studies, Kottayam.) Fourth Revised Edition : 2015 MUMBAI NEW DELHI NAGPUR BENGALURU HYDERABAD CHENNAI PUNE LUCKNOW AHMEDABAD ERNAKULAM BHUBANESWAR INDORE KOLKATA GUWAHATI

3 Author No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording and/or otherwise without the prior written permission of the publisher. First Edition : 2004 Second Revised Edition : 2009 Third Revised Edition : 2011 Fourth Revised Edition : 2015 Published by Branch Offices : New Delhi : Mrs. Meena Pandey for Himalaya Publishing House Pvt. Ltd., Ramdoot, Dr. Bhalerao Marg, Girgaon, Mumbai Phone: / , Fax: himpub@vsnl.com; Website: : Pooja Apartments, 4-B, Murari Lal Street, Ansari Road, Darya Ganj, New Delhi Phone: , ; Fax: Nagpur : Kundanlal Chandak Industrial Estate, Ghat Road, Nagpur Phone: , ; Telefax: Bengaluru Hyderabad : No. 16/1 (Old 12/1), 1st Floor, Next to Hotel Highlands, Madhava Nagar, Race Course Road, Bengaluru Phone: , , , : No , Lingampally, Besides Raghavendra Swamy Matham, Kachiguda, Hyderabad Phone: , Chennai : New-20, Old-59, Thirumalai Pillai Road, T. Nagar, Chennai Mobile: Pune Lucknow Ahmedabad : First Floor, "Laksha" Apartment, No. 527, Mehunpura, Shaniwarpeth (Near Prabhat Theatre), Pune Phone: / ; Mobile: : House No 731, Shekhupura Colony, Near B.D. Convent School, Aliganj, Lucknow Phone: ; Mobile: : 114, SHAIL, 1st Floor, Opp. Madhu Sudan House, C.G. Road, Navrang Pura, Ahmedabad Phone: ; Mobile: Ernakulam : 39/176 (New No: 60/251) 1st Floor, Karikkamuri Road, Ernakulam, Kochi Phone: , ; Mobile: Bhubaneswar Indore Kolkata Guwahati DTP by Printed at : 5 Station Square, Bhubaneswar (Odisha). Phone: , Mobile: : Kesardeep Avenue Extension, 73, Narayan Bagh, Flat No. 302, IIIrd Floor, Near Humpty Dumpty School, Indore (M.P.). Mobile: : 108/4, Beliaghata Main Road, Near ID Hospital, Opp. SBI Bank, Kolkata , Phone: , Mobile: : House No. 15, Behind Pragjyotish College, Near Sharma Printing Press, P.O. Bharalumukh, Guwahati , (Assam). Mobile: , , : Sunanda : M/s. Charita Impressions, Hyderabad. On behalf of HPH

4 PREFACE TO FOURTH EDITION Industrial Marketing, also known by such other names as Business Marketing, Business to Business Marketing, Organisational Marketing etc., is growing in importance because of the fast growth of the industrial (business) market. Although the size of the business market is enormous much larger than that of the consumer market and it is often more complex than consumer goods marketing, the subject has not yet received the importance it deserves. There is a dearth of research and literature on this subject. The main objective of this book, which is a modified version of my earlier work Business Marketing, is to present a fairly comprehensive and succinct textbook in a simple and easy to understand style. This edition is chatacterised by updating of information and modification of some topics. Words fail to express the gratitude to Mr. Anuj Pandey, Niraj Pandey, K.N. Pandey and the Himalaya Publishing House Pvt. Ltd. for the constant encouragement and inspiration. Cochin, June 21, Dr. Francis Cherunilam

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6 CONTENTS 1. An Overview of Industrial Marketing 1-25 Meaning and scope of Industrial Marketing; Classification of industrial goods; industrial customers; components of industrial market; summary. 2. Comparison Between Industrial and Consumer Markets/Marketing (Characteristics of Industrial Markets/Marketing) Why and what; product and demand characteristics; customer characteristics; product/ service mix; market characteristics; marketing mix characteristics; summary. 3. Demand for Industrial Goods Derived demand; joint demand; price insensitivity; price sensitivity; reverse elasticity; cross elasticity; summary. 4. Industrial Buying and Buyer Behaviour Factors affecting industrial buying decision; environmental factors; organisational environment; buying centre factors; roles in buying process; structural dimensions; individual factors; buying objectives/criteria; non-economic objectives; Webster-Wind model; Sheth model; the buygrid model; buy classes; buy phases; appropriate marketing strategies over various buying situations and phases; business buying process complexity; summary. 5. Partnering/Relationship Marketing and CRM Characteristics of adversarial and partnership models; lifecycle models of buyer-supplier relationship; stages of buyer seller relationship models; selection of firms for collaboration; production linkages and industrial marketing; CRM; summary. 6. Industrial Market Segmentation, Targeting and Positioning Market segmentation; requirements for effective segmentation; macro and micro segmentations; intermediate segmentation; nested approach to segmentation; other bases of segmentation; benefits of market segmentation; criteria for segmentation variables; market targeting; differentiation; positioning; summary. 7. Industrial Product Decisions Product; product lifecycle; new product development; classification of new product; product revitalisation/elimination; summary. 8. Industrial Pricing Characteristics of industrial prices; factors affecting pricing; pricing objectives; costs in industrial pricing; pricing methods/approaches; new product pricing; pricing over the PLC; pricing policies; geographic pricing; transfer pricing; leasing; summary. 9. Industrial Marketing Communication Communication mix; salient features of business marketing communication; major decisions in industrial marketing communication; trade fairs and exhibitions. 10. Personal Selling Types of industrial salesmen; management of sales force; knowledge/training for sales force; organising sales force; personal selling process; summary.

7 11. Industrial Business Marketing Logistics Components of logistics: importance of logistics; business-to-business logistical services; supply chain management; types of distribution; channel systems; multi-channel marketing system; channel conflicts; factors influencing channel design; summary. 12. Industrial Marketing Information System Marketing information system and marketing research; information requirements; utility/ importance and objectives of industrial marketing research; consumer research vs. industrial research; types of research; phases of a research project; methods of data collection; sampling; research agency; summary. 13. Services Marketing Characteristics of services; service marketing mix; service marketing strategy; differentiation and positioning. 14. E-Business Tele marketing to e-business; growth and significance of e-commerce; barriers to e-business; summary. 15. Strategic Marketing Planning and Control Classes of decisions; strategic management; levels of strategy; strategic management process; approaches to strategy making; competitive structure of industries; strategic groups; structural analysis and competitive strategy; generic competitive strategies; four routes to strategic advantage; strategic business marketing management; evaluation and control of industrial marketing; summary. 16. International Industrial Marketing International market for industrial goods; trends in major exports; trends in major imports; direction of trade; market segmentation; international trade in services; market entry strategies: exporting; licensing and franchising; contract manufacturing; management contracting; turn-key contracts; wholly owned manufacturing facilities; assembly operations; joint ventures; third country location; mergers and acquisitions; strategic alliance; countertrade; global sourcing. 17. Cases Distribution Barrier 2. In and Out 3. Business Ethics 4. The Equations 5. Decision Muddle 6. Tetrapack 7. Partnership Pangs 8. Intel Inside 9. Behavioural Diversity of University Departments 10. Knocking at a Closed Door 11. Lakshmi Machine Works Ltd. 12. V-Guard Industries Ltd. 13. The Documentation Market 14. The Indica Saga

8 C H A P T E R CHAPTER 01 AN OVERVIEW OF INDUSTRIAL MARKETING Chapter Objective The objective of this chapter is to help understand: The meaning and scope of industrial marketing Broad categories of industrial goods and their marketing implications Important types of industrial buyers Components of industrial market

9 2 INDUSTRIAL MARKETING Several specialised disciplines within the broad discipline of Marketing have emerged over time, like International Marketing, Industrial Marketing, Services Marketing and Social Marketing. Industrial goods account for a substantial share of the total sales in a modern economy. However, Industrial Marketing, also known by such names as Business Marketing, Business to Business Marketing, Commercial Marketing, Institutional Marketing and Organisational Marketing, is a subject that has not yet received the importance it deserves, even in a country like U.S.A., although, the size of this market is enormous much larger than that of the consumer market and it is often much more complex than consumer goods marketing. Traditionally, business marketing has been a distant cousin of the mainstream of the marketing thought. However, the employment opportunities, along with the growing importance of high-technology business products and the success of foreign competition have highlighted the need for increased business marketing study. 1 MEANING AND SCOPE OF INDUSTRIAL MARKETING Industrial goods/services are those goods/services which are used (mostly commercially) in the production/rendering of goods/services. They include such goods as capital goods, raw materials, intermediates and MRO supplies. According to the Industrial Marketing Committee Review Broad, industrial marketing consists of all activities involved in the marketing of product and services to organisations (i.e., commercial enterprises, profit and non-profit institutions, government agencies, and resellers) that use products and services in the production of consumer or industrial goods and services, and to facilitate the operation of their enterprises. 2 Haas defines Industrial Marketing as the process of discovering and translating industrial customer wants, needs, expectations and requirements into product and service specifications and then, in turn, through effective promotion, channeling, pricing and after sale servicing, convincing more and more of these customers to use and continue to use these goods and services. Thus, in a general sense, industrial marketing describes all marketing activities not directed at the household or the ultimate consumer. Used in this manner, the term industrial marketing applies to the marketing of all goods and services to businesses and other organisations for their use, either directly or indirectly, in the goods and services that they, in turn, produce. 3 Bingham Jr. defines Business Marketing as those activities that facilitate exchanges involving products and consumers in business markets. A business marketing transaction takes place whenever, a good or service is sold for any use other than personal consumption. 4 Gross et al. define Business Marketing as the marketing of products and services to organisations rather than to households or ultimate consumers. The purchase is made not for self gratification, but rather to achieve organisational objectives. 5 The term Industrial Marketing was popular in the past. However, in many circles today, the term Business Marketing has supplanted the term Industrial Marketing. Robert W. Haas, one of the popular authors on this subject, has changed the title of his book from Industrial

10 AN OVERVIEW OF INDUSTRIAL MARKETING 3 Marketing Management to Business Marketing Management for the recent edition. Business Marketing/Business to Business Marketing is broader than Industrial Marketing. It encompasses industrial goods marketing and a considerable part of the consumer goods marketing. In fact, a large chunk of the consumer goods pass through certain business marketing processes before they finally reach the consumers. The marketing of consumer goods to marketing middlemen, like wholesalers and retailers, is business marketing. Business Marketing also includes marketing of consumer goods to organisations (like hospitals, educational institutions, hostels, orphanages, etc.), for in-house consumption, to charitable/voluntary social organisations (like Red Cross) for free distribution to the target beneficiaries, to firms and other organisations to give away as gifts and compliments (this is, in fact, a sizable business such gift items include diaries, pens, wrist watches, clocks, fancy items, etc.) Thus, industrial marketing includes the following: 1. Marketing of industrial goods 2. Marketing of consumer goods to: Marketing middlemen Organisations for in-house consumption Organisations for giving away as gifts/compliments Organisations for charitable distribution In sum, business markets are markets for products and services, local to international, bought by businesses, government bodies, and institutions (such as hospitals) for incorporation (e.g., ingredient materials or components), for consumption (e.g., process materials, office supplies, consulting services), for use (e.g., installations or equipment), or for resale... The only markets not of direct interest are those dealing with products or services which are principally directed at personal use or consumption, such as packaged grocery products, home appliances, or consumer banking. 6 Figure 1.2, given in the Summary at the end of the chapter, outlines the scope of Industrial Marketing. CLASSIFICATION OF INDUSTRIAL GOODS On the basis of how people buy, consumer goods are classified as convenience goods, shopping goods, speciality goods and unsought goods. Such classification does not, however, suit the business goods as there is no such conspicuous variability in the buying behaviour of business goods. An appropriate classification of the business goods would be on the basis of how the goods are used. Based on such criterion, business goods may be classified as follows: Capital Equipment and Investments These include capital goods, land, building and other companies. They are also known as foundation goods.

11 4 INDUSTRIAL MARKETING There are mainly two categories of capital equipment, namely, single purpose equipment and multipurpose equipment. Multipurpose machines, also known as general purpose machines, are versatile machines which can be used for different operations and, therefore, they have a horizontal market, i.e., a market extending across many industries. Examples include lathes, milling machines, shapers, boilers, compressors, etc. Single purpose machines (SPMs) are made specifically for performing exclusive operations in only one company or industry. SPMs are often meant for mass production. Piston turning lathe, camshaft grinder and gear generator are examples of SPMs. Capital equipment also includes accessories which are light equipment used to facilitate production, administrative or marketing activities such as hand-held drills, personal computers, typewriters, calculators, fire extinguishers, furniture, etc. Investments include land, building, and companies acquired. Marketing Implications: The top executives very actively involve in the decision-making in respect of major capital investments and the decision-making process involves very careful evaluation of alternatives from the commercial and several other points of view. This is not only because of the large size of the capital outlay but also because the type of technology/equipment, the size of productive capacity, etc., impact on the quality and cost of the output and competitiveness of the firm. Similarly, the choice of location and site will have to be evaluated not only from the commercial point of view but also from other perspectives like ecological, political, demographic and sociological. The marketing people should, therefore, be able to convince the decision-makers with facts, figures and logic the superiority of their offer. In case of items of large capital outlay or of highly technical nature, the role of direct marketing is very great. Whether a capital equipment is multipurpose or single purpose has also got certain implications. Because of the limited scope of use, the demand for SPM tends to be more volatile than that of the MPM. As the SPM is custom built, or has only limited applications, it is often difficult to find alternate buyers if a buyer backs out. It is, therefore, quite common that the machine manufacturers take some advance payment with the order for SPM. There could still be risks. For example, in June 1998, the Coimbatore based Lakshmi Machine Works Ltd. (LMWL) decided to curtail its production by about 50 per cent despite the fact that its order book was so full that it needed 18 months to complete the execution of all the orders at hand. Though spinning mills had placed orders on LMWL by paying advance, the units were not willing to confirm their plans of taking delivery because of the grim textile situation. It was reported that even some units which had confirmed the delivery dates had backed out on their earlier commitments. As most of these textile machinery were tailor made for each customer, alternative avenues of marketing was hardly present. The SPM is more prone to become obsolete than the MPM. Even if the products and, therefore, the nature of the machinery used to produce it, of one firm or industry changes, the total demand for MPM may not be very drastically affected. MPM, therefore, tend to have a longer life cycle than the SPM. Because of their versatility, many MPMs have a second hand market whereas, there may not be, or may have only a very narrow, market for used SPMs.

12 AN OVERVIEW OF INDUSTRIAL MARKETING A very close relationship is required between the manufacturer and buyer of SPM. In large organisations, the purchase of standard accessories is normally routinised without the need for the active involvement of top executives. Indirect channels are common in the marketing of such goods. Easy availability is a very important factor in their marketing. Demand for major capital equipment depends on a number of factors like government policy, prospects of user industries, investment climate, credit availability, etc. Leasing of capital equipment has become popular. Manufactured Materials and Component Parts Manufactured materials are raw materials that have undergone some processing before entering into the manufacturing process of a product. For example, rubber sheets or crumb rubber, made out of natural latex, used by rubber product manufacturers, aluminium extrusions, copper formed into wire, etc. Component parts are manufactured items, subassemblies or completely assembled units that are incorporated into the buyer s final product. Examples: automobile tyres, dash board instruments, motors, batteries, etc. Many companies do not process or manufacture all the items required in their production. In fact, the trend for some time now has been toward de-integration and outsourcing. Many materials and component parts are outsourced by manufacturers of final product. For example, nearly 80 per cent of the total number of parts and components of Telco s Indica are outsourced (see the case on Indica for details). Marketing Implications Whether the material or component part is a standardised one or custom made may have implications for marketing strategy. In the case of a custom made item, very close interaction between the engineering/ production departments of both the manufacturer and the buyer would be beneficial. Standardised items are normally bought through the purchasing department of the buying firm on the basis of the product specifications developed by the engineering and production people. Quality, price and reliability of supply are very important considerations in the selection of suppliers. Several firms prefer to have more than one supplier of items which are important and bought in large quantities. Partnering with one or more supplier is not uncommon. In this age of trends like just in time inventory (JIT), the ability of a supplier to effectively meet the challenging demands of the buyer is a critical factor. Many component parts have two market segments the original equipment manufacturer (OEM) segment and the replacement market or the after market. For example, MRF markets its car radial tyres to OEMs like Maruti and to the replacement market. While the marketing of components to the OEM segment is normally direct, the sale to the replacement market is often through indirect channels. For products like truck tyres and spares, there are large business buyers in the replacement market, like State Road Transport Corporations, where a marketing approach different from that for other customers may be required. 5

13 6 INDUSTRIAL MARKETING The purchase policy of the OEM, may some times be influenced by the competitive situation for their products. For example, under the controlled economic regime in India when the supply of certain two-wheelers was shorter than the demand, some companies supplied their two wheelers with low quality, low priced tyres. But today, when the market is very competitive, companies pay due attention to the quality of the component parts and even the type and brand of the tyre used may be highlighted in the promotional campaigns. Business with the OEM segment may be very important for gaining business in the after market. For example, MRF highly advertises that its car radials are used as original product by Maruti and several foreign brands of cars in India. It may help the company in at least two ways. That the company is a leading supplier to the OEMs in a highly competitive market may give some credibility to its products. Secondly, many customers prefer the same brand as used originally at the time of replacement. The fact that Sundaram Fastners is a leading supplier of certain component parts to world leaders like General Motors has a profound impact on the image of the company. Manufactured material, components and raw materials are also known as entering goods. MRO Supplies Maintenance, repair and operating supplies get used up in facilitating the operation of the enterprise but do not become part of the finished product. Examples of maintenance supplies include cleaning compounds, paint, brooms and light bulbs. Bearing, gears and filters are examples of repair supplies. Operating supplies include office supplies such as pen, ink, paper, pencil, envelope, etc., lubricants and coolants for factory machinery, fuel and lubricants for company vehicles, etc. Marketing Implications As MRO supplies are bought by a wide variety of customers, a variety of intermediaries may be required to reach this broad and large multiplicity of customers. However, very large customers may be directly marketed to. Purchase of MRO suppliers are normally routinised. Organisations prefer to purchase them from suppliers who are reliable, capable of supplying all the items in a category and are good to deal with. It is, therefore, necessary to ensure that such suppliers deal with the company s products. Agents play an important role in the distribution of many of these items. Personal selling is important when certain types of new products are introduced. Company/brand reputation is important in respect of many MRO supplies. This gives some indications of the type of promotional strategy required. Process Materials Process materials used in the manufacture of a product may be distinguishable in the final product, like sheet metals, electric and electronic circuit wiring, etc., or indistinguishables like additives used in lubricants, certain ingredients used in pharmaceutical and food products, etc. Process material also include catalysts.

14 Marketing Implications AN OVERVIEW OF INDUSTRIAL MARKETING Process materials are also normally bought routinely by the purchasing department of a firm. Most process materials are demanded across a wide spectrum of industries by a very large number of customers and hence, a wide variety of channels is common. A buyer may lay down specifications, either developed by the buyer or agencies like the Indian Bureau of Standards. Hence, it is inevitable in such cases that the seller satisfies such standards or specifications. Process materials lose, by and large, their identity in the final product and for very few of them there is a replacement market. Therefore, advertising them to the buyers of the final product may not be meaningful. Business Services Business services cover a broad spectrum like technical service of maintaining equipment, non-technical services of maintaining the premises like janitorial services and commercial services like banking, insurance, research, consultancy, etc. MRO supplies and business services are also known as facilitating goods. Raw Materials Raw materials are one of the most important items of operating expenses. In many cases, the quality of raw materials affects the quality and cost of the output. Raw materials may be primary products or manufactured products. Many primary products also undergo some processing before they are supplied as raw materials to the industry. For example, coconut is converted into copra before supplied to the oil mill. Many food processing units use wheat flour, and not raw wheat, as the raw material. Marketing Implications For many raw materials, the customers are very diverse and very large in number and hence, a variety of channels may have to be used. Large customers, however, may have to be marketed directly, even when the sale is by indirect channels. As raw materials account for a large chunk of the cost of production and as the price, and quality of the raw material and the reliability of supply are very important, multiple buying influences are involved at least in the initial stages of the procurement cycle, in the case of large organisations. When a new raw material which substitutes the existing one is to be introduced, direct promotion may be necessary. Use Based Classification Government of India uses a use based classification of goods. On the basis of the nature of the output and its use, industries are classified into basic industries, capital goods industries, intermediate goods industries and consumer goods industries. Basic goods, capital goods and intermediate goods are essentially industrial goods. As sated earlier, most consumer goods also pass through the process of business marketing. 7

15 8 INDUSTRIAL MARKETING Table 1.1 Use Based Classification of Goods Sl. No. Classification Weight in the index of industrial production 1 Basic goods Capital goods Intermediate goods Consumer goods 2.40 Source: Economic Survey Basic industries are those industries which provide essential inputs for the development of other industries and the economy. In other words, these are industries which provide bases for development of other industries. For example, the iron and steel industry forms a basis for the development of the engineering industry. Fertiliser is regarded as a basic input for the agriculture. Coal, oil and electricity are also regarded as basic industries because growth of modern industry depends on the supply of these vital inputs. Capital Goods Industries are those industries which produce machinery, equipment or tools. A capital good is one which is instrumental in producing other goods or services. The capital goods do not directly serve any consumption requirement. They are used to produce consumer goods (and other goods) and services. The capital goods industries are capital intensive in nature, i.e., they require heavy capital investment. Intermediate Goods are goods which have already undergone manufacturing process but which form inputs for other industries as material for further processing, part or component. The Consumer Goods Industries are those industries the output of which serve the final consumption requirements. The consumer goods may be broadly classified into Consumer Durables and Consumer Non-durables. Consumer non-durables are those goods which are used up at once or within a relatively short period, like foodstuffs, cigarettes, soaps, electric bulbs, etc. Consumer durables, on the other hand, serve the consumers over a relatively long period, like car, bicycle, electric fan, television, refrigerator, etc. A distinguishing characteristic of the consumer durables is that their life or service may be extended by repairs. The following table shows some important industries that come under the different categories: 1. Basic Industries: Mining and quarrying Fertilizers Heavy inorganic chemicals Cement Iron and Steel basic industries Non-ferrous basic metals Electricity

16 AN OVERVIEW OF INDUSTRIAL MARKETING 9 2. Capital Goods Industries: Hand tools and small tools Specialised equipment Machine tools Agricultural machinery (tractors) Heavy electrical equipment Electric motors Electric cables and wires Rail road equipment Heavy vehicles 3. Intermediate Goods Industries: Cotton Spinning Jute Textiles Tyres and Tubes Synthetic Resins and Plastics Man-made Fibres Dye-stuffs Products of Petroleum and Coal (petroleum refinery products) Bolts, Nuts, Nails, Screws, Springs, Chains, etc. Manufacture of Metal Dry Cells 4. Consumer Goods Industries: A. Consumer Durable Goods Electric Fans Telecommunication Equipment Motor Cycles and Bicycles B. Consumer Non-durable Goods Food Manufacturing Tobacco Manufacturing Cotton Weaving Paper and Paper Products Rubber Foot-wear Drugs and Pharmaceuticals Soaps and Glycerine Electric Lamps

17 10 Overlap of Categories INDUSTRIAL MARKETING There are a large number of products which fall into the category of consumer goods and business goods. A personal computer used in a house for personal purposes is a consumer good but the same brand of PC used in an office is a business good. A car tyre bought by an OEM is an industrial good but it is a consumer good when it is bought by an individual. A top executive of a company who decides which brand of car be bought for his official use is making a business buying decision but when the same person decides about the car for his personal (private) use, he is making a consumer buying decision. Several of the variables, or their relative importance, influencing his buying decisions in these two situations would be different. Many goods which are generally regarded as consumer goods have a sizeable business market. There are several products which were originally intended to be business goods but which later found good demand in the consumer market. For some of them, in due course, the consumer market overtook the business market in size. Van, originally intended to for commercial deliveries, had become a popular family vehicle. Marketing Implications The emergence of new demand patterns have marketing implications. When consumers become attracted to business products, responsive marketers may adapt those products to suit the new found market s need more closely. A good example of this is the huge consumer market that now exists for video cameras, which in past years were the domain of commercial television broadcasters. 7 Similarly, there are cases of products originally targeted at the consumer market gaining demand in the business market. For example, the business market for television has grown. TV has penetrated into hotels, lodges, hospitals, waiting rooms of consultants (including medical practitioners) and other organisations, educational institutions, hostels, shops, airports, railway stations, bus stands, buses and so on. The overlap of categories implies that different marketing approaches are required for different categories. When an industrial product becomes a consumer product, different segments may develop within the consumer market and vice versa. Many situations would need product mix modifications. There are, of course, many products which do not require any modification. In a number of cases, although the product does not need any modification, other variables of marketing mix may have to be modified. Figure 1.3 in the chapter end Summary depicts the classification of industrial goods. The Standard Industrial Classification System The Standard Industrial Classification (SIC) refers to the scheme by which industries and products were systematically classified in the United States so as to easily identify products by industry, group and subgroup within the industry and other relevant product particulars.

18 AN OVERVIEW OF INDUSTRIAL MARKETING The SIC system enables the identification of groups of business firms that produced the same type of product. The SIC coding system worked in the following way: First, the nation s economy was divided into a number of basic industries (such as agriculture, mining, construction, manufacturing, etc.) and each of this industry was given a two-digit classification code. Next, major groups were identified within each basic industry and was given a specific two-digit code. (For example, mining industry was divided into major groups such as metal mining, coal mining, oil and gas extraction, etc.). Major groups are then further subdivided into three-digit industry groups and it proceeded into further details as depicted in figure Basic industry (2-digit) Major group (2-digit) Industry group (3-digit) Specific industry (4-digit) Product class (5-digit) Product (7-digit) Fig. 1.1: The SIC System The U.S. Standard Industrial Classification (SIC) system has been replaced by the North American Industry Classification System (NAICS). NAICS was developed jointly by the U.S., Canada, and Mexico to provide new comparability in statistics about business activity across North America. The Industry Classification data are very useful for marketing planning. It is often an excellent basis on which to segment markets. If the manager understands the needs and requirements of a few firms within an SIC/NAICS category, requirements can be projected for all firms within that category because their requirements will be similar, and potential suppliers can evaluate the total market through a detailed analysis of a few companies. The Industry Classification data is also useful for identifying new customers. The marketing manager can study and evaluate whether the firms in it could use the marketer s product or service. 8 SIC India Codes Information on Standard Industrial Classification (SIC) Codes for export import trade, industrial product classifications, and exim classification list are available from SIC India.com. This classification is related to the International Trade Centre s ITC HS (Harmonized System) Classification. There are millions of trade transactions occurring each year. These transactions are classified under approximately 8,000 different products. Every item that is exported is assigned a unique 10-digit identification code. The Harmonization Code System (HS-Code) is a system of progressively more specific identifiers for a commodity. At the broadest level the SIC code provides a 10 category division structure: A. Division A: Agriculture, Forestry, and Fishing B. Division B: Mining C. Division C: Construction

19 12 D. Division D: Manufacturing INDUSTRIAL MARKETING E. Division E: Transportation, Communications, Electric, Gas, and Sanitary Services F. Division F: Wholesale Trade G. Division G: Retail Trade H. Division H: Finance, Insurance, and Real Estate I. Division I: Services J. Division J: Public Administration Each division is divided into Major Groups and each Major Group is given a two digit code. For example, for Division A: Agriculture, Forestry, and Fishing it starts with 01; for Division B: Mining with 10; for Division C: Construction with 15; for Division D: Manufacturing with 20 and so on. Each Major Group is divided into a number of Industry Groups which are identified by a three digit code. Each industry Group is divided into a number of Product Groups identified by four digit codes. See Annexure 1.1 for more information. INDUSTRIAL CUSTOMERS There are a number of categories of business buyers. The purpose of buying and their buying behaviour may differ widely. It is important to understand the characteristics of these different types of business buyers because these characteristics have marketing implications. The buying process, quantity of purchase, purchase timing, buying channels, responses to different marketing stimuli, etc., may vary between the different categories of buyers. They would also represent different market segments calling for different marketing strategies. At a very broad level, there are two types of business buyers, viz., commercial enterprises and non-commercial organisations. Commercial Enterprises There is a vast variety of commercial buyers ranging from one-man enterprises to giant corporations. Profit is an essential motive of their buying. Ownership Types On the basis of the type of ownership of the enterprises, business buyers may be classified as public sector, private sector, joint sector and cooperative sector units. The ownership pattern has important bearing on the buying behaviour. For example, in the public sector enterprises, decision-making, generally, is more bureaucratic. The classification of enterprises on the basis of the nature of the ownership does not, however, mean that purchase behaviour of different enterprises within a category are similar. The decision-making environment, however, may vary widely between the public enterprises. The navaratnas, for example, have more autonomy among the public enterprises. Within the private sector, the decision-making style may very widely, depending on size of the enterprise, ownership pattern, extent of professionalisation of management, etc.

20 Purpose AN OVERVIEW OF INDUSTRIAL MARKETING On the basis of the purpose of the purchase, buyers may be classified into manufacturers, resellers and consumers. Industrial units which add value by processing the goods they buy are a very important segment of the business market. The manufacturing sector in India, for example, accounts for nearly one-fifth of the GDP. The growing trend of outsourcing by original equipment manufacturers (OEMs) has significantly contributed to the growth of the industrial market. Nearly 1200 of the total of about 1500 items which make up the Indica car are outsourced, in contrast to the traditional strategy of Telco of manufacturing most of the components in-house. Relationship marketing, explained elsewhere in this book, assumes great significance here. Another very important component of the business market is the reseller segment consisting of distributors, wholesalers and retailers. This broad segment of the business market also includes the marketing intermediaries of consumer goods. In other words, this category includes resellers of industrial goods and consumer goods. Service providers is a very important segment of the business market. Examples include firms providing DTP service, photocopying service, telecommunication services, medical service, banking, insurance, etc. The fastest growing sector in many economies is the services. The developed economies are predominantly service economies in the sense that the service sector generates the bulk of the employment and income in these economies. There are many business enterprises which buy goods for in-house consumption, though, they are not used in manufacturing or providing commercial service. Such items include office stationery, office equipment and furniture, furnishings, etc. As pointed out earlier, although, these items may fall under consumer goods in some other situation, marketing of these goods to business units is business marketing. Non-Commercial Organisations The business market also consists of a variety of non-commercial organisations, i.e., organisations whose activities are not commercial in nature. They may be grouped into two broad types, viz., governmental and non-governmental. These include Central and State government organisations (including departments) and corporations, municipalities and panchayats and non-commercial organisations under them. Figure 1.4 in the chapter end Summary provides a summary view of the important categories of business buyers. There is a wide spectrum of non-government organisation (NGOs) engaged in a variety of activities, like the Red Cross, charitable societies, trusts, etc. Many of them make sizeable purchases for in-house consumption, free distribution, or for supply at subsidised or reasonable prices. 13

21 14 INDUSTRIAL MARKETING COMPONENTS OF INDUSTRIAL MARKET A very brief account of the major sectors of the economy constituting the business market is given below. Industrial Sector The fact that the term Industrial Marketing has been traditionally used to refer to Business Marketing indicates the preponderance of the industrial sector in the business market. The industrial sector, obviously, is one of the most important constituents of the business market. Industrial marketing encompasses all the input supplies (including capital goods, technology, consultancy and finance) to the numerous units of an enormous variety of this sector. The industrial sector generates about one-fourth of the GDP of India. The industrial sector consists of the following three important sub-sectors according to Government classification: 1. Manufacturing 2. Mining and quarrying 3. Electricity, gas and water supply Manufacturing is the largest sector, accounting for over 80 per cent of the income generation in the industrial sector. Electricity, gas and water supply contribute about 10 per cent of the industrial sector s share of the GDP. Industrial goods marketed to the industrial units range from very high value machinery and equipment to items of relatively insignificant value like certain supplies and consumables, technologically highly sophisticated to very common items, and very specialised items to general items. In short, the industrial sector is a market for all types of the goods described under the section Classification of Business Goods capital equipment and investments, manufactured materials and component parts, MRO supplies, process materials, business services, and raw materials. Agricultural Sector Agricultural inputs and bulk of the traded agricultural produce fall within the ambit of business market. Business marketing encompass agricultural produce sold to processing units (including hotels and restaurants). Unprocessed agricultural produce sold to ultimate consumers also involve business marketing when marketing middlemen are involved in the process. The agricultural sector is a very diverse one consisting of fishery, animal husbandry, poultry, etc., besides plants and vegetation. The share of the agricultural sector has been steadily declining in India a common phenomenon associated with economic development although, the aggregate value of the output of this sector has been rising. The agricultural sector still generates over one-fifth of the GDP of India and is the livelihood of a majority of the population.

22 AN OVERVIEW OF INDUSTRIAL MARKETING The business market in the agricultural sector has been expanding due to, inter alia, technological and related developments. Purchased inputs, like seeds, nutrients/feeds, etc., have grown in importance in the agricultural sector. The popularity of the high yielding varieties of seeds has also helped increase the demand for nutrients like fertilizers and plant protective items like pesticides and insecticides. Demand for agricultural equipment, like tractors, trillers, pump sets, etc., and implements has been on the increase. The development of infrastructure in the agricultural sector, like irrigation systems, storage and transportation facilities, naturally creates considerable demand for several industrial products like construction materials and equipment. The development of irrigation facilities would increase demand for high yielding varieties of seeds, plant nutrients and protectants, and farm equipment and implements. This would, in turn, help the growth of the service sector related to the agricultural sector like repair shops, shops selling spare parts and supplies, etc. The business of the financial sector to the agriculture would also grow. The development of fisheries, poultry, animal husbandry and floriculture are more business oriented, in respect of both the inputs and outputs, than the traditional agricultural sector. Service Sector The service sector is the largest sector in most of the economies. It is also the fastest growing sector in many economies. The service sector is an enormously wide spectrum. Following are some of the important classes within this sector: Service Booths These are shops equipped to sell certain types of services like telecommunication (like STD/ISD/local calls, fax, internet, etc.), DTP, photocopying, etc. There has been a very fast growth of this segment in India. This is an important market segment for a number of equipment and accessories. The scale of operation of most of them is small. Repair and Maintenance Service As the industrial market expands, this segment also grows. Repairs and maintenance service rendered to business units are business products. The capital goods and other goods needed to run the repair and maintenance business are industrial goods. Rental Service There has also been a growth of rental services. More and more products are entering this segment. Products commonly found in this segment include, furniture, computers, T.V., VCR, printers, several other equipment and implements, cassettes, publications, etc. Hotels and Restaurants The hotel and restaurant business is growing fast. An increasing trend of eating out is often associated with economic development. While small hotels and restaurants, generally, depend almost entirely on the consumer market, large, particularly star hotels may have significant sales to business and organisations. All purchases by all types of hotels and restaurants are part of the business market. 15

23 16 Transport INDUSTRIAL MARKETING Commercial transport is a very important segment of the industrial market. There is an enormous potential for further development of this sector in India. The new policy of Government of India, which even allows foreign investment in this sector, the expressways and other transport infrastructure development programmes should accelerate the development of this sector. As pointed out elsewhere, the outsourcing trend in the automobile industry increases the scope of industrial marketing. Relationship marketing has an important place here. The development of the transport sector will spur the growth of several ancillary services. The present transport system of the country comprises several modes of transport including rail, road, coastal shipping, inland water transport, air transport, etc. Transport has recorded a substantial growth over the years both in areas of network and in output of the system. The railways and a significant part of the passenger road transport are in the public sector. Firms marketing to the transport sector have to select their segments and devise appropriate strategies for the different segments. Trade Almost the entire trade sector is a business market. As pointed out earlier, even marketing of consumer goods to the marketing intermediaries is business marketing. The place of the trade sector in the business market is obvious from the fact that most of the goods, consumer and industrial, pass through intermediaries. Finance and Insurance This sector is also an important market for several business goods. More importantly, a considerable part of the business of this sector is to the business market. There are specialised institutions to cater to the various needs of the business sector. Health Service Health service is a sector with enormous growth potential. This is also a market with very diverse buyer characteristics. There are different systems of medicines with their own unique characteristics. Organisational types vary from one man clinics/consulting to very large and full fledged hospitals, general types to high speciality ones, health resorts, organisations run on charity to corporate firms and so on. The marketing environment in respect of each type would be different. Non-Business Organisations The non-business organisations sector forms a significant segment of the business market. It buys both industrial and consumer goods. This sector encompasses government departments and organisations and non-government organisations (NGOs). A variety of organisations exist in this sector like hospitals, schools, orphanages, organisations like Red Cross and other social service organisations.

24 International Market AN OVERVIEW OF INDUSTRIAL MARKETING Although, the international market for business goods falls within above-mentioned sectors of the national economies, it deserves a special mention because the growing importance of this large market. Business products (both industrial products and consumer products undergoing business marketing) dominate the global trade. Even industrial goods taken alone make up a major part of the world trade. Fig.1.5 at the end of the chapter presents a summary view of the components of the Industrial Market. 17 SUMMARY Industrial goods/services are those goods/services which are used (mostly commercially) in the production /rendering of goods/services, such as capital goods, raw materials, intermediates and MRO supplies. Industrial Marketing, also known by such names as Business Marketing, Business to Business Marketing, Commercial Marketing, Institutional Marketing and Organisational Marketing, consists of all activities involved in the marketing of product and services to organisations (i.e., commercial enterprises, profit and non-profit institutions, government agencies, and resellers) that use products and services in the production of consumer or industrial goods and services, and to facilitate the operation of their enterprises. Figure 1.2 outlines the scope of business marketing. Industrial Market Marketing of Industrial Goods Marketing of Consumer Goods to: Business Enterprises Non-Business Organisations Organisations Organisations buying for in-house buying for in-house Resellers Business Consumers consumption or consumption or business promotion charitable distribution Fig. 1.2: Dimensions of Industrial Marketing On the basis of how the goods are used, business goods may be classified as shown in Figure 1.3.

25 18 INDUSTRIAL MARKETING Industrial Goods Capital Equipment and Investments Manufactured Materials and Component Parts MRO supplies Process materials Business services Raw materials Overlap categories Fig. 1.3: Classification of Industrial Goods There are a number of categories of business buyers. The purpose of buying and their buying behaviour may differ widely. Figure 1.4 provides a summary view of the important categories of business buyers. Industrial Customers Commercial Organisations Non-Commercial Organisations Public sector enterprises Private sector enterprises Cooperative enterprises Joint ventures Government organisations Cooperatives Voluntary organisations large, medium, small and tiny units Processing enterprises, Industrial/consumer goods resellers, Service enterprises Fig. 1.4: Types of Business Buyers The industrial market consists of several major sectors of the economy, such as (1) the industrial sector consisting of three important sub-sectors according to Government classification: manufacturing; mining and quarrying; electricity, gas and water supply; (2) the agricultural sector which is a very diverse one consisting of fishery, animal husbandry, poultry, etc., besides plants and vegetation; ( 3) the service sector which is an enormously wide spectrum; (4) the non-business organisations sector, encompassing government departments and organisations and non-government organisations (NGOs), which buys both industrial and consumer goods. A variety of organisations exist in this sector, like hospitals, schools, orphanages, organisations like Red Cross and other social service organisations. It is depicted in Figure 1.5.

26 AN OVERVIEW OF INDUSTRIAL MARKETING 19 Industrial Market Industrial sector Agricultural sector Services sector International market Non-business market Fig. 1.5: Components of Business Market REFERENCES 1. Frank G. Bingham Jr., Business Marketing Management (Lincolnwood, Illinois: NIC Business Books, 1998), p Cited by Robert R. Reeder et al., Industrial Marketing (New Delhi: Prentice Hall of India, 1997), pp Robert W. Haas, Industrial Marketing Management (New York: Petrocelli/Charter, 1976), p Frank G. Bingham Jr., op. cit., p Andrew C. Gross et al., Business Marketing (Delhi: A.I.T.B.S. Publishers & Distributors, 1998), p Eugene J. Kelley and Lisa R. Hearne, Management Education and the Broadening Role of Businessto-Business Marketing, Report , Institute for the Study of Business Markets, College of Business Administration, Pennsylvania State University. [Cited by Michael D. Hutt and Thomas W. Speh, Business Marketing Management (Chicago: The Dryden Press, 1989, p. 4)] 7. Andrew C. Gross et al., op. cit., p Michael D. Hutt and Thomas W. Speh, Ibid., p REVIEW QUESTIONS 1. Explain the meaning of industrial marketing and examine the relevance of specialised study of Industrial Marketing. 2. Give an account of the classification of business goods. Examine the marketing implications of each category. 3. Describe the different categories of industrial buyers. 4. Describe the important components of the industrial market. 5. Write short notes on the following: (1) Overlap categories of goods (2) Non-business segment of the business market (3) Difference between Industrial Marketing and Business Marketing (4) Standard Industrial Classification. 6. Write very short answers (1 to 3 sentences) to the following questions: (1) Define industrial marketing. (2) What are business goods? (3) What is Standard Industrial Classification (SIC)? (4) What is meant by basic industry? (5) What are intermediate goods? (6) What are MRO supplies?

27 20 INDUSTRIAL MARKETING ANNEXURE 1.1 ITC (HS) CLASSIFICATION AND SIC CODES SIC Division Structure Division A: Agriculture, Forestry, and Fishing Major Group 01 : Agricultural Production Crops Major Group 02 : Agricultural Production Livestock and Animal Specialties Major Group 07 : Agricultural Services Major Group 08 : Forestry Major Group 09 : Fishing, Hunting, and Trapping Division B: Mining Major Group 10 : Metal Mining Major Group 12 : Coal Mining Major Group 13 : Oil and Gas Extraction Major Group 14 : Mining and Quarrying of Nonmetallic Minerals, Except Fuels Division C: Construction Major Group 15 : Building Construction General Contractors and Operative Builders Major Group 16 : Heavy Construction Other Than Building Construction Contractors Major Group 17 : Construction Special Trade Contractors Division D: Manufacturing Major Group 20 : Food and Kindred Products Major Group 21 : Tobacco Products Major Group 22 : Textile Mill Products Major Group 23 : Appare and Other Finished Products Made From Fabris and Similar Materials Major Group 24 : Lumber and Wood Products, Except Furniture Major Group 25 : Furniture and Fixtures Major Group 26 : Paper and Allied Products Major Group 27 : Printing, Publishing, and Allied Industries Major Group 28 : Chemicals and Allied Products Major Group 29 : Petroleum Refining and Related Industries Major Group 30 : Rubber and Miscellaneous Plastics Products Major Group 31 : Leather and Leather Products

28 AN OVERVIEW OF INDUSTRIAL MARKETING 21 Major Group 32 : Stone, Clay, Glass, And Concrete Products Major Group 33 : Primary Metal Industries Major Group 34 : Fabricated Metal Products, Except Machinery And Transportation Equipment Major Group 35 : Industrial and Commercial Machinery And Computer Equipment Major Group 36 : Electronic And Other Electrical Equipment And Components, Except Computer Equipment Major Group 37 : Transportation Equipment Major Group 38 : Measuring, Analyzing, And Controlling Instruments; Photographic, Medical And Optical Goods; Watches And Clocks Major Group 39 : Miscellaneous Manufacturing Industries Division E: Transportation, Communications, Electric, Gas, And Sanitary Services Major Group 40 : Railroad Transportation Major Group 41 : Local And Suburban Transit And Interurban Highway Passenger Transportation Major Group 42 : Motor Freight Transportation And Warehousing Major Group 43 : United States Postal Service Major Group 44 : Water Transportation Major Group 45 : Transportation By Air Major Group 46 : Pipelines, Except Natural Gas Major Group 47 : Transportation Services Major Group 48 : Communications Major Group 49 : Electric, Gas, And Sanitary Services Division F: Wholesale Trade Major Group 50 : Wholesale Trade durable Goods Major Group 51 : Wholesale Trade non-durable Goods Division G: Retail Trade Major Group 52 : Building Materials, Hardware, Garden Supply, And Mobile Home Dealers Major Group 53 : General Merchandise Stores Major Group 54 : Food Stores Major Group 55 : Automotive Dealers And Gasoline Service Stations Major Group 56 : Apparel And Accessory Stores Major Group 57 : Home Furniture, Furnishings, And Equipment Stores Major Group 58 : Eating And Drinking Places Major Group 59 : Miscellaneous Retail

29 22 INDUSTRIAL MARKETING Division H: Finance, Insurance, And Real Estate Major Group 60 : Depository Institutions Major Group 61 : Non-depository Credit Institutions Major Group 62 : Security And Commodity Brokers, Dealers, Exchanges, And Services Major Group 63 : Insurance Carriers Major Group 64 : Insurance Agents, Brokers, And Service Major Group 65 : Real Estate Major Group 67 : Holding And Other Investment Offices Division I: Services Major Group 70 : Hotels, Rooming Houses, Camps, And Other Lodging Places Major Group 72 : Personal Services Major Group 73 : Business Services Major Group 75 : Automotive Repair, Services, And Parking Major Group 76 : Miscellaneous Repair Services Major Group 78 : Motion Pictures Major Group 79 : Amusement And Recreation Services Major Group 80 : Health Services Major Group 81 : Legal Services Major Group 82 : Educational Services Major Group 83 : Social Services Major Group 84 : Museums, Art Galleries, and Botanical and Zoological Gardens Major Group 86 : Membership Organizations Major Group 87 : Engineering, Accounting, Research, Management, And Related Services Major Group 88 : Private Households Division J: Public Administration Major Group 91 : Executive, Legislative, And General Government, Except Finance Major Group 92 : Justice, Public Order, And Safety Major Group 93 : Public Finance, Taxation, And Monetary Policy Major Group 94 : Administration Of Human Resource Programs Major Group 95 : Administration Of Environmental Quality And Housing Programs Major Group 96 : Administration Of Economic Programs Major Group 97 : National Security And International Affairs Major Group 99 : Non-classifiable Establishments

30 Example AN OVERVIEW OF INDUSTRIAL MARKETING 23 Division D: Manufacturing The manufacturing division includes establishments engaged in the mechanical or chemical transformation of materials or substances into new products. These establishments are usually described as plants, factories, or mills and characteristically use power driven machines and materials handling equipment. Establishments engaged in assembling component parts of manufactured products are also considered manufacturing if the new product is neither a structure nor other fixed improvement. Also included is the blending of materials, such as lubricating oils, plastics, resins, or liquors. The materials processed by manufacturing establish-ments include products of agriculture, forestry, fishing, mining, and quarrying as well as products of other manufacturing establishments. The new product of a manufacturing establishment may be finished in the sense that it is ready for utilisation or consumption, or it may be semi finished to become a raw material for an establishment engaged in further manufacturing. For example, the product of the copper smelter is the raw material used in electrolytic refineries; refined copper is the raw material used by copper wire mills; and copper wire is the raw material used by certain electrical equipment manufacturers. The materials used by manufacturing establishments may be purchased directly from producers, obtained through customary trade channels, or secured without recourse to the market by transferring the product from one establishment to another which is under the same ownership. Manufacturing production is usually carried on for the wholesale market, for interplant transfer, or to order for industrial users, rather than for direct sale to the domestic consumer. There are numerous borderline cases between manufacturing and other divisions of the classification system. Specific instances will be found in the descriptions of the individual industries. The following activities, although not always considered as manufacturing, are so classified: Milk bottling and pasteurizing; Fresh fish packaging (oyster shucking, fish filleting); Apparel jobbing (assigning of materials to contract factories or shops for fabrication or other contract operations) as well as contracting on materials owned by others; Publishing; Ready mixed concrete production; Leather converting; Logging; Wood preserving; Various service industries to the manufacturing trade, such as type setting, engraving, plate printing, and preparing electro typing and stereotype plates, but not blueprinting or photocopying services; Electroplating, plating, metal heat treating, and polishing for the trade; Lapidary work for the trade; Fabricating of signs and advertising displays. There are also some manufacturing-type activities performed by establishments which are primarily engaged in activities covered by other divisions, and are, thus, not classified as manufacturing. A few of the more important examples are: Agriculture, Forestry, and Fishing. Processing on farms is not considered manufacturing if the raw materials are grown on the farm and if the manufacturing activities are on a small scale without the extensive use of paid labour. Other exclusions are threshing and cotton ginning, mining. The dressing and beneficiating of ores; the breaking, washing, and grading of coal; the crushing and breaking of stone; and the crushing, grinding, or otherwise preparing of sand, gravel, and non-metallic chemical and fertilizer minerals other than barite are classified in Mining.

31 24 INDUSTRIAL MARKETING Construction. Fabricating operations performed at the site of construction by contractors are not considered manufacturing, but the prefabrication of sheet metal, concrete, and terrazzo products and similar construction materials is included in the Manufacturing Division. Wholesale and Retail Trade. Establishments engaged in the following types of operations are included in Wholesale or Retail Trade: cutting and selling purchased carcasses; preparing feed at grain elevators and farm supply stores; stemming leaf tobacco at wholesale establishments; and production of wiping rags. The breaking of bulk and redistribution in smaller lots, including packaging, repackaging, or bottling products, such as liquors or chemicals, is also classified as Wholesale or Retail Trade. Also included in Retail Trade are establishments primarily engaged in selling, to the general public, products produced on the same premises from which they are sold, such as bakeries, candy stores, ice cream parlours, and custom tailors. Services. Tyre retreading and rebuilding, sign painting and lettering shops, computer software production, and the production of motion picture films (including video tapes) are classified in Services. Most repair activities are classified as Services. However, some repair activity such as shipbuilding and boatbuilding and repair, the rebuilding of machinery and equipment on a factory basis, and machine shop repair are classified as manufacturing. Examples Major Group 20: Food And Kindred Products Industry Group 201: Meat Products 2011 Meat Packing Plants 2013 Sausages And Other Prepared Meat Products 2015 Poultry Slaughtering And Processing 2011 Meat Packing Plants Establishments primarily engaged in the slaughtering, for their own account or on a contract basis for the trade, of cattle, hogs, sheep, lambs, and calves for meat to be sold or to be used on the same premises in canning, cooking, curing, and freezing, and in making sausage, lard, and other products. Also included in this industry are establishments primarily engaged in slaughtering horses for human consumption. Establishments primarily engaged in slaughtering, dressing, and packing poultry, rabbits, and other small game are classified in Industry 2015; and those primarily engaged in slaughtering and processing animals not for human consumption are classified in Industry Establishments primarily engaged in manufacturing sausages and meat specialties from purchased meats are classified in Industry 2013; and establishments primarily engaged in canning meat for baby food are classified in Industry Bacon, slab and sliced-mitse Beef-mitse Blood meal Boxed beef-mitse Canned meats, except baby foods and animal feeds-mitse

32 AN OVERVIEW OF INDUSTRIAL MARKETING 25 Corned beef-mitse Cured meats-mitse Dried meats-mitse Frankfurters, except poultry-mitse Hams, except poultry-mitse Hides and skins, cured or uncured Horsemeat for human consumption-mitse Lamb-mitse Lard-mitse Luncheon meat, except poultry-mitse Meat extracts-mitse Meat packing plants Meat-mitse Mutton-mitse Pork-mitse Sausages-mitse Slaughtering plants: except animals not for human consumption Variety meats edible organs-mitse Veal-mitse

33