If you plan on doing business with companies from the European Union, you will probably come across NACE codes — a set of numbers and letters that classify a business according to its activity.
In this article, we'll discuss :
- what are NACE codes and what they're used for,
- how they're defined, and
- how they can help your company's sales team make more sales.
What are NACE Codes, and What are They Used For?
The Statistical Classification of Economic Activities in the European Union is the standard industrial classification system used by the Member States and the Commission of the EU. The system is commonly referred to as NACE, which is an acronym for the French term “nomenclature statistique des activités économiques dans la Communauté européenne”.
The NACE is mandatory in the EU and mainly used for statistical purposes. They segment and categorize the range of economic activities in a way in which a NACE code describes the statistical unit carrying out the economic activity it designates.
For example, code 63.12 refers to "web portals".
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Economic activity is defined when resources, such as capital goods, are combined to create a particular product or service. All economic activities are characterized by a resource input, a production or manufacturing process, and an output of particular products, be they goods or services.
The NACE system is structured in a way in which economic activity is allowed to incorporate both a single process and multiple sub-processes, with each sub-process relating to a distinct classification category.
However, the combination of all these activities is regarded as one activity if the production process is set up to constitute an integrated series of fundamental activities within a single statistical unit.
This system was established in 1970 by the Member States of the European Union and the European Commission as a provisional framework for collecting and presenting comparable economic activities at the European level.
The current version of the code is its second revision, NACE Rev2, conducted in 2008, but the overall characteristics of NACE remained unchanged.
The purpose of NACE codes is not to provide categories for specific sorts of unit statistics. Instead, the units can engage in various economic activities and can be classified in many ways according to special qualities. Besides offering a unified classification of industry standards, NACE is a single, centralized BOM (bill of materials), which is useful for companies targeting specific company codes in several European Union Member States.
These codes can be particularly useful in many situations, for targeting the right industries (especially for B2B Prospecting Tools), discovering market trends, or is used by banks to assess risks according to sectors.
NACE Code Classes
The concept of classes is fundamentally based on criteria for how activities are divided across and merged into units of production.
The NACE code classes are the most specific and most broadly used specification. The criteria that define a class must ensure that the code classes permit sectoral classification of units that operate within the class and that said units perform tasks that are comparable to one another.
In general, NACE Rev. 2, which incorporates the fourth revision of International Standard Industrial Classification of All Economic Activities (ISIC), gives the production process more weight when establishing the various classes. On the other hand, activities are combined when they involve a shared method for producing goods and services that use comparable technologies.
A class contains the units that create the majority of the category of goods and services that identify it. The production of the category of goods and services that defines a specific class represents most of the production of units belonging to this class.
The proportional relevance of the activities to be covered is another crucial consideration when designing the NACE classes. Accordingly, individual seminars are typically offered for activities currently being carried out in the majority of Union Member States or for activities particularly significant to the global economy.
How to Read a NACE Code
NACE codes have a hierarchical structure of four levels. As such, the first four digits of the code — the first four levels of the classification system — are all the same in all EU countries.
The hierarchical order goes as follows:
- Level 1 — Level one describes industry sections, of which there are 21. These are identified by alphabetical letters from A to U; individual codes are elaborated below;
- Level 2 — Level 2 refers to divisions, of which there are 88, distributed across different sections. These are identified by two-digit numerical codes ranging from 01 to 99;
- Level 3 — Level 3 refers to groups, of which there are 272. These are identified by three-digit numerical codes running from 01.1 to 99.0;
- Level 4 — Level 4 refers to classes, of which there are 615. These are identified by four-digit numerical codes ranging from 01.11 to 99.00. Level 4 is the most widely used format of NACE codes.
Additionally, the NACE Regulation allows the Member States to use a national version of the classification system derived from NACE. However, this version has to fit within the structural and hierarchical frameworks of the NACE system.
The list above effectively describes 615 four-digit codes used across the European Union. Member States add the 5th level, which applies only within the State and has to be integrable into the standardized NACE hierarchy.
For example, Belgium has an additional 328 codes, rounding up the total number of NACEBEL codes to 943.
Here's an example of the NACE code that applies across all EU countries
Section Q — Human health and social work activities
Division 86 — Human health activities
Group 86.2 — Medical and dental practice activities
Class 86.23 — Dental practice activities.
Following this example, whenever you encounter a code 86.23, you know it refers to Dental practice activities. The full form of this code would be Q86.23, but the preceding letter code is rarely used.
Another example would be code 63.12; according to Eurostat Methodologies and Working Papers, the breakdown of this code is as follows:
Division 63 — Information service activities
Group 63.1 — Data processing, hosting, and related activities; web portals
Class 63.12 — Web portals
Broad Structure of NACE Rev. 2
Here's a table containing the Statistical Classification of Economic Activities in the European Community Rev. 2 and division codes for each section.
|Agriculture, forestry, and fishing
|01 – 03
|Mining and Quarrying
|05 – 09
|10 – 33
|Electricity, gas, steam, and air conditioning supply
|Water supply; sewerage, waste management, and remediation activities
|36 – 39
|41 – 43
|Wholesale and retail trade; repair of motor vehicles and motorcycle
|45 – 47
|Transportation and storage
|49 – 53
|Accommodation and food service activities
|55 – 56
|Information and communication
|58 – 63
|Financial and insurance activities
|64 – 66
|Real estate activities
|Professional, scientific and technical activities
|69 – 75
|Administrative and support service activities
|77 – 82
|Public administration and defense; compulsory social security
|Human health and social work activities
|86 – 88
|Arts, entertainment, and recreation
|90 – 93
|Other service activities
|94 – 96
|Activities of households as employers; undifferentiated goods- and services-producing activities of households for own use
|97 – 98
|Activities of extraterritorial organisations and bodies
How to Use NACE Codes for Better Business Leads
As previously mentioned, NACE codes can be incredibly useful to B2B marketing companies targeting specific company codes in several European Union Member States.
In a perfect world, your company's marketing department would provide sales representatives with hundreds of “sales-ready” leads so that they may immediately begin contacting potential clients.
Unfortunately, this is an incredibly rare occurrence.
Therefore, you should focus on those clients that are more likely to show interest in the solution your company offers — these should be the focus of your outreach efforts. However, knowing how to approach the matter and find a prospective customer that meets your criteria is critical since accurate targeting is essential for successful prospecting.
Deconstructing and rebuilding your sales plan focused on various industries can help you create a better one that's highly tuned for targeting specific businesses. And NACE codes can help you achieve that.
The biggest advantage of using NACE codes is that they allow you to target certain sectors, sub-sectors, and industry divisions that you may not be familiar with yet. This is a huge benefit because it allows you to increase your customer base.
Sure, you might have a good idea of who your customers are, but classifying your goods and services into their respective industries will help you determine which of those industries best represent your ideal customers.
In other words, using NACE codes will help you focus more effectively on the most appropriate industry branches, which would eventually lead to better sales. It’s important to adequately identify your sales outreach initiative and ensure that your goods or services are presented to an appropriate audience that recognizes their value.
Filtering Prospective Customers
NACE codes can be very useful because they allow you to easily pinpoint the businesses within your target market that fall into a specific sub-segment on which you should focus your efforts.
By filtering your target companies using NACE codes, you may successfully identify your targeted market across various industries, organization sizes, and locations.
Begin by collecting detailed profile data on your targeted audience. Once you've established your industry target, you can use NACE Codes to determine which industry branch best matches your ideal customer profile and relay that data to your sales teams.
Alternatively, you can use Infobel Pro’s B2B data services that allow the company's customers to search for appropriate sales targets within a database based on the NACE codes. It's a complex filtering system that provides clients with numerous ways to filter their target sections based on different bits of data to determine the best segment(s) for their inbound or outbound marketing efforts.
Let's assume that you've developed a product for the German market that's intended for the food industry, more specifically, the production of poultry meat.
You'll need to find the companies that perform such business activities, so your sales team can contact them and initiate the sales process. Targeting the whole food manufacturing industry is pointless; because the vast majority of the food industry doesn't actually rely on your revolutionary product for manufacturing goods.
You need to target companies that are in the production of meat and poultry meat products.
Using Infobel Pro's services, you can select the industry section code, in this case, C — which is Manufacturing, and then Division code 10 — the Manufacture of food products. You can narrow your search further by selecting the 10.1 group, which deals in the Processing and preserving of meat and the production of meat products.
And finally, you can pinpoint your perfect customers by selecting the appropriate code. In this case, that's NACE code 10.13, which is the code for the Production of meat and poultry meat products. However, since you're targeting companies located in Germany, you can further narrow your search by filtering your results by location.
Once you've established which organizations look to be a good fit for your prospective clients, use the information from your preliminary inquiry to complete producing the company profiles. These insights might assist you in developing a list of target businesses that may be interested in purchasing what you have to offer.
Since they're built using reliable B2B data, Infobel Pro's B2B data services continuously evolve into a more powerful and intelligent sales facilitation tool. It's a platform that allows you to search for companies that match the parameters you have defined for each industry using your input (regardless of the market you operate in).
Furthermore, it allows you to find ways to contact your target audience either by phone or email. In mere minutes, you can access a whole list of companies with contact information that exactly matches your criteria. You may then export them to your CRM system or as a CSV/XLS file, and you'll be ready to start selling to this group of businesses.