Everything you need to know about the classification of products. Goods or products are classified as either consumer goods or industrial goods.
Consumer goods are produced for the personal use of the ultimate consumer, while industrial goods are produced for industrial purposes. There are many goods, such as typewriters and stationery can be classified as both industrial and consumer goods.
Marketers have traditionally classified products on the basis of three characteristics – durability, tangibility and use.
Products can be classified as:- A. Consumer Products B. Industrial Products.
Some of the types of consumer goods are:- 1. Convenience Goods 2. Shopping Goods 3. Speciality Goods 4. Impulse Goods 5. Emergency Goods.
Some of the types of industrial goods are:- 1. Raw Materials 2. Fabricating Materials and Parts 3. Installations 4. Accessory Equipment 5. Supplies 6. Services.
Classification of Products: On the basis of Durability and Tangibility, On the basis of Consumer Shopping Habits and a Few Others
Classification of Products – 2 Major Classification: Consumer Products and Industrial Products
Products may be classified on the basis of users of the products, the type of consumers who use the product that is:
1. Consumer products, and
2. Industrial products.
Consumer products are those products that are bought by the final customer for consumption.
Consumer products are of four types:
i. Convenience products,
ii. Shopping products,
iii. Speciality products, and
iv. Unsought products.
i. Convenience Products:
Convenience Products are usually low priced, easily available products that customer buys frequently, without any planning or search effort and with minimum comparison and buying effort. Such products are made available to the customers through widespread distribution channels-through every retail outlets. This category includes fast moving consumer goods (FMCG) like soap, toothpaste, detergents, food items like rice, wheat flour, salt, sugar, milk and so on.
ii. Shopping Products:
Shopping products are high priced (compared to the convenience product), less frequently purchased consumer products and services. While buying such products or services, consumer spends much time and effort in gathering information about the product and purchases the product after a careful consideration of price, quality, features, style and suitability.
Such products are distributed through few selected distribution outlet. Examples include television, air conditioners, cars, furniture, hotel and airline services, tourism services.
iii. Speciality Products:
Speciality Products are high priced branded product and services with unique features and the customers are convinced that this product is superior to all other competing brands with regard to its features, quality and hence are willing to pay a high price for the product. These goods are not purchased frequently may be once or twice in lifetime and are distributed through one or few exclusive distribution outlets. The buyers do not compare speciality products.
iv. Unsought Products:
Unsought product is consumer products that the consumer either does not know about or knows about but does not normally think of buying. In such a situation the marketer undertakes aggressive advertising, personal selling and other marketing effort. The product remains unsought until the consumer becomes aware of them through advertising. The price of such product varies. Examples of unsought product are cemetery plots, blood donation to Red Cross, umbilical cord stem cell banking services.
Industrial Products are purchased by business firms for further processing or for use in conducting a business .The distinction between consumer product and industrial is based on the purpose for which the product is bought. Like a kitchen chimney purchased by a consumer is a consumer product but a kitchen chimney purchased by a hotel is an industrial product.
Business products include:
i. Material and parts,
ii. Capital items,
iii. Supplies, and
i. Material and parts – Material and parts include raw material like agricultural products, crude petroleum, iron ore, manufactured materials include iron, yarn, cement, wires and component parts include small motors, tires, and castings.
ii. Capital items – Capital items help in production or operation and include installations like factories, offices, fixed equipments like generators, computer systems, elevators and accessory equipments like tools office equipments.
iii. Supplies – Supplies include lubricants, coal, paper, pencils and repair maintenance like paint, nails brooms.
iv. Services – Services include maintenance and repair services like computer repair services, legal services, consultancy services, and advertising services.
Classification of Products – 2 Important Categories: Consumer Products and Industrial Products
Broadly speaking, products are divided into two categories – consumer and industrial products.
1. Consumer Products:
Products purchased by ultimate consumers or users for satisfying their personal needs and desires are called consumer products. Examples are – cold drinks, eatables, drinks, textiles, toothpaste, shoes, pens, fans etc.
Consumer products have been classified on two important basis:
i. Extent of shopping effort involved, and
ii. Durability of product.
i. Shopping Effort Involved:
This refers to time and efforts buyers are willing to spend on buying the product.
On this basis, product is classified into three categories:
a. Convenience Product
b. Shopping Product
c. Specialty Product.
This classification has been given by M.T. Copeland.
a. Convenience Product/Goods:
These are goods purchased frequently, immediately and with least time and efforts. Convenience in purchase is the main criterion in purchasing it, for example easy and quick availability, nearness of shop etc.
Important Characteristics are:
(1) Regular and continuous demand.
(2) Essential for consumers.
(3) Small unit of purchase and low price.
(4) Branded/Standardised products.
(5) No enquiries about quality, price as customers know about them due to regular purchase.
(6) Keen competition among producers.
(7) Large numbers of advertisements.
(8) Increasing role of sales promotion schemes, discount offers, gift offers, etc.
Types of Convenience Goods:
For purchasing staple goods, consumers do not spend too much time. These items are bought frequently for immediate use; e.g., milk, bread, grocery items.
(2) Impulse Goods:
Desire to buy such goods is aroused suddenly while shopping. They are purchased on sight without forethought, e.g., magazines, gift items, etc. Window displays are made to draw consumer’s attention.
(3) Emergency Goods:
Purchased on some urgent and compelling need; e.g., handkerchief by a traveler, umbrella due to sudden rains, pain reliever for headache etc. Customer does not have much time to bother about price/quality of a product.
b. Shopping Products:
Shopping goods are goods bought only after comparing quality, price, suitability and style in several stores and putting some effort in the process and not buying in haste. Consumers select such goods only after analysis and evaluation of merits and demerits of all substitutes of product and comparing the brands as well as stores.
Service and warranty work are often important considerations as well. Examples are – Furniture, clothing. Readymade Garments, shoes, sarees, major appliances. Shopping goods are durable in nature. They are purchased less frequently and are of high unit value. A shopping good may not be purchased for a considerable period after the decision to buy the product is made.
Chief characteristics are:
(1) Durable Nature
(2) High Unit price
(3) Comparison in selection
(4) Gap between decision to buy and actual buy
(5) Persuasive Effects of salesmen/Retailers.
c. Specialty Goods:
When consumers search extensively for a product and are extremely reluctant to accept substitutes for it, it is a Specialty Good. These are products with brand loyalty of highest order Examples are – expensive stereo, gourmet food products. These goods are of very high unit value and infrequently purchased.
d. Unsought Goods:
These are products normally not purchased except when a certain problem arises to be solved e.g., emergency automobile repair, polio vaccine, cancer treatment. Consumers generally are not aware of these products or their importance till they realize it.
2. Industrial Goods/Products:
Industrial products are primarily goods used as inputs in producing other goods. Examples are – raw-materials, engines, lubricants machines, tools etc.
Chief characteristics are:
(a) Derived Demand, that is, their demand is derived from demand of other products; e.g., demand for leather is derived from demand for shoes and other leather products.
(b) Technical Considerations in their purchase include advice from experts like engineers, production managers cost accountants.
(c) Direct Selling (by manufacturers, and sometimes, according to buyers’ specifications).
(d) Limited Buyers (Compared to consumer products).
(e) Geographically Concentrated i.e., similar production units are located in a particular area.
(f) Reciprocal Buying – (in case of basic industries like. Oil, Steel, rubber, chemicals). For instance, Ashok Ley land may buy tyres and tubes from Ceat and sell them trucks.
(g) Leasing instead of Buying (this is a growing trend). For example, transport agencies instead of purchasing public carriers on outright basis, take them on hire basis.
Major Categories of industrial goods are:
(i) Raw-materials e.g., natural rubber, cotton, sugarcane & agricultural products, mines, forestry.
(ii) Component parts and materials e.g., tyres and batteries for cars.
(iii) Accessory items e.g., smaller machines.
(iv) Installations e.g., overhead cranes, Buildings, Machines.
(v) Supplies e.g., fuel, coal, cleaning materials, lubricating oil, electric power etc., nuts, bolts.
(vi) Business Services e.g., consultants, hiring advertising agency.
(i) Raw-Materials e.g., agricultural products, mines and forests.
(ii) Semi-finished-goods, supplied by one industrial unit to another; these goods are further processed by receiving unit.
(iii) Fabricating Goods used by receiving unit without processing e.g., speaker/cabinet of TV, Tyre and Tube of Cycle, Tyre, Tube, Light, Horn, Plug of Scooter.
(iv) Production Supplies necessary for operating industrial units e.g., Coal, Gas, Fuel, Diesel etc.
(v) Production Facilities & Equipment e.g., Buildings, Machines, Equipment, Furniture, Fixtures etc.
(vi) Managerial Materials used in management/administration of an enterprise, e.g., Stationery, Accounting Machines, and Data Processing Machines.
Classification of Products – Consumer Goods and Industrial Goods
Goods or products are classified as either consumer goods or industrial goods. Consumer goods are produced for the personal use of the ultimate consumer, while industrial goods are produced for industrial purposes. There are many goods, such as typewriters and stationery can be classified as both industrial and consumer goods.
Consumer goods are generally classified into five different types:
i. Convenience goods
ii. Shopping goods
iii. Specialty goods
iv. Impulse goods
v. Emergency goods.
i. Convenience Goods:
Convenience goods are bought with a minimum of shopping effort. These goods are bought with the maximum of convenience such as ready availability and the satisfaction of immediate requirements, standard quality and more or less uniform price. Typical examples are cigarettes, grocery products, drugs, newspapers, etc.
Characteristics of convenience goods are:
(a) They are non-durable —they are frequently required.
(b) They are often bought by hand.
(c) They are often bought by habit, without much deliberation.
(d) They are inexpensive and are not worth going and bargaining from shop to shop.
Since shopping convenience is most important, place is a vital factor. Customers will not go out of their way to purchase convenience goods; frequently the purchase is not planned. For successful marketing, convenience goods must be placed in as many outlets as possible.
Customers will not search for these goods and they must be placed in front of them wherever possible. Convenience goods need minimum shopping effort and maximum exposure. Convenience goods need large promotion budget.
ii. Shopping Goods:
Shopping goods are those goods which are bought by consumers after some shopping, i.e. making comparisons about their price, quality and suitability. Before purchasing such goods, the shopper usually visits several stores. Typical shopping goods are furniture, car, appliances, shoes, etc.
Characteristics of shopping goods are:
(a) They are relatively durable and long-lasting.
(b) They are generally high-priced items.
(c) They require much shopping time.
(d) They do not stores brand identification.
Shopping goods are of two types — homogeneous goods and heterogeneous goods.
Homogeneous goods are considered to be of equal quality, suitability and styling and comparison with competing goods is limited to price. Examples of homogeneous goods are TV sets, refrigerators and washing machines.
Heterogeneous goods are the goods that the consumer compares for quality, suitability and styling with the price being relatively unimportant. Furniture, famous brand clothing are examples of heterogeneous goods.
Shoppers generally do not know all the characteristics of the goods they buy and part of the shopping effort is spent for learning about the product. For example, an automobile purchaser learns about the features of a particular model from the salesperson. Unlike convenience goods, shopping goods are planned and there is no rush to get the product.
Since the customer is willing to visit more than one shop for shopping goods, such goods do not require a maximum number of outlets. It may, however, be noted that all consumers do not shop to the same extent for shopping goods as they do for convenience goods. In particular, rich consumers would just walk to a well-known shop and purchase their requirements from there.
The advertising of both homogeneous and heterogeneous shopping goods is usually the responsibility of the retailer, although many producers encourage the promotion through advertising.
iii. Specialty Goods:
Specialty goods are those goods for which consumers are willing to make a special purchasing effort. Substitutions will not be made because of a brand name or a characteristic that the customer insists upon. In the case of shopping goods consumers move from shop to shop unaware of the particular type of products that suit them as regard to price, quality or style.
In other words, their minds are open for the choice. But specialty goods possess such unique characteristics and brand identification that the consumers would make any effort to have that particular product. In other words, they know what special type of products they want.
They have to only spend time and energy to locate the shops where it is available. A Titan watch, a Maruti Zen car, a Reid and Taylor men’s suits are examples of specialty goods.
Every producer would like his product to be classified under the specialty goods label. Such goods are the most sought after and yield the highest profits.
Characteristic of speciality goods is the customer’s insistence on the particular product. As regard to place, this insistence brings about a willingness to travel a considerable distance to make the purchase. As a result, specialty goods are generally restricted to single outlet in each region. Middlemen are rarely found in the distribution channels of specialty goods. This provides a very close relationship between the manufacturer and the retailer which is beneficial to both parties.
Much of the advertising of specialty goods is done by retailers, frequently with the cooperation of the producer. Mass media as newspapers and magazines are used and advertisements simply remind the public where the product can be bought.
iv. Impulse Goods:
Some authors consider impulse goods to be a specific type of convenience goods. Impulse goods are those bought without planning. Consumers have no pre-thinking about their purchase nor do they indulge in any serious deliberation to purchase them. The decision to purchase is taken on the spot and generally induced by some attractive sign or symbol or by some special canvassing.
A man goes to a market with a shopping list. If he buys a new cosmetic that was not in his list, that purchase is impulsive. Impulse goods are relatively low-priced products such as cosmetics, foods, books for light reading in railway stalls, etc.
Impulse goods are highly competitive and sensitive to price differences. One reason is that substitutes are easily available. Impulse goods require massive advertising in the largest media and it is the responsibility of the producer. Since the location of the store is vital to the success of impulse goods, producers develop high budgets to points of purchase and displays.
v. Emergency Goods:
Emergency good is purchased immediately to fill an urgent need. They may be convenience goods or shopping goods, for example, a sudden need for an umbrella or drug.
Most of the goods sold under emergency conditions are convenience goods. Market strategy for emergency goods is mainly concerned with getting them to the places where the customer expects them.
Many retailers stock emergency goods in anticipation of their customers’ needs. A producer promoting his convenience goods is promoting his emergency goods at the same time, since they are the identical goods sold under different conditions. Promotion of such goods needs nothing more than informing the neighbourhood customers of the stores location and working hours.
Fast Moving Consumer Goods refer to non-durable products such as grocery items, toiletries, cosmetics, etc. A consumer generally spends a minimum effort to secure them. FMCGs can be further subdivided into three classes — Convenience goods, Shopping goods and Speciality goods.
An FMCG has the following characteristics:
(a) Frequent Purchase:
These goods are frequently purchased by the consumers. A product like soap is bought very frequently. It is an inexpensive product and is available almost everywhere.
(b) Low Involvement:
FMCGs are low-involvement goods. When a customer walks into a shop to buy a packet of salt, he rarely makes an effort to choose the item. There are exceptions to this rule. Products like cigarettes, though an FMCG product, are found to command a high level of brand loyalty. Once a consumer gets used to a particular brand of cigarettes, he does accept any other brand.
(c) Low Price:
FMCGs are usually low-priced products. Low price of the product puts these products in the low involvement category.
(d) High Volumes:
The market for FMCGs is characterized by high volumes. A small family may use three to four cakes of soaps in a month. If that number is multiplied by the number of such families throughout the country, there will be an enormous number.
(e) Low Margins:
Because of cut-throat competition these products are sold at a price which is very close to their production costs and the margins offered to the distributors are rather low.
(f) Extensive Distribution Networks:
Consumer preferences for the FMCG products are not rigid. Generally a buyer asks for a product but accept whatever brand is given by the shopkeeper. The notion of brand loyalty is not prevalent in a large section of the market. The consumer will allow the shopkeeper to decide for him. In view of such customer behaviour, it becomes necessary for companies to make sure that their product is well distributed.
(g) High Stock Turnover:
FMCGs have a very high stock turnover. This is due to the fact that these products are bought frequently and at regular intervals. In other words, these goods have a short shelf life.
The basic characteristics of fast moving consumer goods. Now we shall consider various growth strategies followed by FMCG companies.
The success of an FMCG depends greatly on its marketing strategy. A marketer follows a wide combination of strategies.
More important ones are discussed below:
(1) Multi-Brand Strategy:
A firm often nurtures a number of brands in the same category. There are various motives for doing this. The rationale behind this strategy is to capture as much of the market share as possible by trying to cover as many segments as possible as it is not possible for one brand to cater to the entire market. Consider the strategy adopted by Hindustan Lever.
They have introduced many brands in the soaps market so that no segment is left untouched. It has Dove for ultra-premium segment, Lifebuoy for the economy segment and brands like Rexona, Liril and Lux for the intervening segments. Thus the company has covered itself against competition and captured market shares in every possible segment.
(2) Product Flanking:
Product flanking refers to the introduction of different combinations of products at different prices to cover as many market segments as possible. It is fundamentally offering the same product in different sizes and price combinations to tap diverse market opportunities.
(3) Building Product Lines:
Some companies add related new product lines to give the consumer all the products he would like to buy under one umbrella. Britannia has precisely adopted a similar strategy. It has introduced a wide variety of biscuits in the past few years.
(4) New Product Development:
Owing to the intensive competition between most products, companies which fail to develop new products are exposing themselves to great risks. Companies develop new products to compete with existing similar products or services or to improve an established product or service.
A company can add new products through the acquisitions of other companies or by devoting one’s own efforts on new product development. With the help of new products a company can enter an expanding market for the first time and supplement its existing product lines.
(5) Innovations in Core Products:
In the FMCG market, the life of a product is short. Marketers should therefore continually try to introduce new brands to offer something new and meet the changing needs of the customers.
(6) Advertising and Media Coverage:
Advertising is required to build awareness about an FMCG which is available in the market but not many people might know about it. Informative advertising is important in the pioneering stage of a product while persuasive advertising becomes important in the competitive stage. Most advertising falls into this category. Reminder advertising is quite common with mature products.
In many cases the same goods may be classified as industrial or consumer goods, but classification is important because their market strategies required in the distribution of the two are entirely different.
Industrial goods may be divided into the following categories:
i. Raw Materials:
Raw materials used in the production of other goods are called industrial goods. Such goods may be sold in their natural state or may be processed.
(a) Natural products such as iron ore, crude petroleum, lumber.
(b) Farm products such as livestock and agricultural products, fruits, cotton, vegetables, etc.
Raw materials in their natural state are characterized by limited supplies and small number of large producers. Since extractive industries must be located where the product is found, the cost of transportation is a major part of the total cost of product. Marketing strategy should reduce the cost of transportation. Brand identification is unimportant to industrial users, who are more concerned with low prices and certainty of supply.
Agricultural products are sold in the industrial market to businesses like restaurants, hotels, packers. Such goods must be graded and standardized. They are generally produced by small farmers. This means that the goods need a great deal of handling which can be done through long channels of distribution. Many middlemen are necessary to deliver the goods from the farmer to the industrial user. Little attention is paid to the promotion of agricultural goods that are destined for industry.
ii. Fabricating Materials and Parts:
Many manufacturers purchase rather than construct some of the component parts of their product. These parts become part of the product. The automobile industry is a classic example of the industrial market for fabricating materials. The major producers are essentially assembly plants that put together such parts as tyres, batteries, etc., that have been purchased from affiliated companies rather than internally produced.
Producers of fabricating materials and parts are usually located near their important customers. Sale of such goods is usually by contract and for a long period of time and as a result marketing is minimal.
Machinery and equipment of an industrial producer are depreciated by long use and new ones are to be installed. Examples are blast furnaces, locomotives, factory buildings, etc. Middlemen are rarely used for the purchase of installations and the channel of distribution is short, running from the producer directly to the industrial user. The marketing of such products should only be entrusted to engineers trained in selling.
iv. Accessory Equipment:
Accessory equipment facilitates rather than perform the basic operations of a manufacturing plant. Small motors, computers, office furniture are examples of accessory equipment. Advertising and other sales promotion strategies are used in marketing accessory goods.
The more expensive is the accessory product, the shorter is the channel of distribution. This is because the higher-priced articles have a smaller market and their sales are large enough to make it worthwhile for a producer to send a salesman to a prospective customer.
Supplies are materials used in the operation of a business that do not become a part of the finished product. Lubricating oil, coal, stationery are examples of supplies. Supplies are the convenience products of the industrial market. They are relatively low priced and usually bought in small quantities. The channel of distribution for these goods is short and the goods are frequently negotiated in large contract lots by top executives.
Low cost industrial supplies need extensive channels of distribution. Wholesalers, by carrying the lines of many manufacturers, are able to have their salesman call on many users and sell large quantities of the goods of various producers to make the call profitable.
Nearly half of all consumer expenditures are for services. There is a big market for industrial services. Realizing this, many large organizations are moving into the service sector. For example, in USA, Gerber, the baby food company, owns nursery schools and Coca-Cola has entered the education market.
The growing complexity of business has reached a point where even the largest manufacturers are unable to fulfil all their needs internally. When they face problems, they turn to highly specialized service companies for help. These may be trained engineers or management consultants or programmers.
Generally, outside service companies are used when the cost of self-servicing is higher than the cost of buying the service.
Services are defined as activities, benefits or satisfactions which are offered for sale or are provided in connection with the sale of goods.
d. Based on buyer involvement.
Services cannot be seen, touched, tasted, smelled or heard. They are difficult to display, demonstrate or illustrate. For this reason, they cannot be marketed by normal promotion but need special and imaginative programmes.
Perishability of services is obvious. Most services are used up the moment the job is done. When the move is over the service is complete. Services cannot be stored for later use.
Services are difficult to standardize. Different hairdressers will give different results. Buyers are very much involved in the service product. Tax specialists give advice on the specific problems of each of their customers.
Since sales of services are essentially one-on-one transactions, personal selling is the most important marketing feature and service industries depend heavily on training programmes. Some marketers advocate the creation of a tangible product in the minds of their potential customers. Service companies often charge cost-plus while others charge, what the traffic will bear.
The most important factors in the success of a service company are speed and satisfaction. For that purpose, they must be located near its customers, maintain an adequate stock of parts and should have sufficient number of skilled service personnel. Services are rarely sold through middlemen. The normal distribution channel is from the service company directly to the user.
Classification of Products – With Examples
The basis used by Marketers to classify the products are:
1. On the basis of durability and tangibility of the product.
2. On the basis of Consumer Shopping Habits.
3. On the basis of use in industry.
1. On the basis of Durability and Tangibility:
Products are classified as – Non-durable Goods, Durable goods and services on the basis of durability and tangibility.
i. Non-Durable Goods – These represent the tangible goods that are consumed in one or few uses.
Example – Soap, Salt, coke etc.
ii. Durable Goods – Tangible goods that go on or survive many uses.
Example – Refrigerator, Clothing, television etc.
iii. Services – They are acts provided by one party to another that are essentially intangible in nature and are usually manufactured and consumed simultaneously. Example – Medical services, Transportation Services etc.
2. On the basis of Consumer Shopping Habits:
Here the products are classified depending upon the shopping habits adopted by the consumer in buying the product.
They are classified as:
i. Convenience Goods,
ii. Shopping Goods,
iii. Speciality Goods, and
iv. Unsought Goods.
i. Convenience Goods:
Goods that are purchased for the convenience of the consumer.
They are further classified as:
a. Staples – These are goods that are purchased on a regular basis and form a part of the daily food and lifestyle requirement of the consumer – Rice, Wheat, Sugar, and Toothpaste etc.
b. Impulse – Goods that the consumer buys when he has not gone with the intention of buying these goods; mainly they are not a part of his pre-decided shopping list. They are purchased on an impulse.
Example – Chocolates, Ice creams, Shirts etc.
c. Emergency – Goods that are a must and need to be purchased depending upon the situation.
Example – Umbrella, Footwear, Medicines.
ii. Shopping Goods:
Goods that a consumer will go specifically shopping for are shopping goods.
They are further classified as:
a. Homogenous Goods – In homogenous goods, product features are more or less the same, only price difference is noticeable, e.g., Salt, Soap etc.
b. Heterogeneous – In these types of goods, product features vary and they are compared while buying.
Example – Television, Music System.
iii. Specialty Goods:
These are goods which have unique characteristics and Brand identity. These generally hold a “snob appeal” for the buyer.
Example – Mercedes Car, Nakshatra Diamonds.
iv. Unsought Goods:
Not known to consumers or known but not sought.
Example – Burglar Alarms, Smoke detectors.
3. Product Classification Based on Use in the Industry:
Under this classification the Products are classified depending upon their application in the Industry as – Materials and parts, Capital Items, Supplies and Services.
Materials and parts are further classified into raw materials and manufactured materials. Raw materials are further classified into Farm Products and Natural Products and manufactured materials are further classified into Component Materials and Component parts.
Similarly Capital items are classified into Installations and into Equipment’s and Supplies and Services are classified into Operating Supplies and maintenance and Repairs.
Raw materials are materials that are processed to make the finished products. They are further classified as – materials that are natural and extracted from the nature and farm products that are grown in the farm.
Example – Natural raw material – iron ore, Lumber
Farm produced raw material – Wheat, Cotton.
Manufactured Materials are materials that are manufactured in the manufacturing unit using some raw material. They are classified into Component Material and Component Parts. The difference between component material and component parts is that while component material goes into a finished product it forms an undistinguishable part of the product, whereas a component part is usually a distinguishable part of the finished product.
Example – Component material – Cement, Yarn
Component part – Tyres, Small Motors.
Capital Items – Capital items are those items whose purchase amount to a capital expenditure for the organisation. These are further classified into Installations and Equipment’s.
Example – Installations – Buildings, Factories, Elevators.
Equipment’s – Trucks, Forklifts, Cranes.
Supplies and Services – Supplies and services are allied products that though not a part of the end product or finished product, they aid in the manufacturing of the product. These are classified into Operating Supplies and Maintenance and repairs.
Example – Operating Supplies – Lubricants, Oils, Paints etc.
Maintenance and Repairs -Consultancy, Annual maintenance Contracts.
Classification of Products – On the Basis of Durability, Tangibility and Use
Marketers have traditionally classified products on the basis of three characteristics- durability, tangibility and use.
1. Durability and Tangibility Classification:
(a) Non-durable goods- Non-durable goods are tangible goods normally consumed in one or a few uses. For example, soaps, salt and biscuits.
(b) Durable goods- Durable goods are tangible goods that can normally be used for many years. For example, colour TV, refrigerators, washing machines and vacuum cleaners.
(c) Services- Services rate intangible, inseparable, variable and perishable products. For example, airline and banking services.
2. Consumer Goods Classification:
(a) Convenience goods- These are goods that the customer usually purchases frequently, immediately and with a minimum of effort. Examples include soaps and newspapers.
Convenience goods can be further classified into three categories:
(i) Stable goods- Consumer purchases on regular basis.
(ii) Impulse goods- Consumer purchases without any planning or search effort.
(iii) Emergency goods- Consumer purchases on urgent need.
(b) Shopping goods- These are goods that the customer, in the process of selection and purchase, characteristically compares on such bases as suitability and quality. Examples- Furniture, Electrical Appliances, etc.
(c) Special goods- These are goods with unique characteristics or brand identification for which a sufficient number of buyers are willing to make a special purchasing effort. Examples- Cars.
(d) Unsought goods- These are goods the consumer does not know about or does not normally think of buying. The classic examples of known but unsought goods are life insurance.
3. Industrial Goods Classification:
(a) Materials and Parts- These are goods that enter the manufacturer’s product completely. They fall into two classes- raw materials and manufactured materials and parts.
(b) Capital items- These are long-lasting goods that facilitate developing or managing the finished product. They include two groups- Installations and equipment.
(c) Supplies and Business Services- These are short-listing goods and services that facilitate developing or managing the finished product.
Classification of Product – Durability and Tangibility Classification and Consumer Goods
Product has many tangible as well as intangible attributes. With this view in mind, it is appropriate to consider products in identifiable groups. This can be done formally using a classification system which aids market planning.
Producers and marketers have traditionally classified products on the basis of characteristics such as durability, tangibility and use. Each product type has an appropriate marketing – mix strategies.
Products can be classified as follows:
i. Tangible Products:
These are the products that can be touched, felt or seen.
These products can be further classified as:
a. Durable Goods – These are goods that are used or consumed over a long period of time, usually at least 3 years. For example – Television, Clothing, Washing Machine etc. Durable products normally require more personal selling and service, command a higher margin and require more seller guarantees.
b. Non- Durable Goods – These are goods that are used or consumed over a short period of time, say one or few uses. For example – Soap, Tooth Paste, etc. The appropriate strategy for these goods is to make them available in many locations, charge only a small markup and advertise heavily to induce trial etc.
These are goods that cannot be touched, felt or seen.
These products are considered as services. Services are intangible, inseparable, variable and perishable products. As a result, they normally require more quality control, supplier credibility and adaptability. For example haircuts, transportation, repairs, etc.
The vast array of consumer goods can be classified on the basis of shopping habits and variables like time, effort and risk.
Consumer goods can be sub-categorized into the following:
i. Convenience Goods:
These products are relatively inexpensive products that buyer or users choose frequently with a minimum of thought and effort. Examples includes soaps, tooth paste, newspaper etc. The decision process is complicated by the existence of brands, which force the consumer to make comparison and choices.
Convenience goods can be further classified into:
a. Staple Convenience Goods – Staple goods are those goods that are consumed by most people every or on regular basis. For example milk, bread, vegetables etc. Product differentiation for staple items tends to be minimal.
b. Impulse convenience Goods – As the name implies there is no preplanning involved with the purchase of impulse convenience goods. For example – chocolates, magazines etc. The decision to make an impulse purchase is made on the spot.
c. Emergency Convenience Goods – These goods are purchased when a need is urgent. Examples include umbrellas during a rain storm, medicines etc. Manufacturers of emergency goods will place them in many outlets to capture the sale.
ii. Shopping Goods:
These goods are more costly and involve more risk than convenience goods, thereby causing buyers and users to invest more time and effort when making the selection. In the process of selection and purchase, characteristically compares on such bases as suitability, quality, price and style. For example furniture, clothing, appliances etc.
Shopping Goods can be further divided as:
a. Homogeneous Shopping Goods- These goods are similar in quality but different enough in price to justify shopping comparisons.
b. Heterogeneous Shopping Goods- These goods differ in product features and services that may be more important than price.
c. Speciality Goods- These are the unique or specialized products that are most costly and that are unique or so specialized that buyers and users are willing to expand great effort to seek out and acquire them. The market for such goods is small but prices and profits are high. Consumers of specialty goods pay for prestige as well as the product itself. Examples include cars, stereo, cameras etc.
d. Unsought Goods- These goods are those the consumer does not know about or does not normally think of buying like life insurance. These goods require advertising and personal selling support.
e. Industrial Goods- Industrial goods can be classified in terms of how they enter the production process and their relative costliness.
They fall into the following classes:
(1) Materials and Parts:
They are goods that enter the manufacturer’s production completely.
They fall into two categories:
(i) Raw Material – Raw Materials fall into two major classes- Farm Products (e.g., wheat, cotton, Livestock, fruits & vegetables) and Natural Products (e.g. – fish, crude oil, petroleum, iron ore)
(ii) Manufactured Materials and Parts – They fall into two categories – Component materials (e.g., iron, yarn, cement, wires) and Component parts (e.g., small motors, tyres, castings)
(2) Capital Items:
These are long lasting goods that facilitate developing or managing the finished product.
They include two groups:
(i) Installations – Installations consists of buildings such as – factories, offices etc. They are major purchases. They are usually bought directly from the producer, with the typical sale preceded by a long negotiation period.
(ii) Equipment – It compromises portable factory equipment and tools hand tools (drills, lift trucks etc) and office equipments (personal computers, desks etc.). These types of equipment do not become part of a finished product. They have a shorter life than installations but a longer life than operating supplies.
(iii) Supplies – Supplies are short lasting goods and services that facilitate developing or managing the finished product.
Supplies are of two kinds:
(a) Maintenance and repair items – It includes paint, nails, brooms etc.
(b) Operating supplies – It includes lubricants, coal, writing paper, pencils etc.
(iv) Business Services – Business Services include maintenance and repair services (window cleaning, copier repair) and business advisory services (legal, management consulting, advertising). Maintenance and repair services are usually supplied under contract by small producers and business advisory services are usually produced on the basis of the supplier’s reputation and staff.
Classification of Products – On the Basis of Durability, Tangibility and Types of Consumers
Product can be defined as something which can be manufactured to satisfy a need. On a broader level “Product” might include a physical component, an event, a service, a person, an organization or include any of these combinations. You can say product as something in which you invest, which might be in terms of money, time or energy and expect return. Thus a phone, refrigerator, a vehicle, an under construction building, a catering service at an event or a sports event like IPL, can be termed as a “Product”. So basically Product is anything that is offered to market to satisfy a need or want.
Products are classified on the basis of durability, tangibility and the types of consumers that use these products.
According to Durability and Tangibility:
Each product has its own durability, that is how long a product can be used or how many times a product can be used. Tangible products are products that are not physical but require more precision, control and credibility.
Based on durability and tangibility products fall into three groups:
1. Non-Durable Products:
Are the products which have one or very few uses such as soft drinks, shampoos etc. Because these products are purchased and consumed quickly appropriate strategy must be in place so the supply is not affected and require heavy advertising to induce consumer liking and preference.
2. Durable Products:
These are the products that comparatively have longer use than non-durable products. Examples of durable products include refrigerators, phones, cars etc. As these products are more durable, they require higher customer trust, heavy margin on the product and many times personalized selling.
Services are the intangible products that normally require higher credibility, higher quality and a greater adaptability. Examples of services include a legal advice or a counseling service.
Products can also be classified based on types of consumers that use them.
They are consumer products and industrial products:
i. Consumer Products:
These are the products bought by customers for personal use. They are classified based on how customers go about buying them. Consumer products include convenience products, shopping products, specialty products and unsought products.
a. Convenience Products:
These are the products which are needed for daily use and consumers buy them without much comparison and they buy them very frequently. Toothpaste, soaps, newspapers are the few examples. These are products which might have become part of the routine for a customer like using a particular soap, eating a particular brand of biscuits etc.
b. Shopping Products:
These are the products which are less frequently bought by the consumer and which consumer compares the prices, quality, ability and price of these products. Some good examples include furniture, clothing and home appliances.
c. Specialty Products:
These products have some unique capability and the buyer is ready to take some extra efforts to buy these products. Mostly these products have very good brand identification. Classic examples are luxury cars or Apple products.
d. Unsought Products:
These are the products which are less known and consumer is likely to not think of buying them. Hence such products require heavy support and advertising. Some of the examples are charity donations or blood donations.
ii. Industrial Products:
These are the products which might be purchased for further processing or for use in running some other business. Thus purpose for which the product is bought makes it consumer or industrial.
They are three groups of industrial products:
a. Material and Parts:
These include raw materials and manufactured ones. Again raw materials fall into two major groups, farm products and natural products. Farm Products are fruits, vegetables or wheat etc. and natural products include crude oil, fish ores etc. Manufactured materials are again classified as component materials (cement, wires) and component parts (small motors, tires etc.).
b. Capital Items:
These products aid the consumers in their own production or operations. Examples include elevators, generators and accessory equipment such as hand tools and office equipment such as fax machine, desks etc.
c. Supplies and Services:
These are short-term products and services that help in developing or managing the finished product. Supplies are of two kinds. Maintenance and Repair items and Operating Supplies. Business services include maintenance and repair services (window, doors repair) and business advisory services (legal, advertising).
When a product is to be introduced to the market, the product planners need to think about products and services on different levels, where each levees adds more customer value and constitutes customer- value hierarchy.
1. Fundamental Level is the core benefit – What service or benefit the customer is really buying the product for.
2. On the second level the product makers must turn core benefit into a basic product.
3. On the third level marketer must prepare an Expected Product with all the expectations of the buyer satisfied.
4. On the fourth level marketer must exceed customer expectations and prepare an augmented product.
5. On the fifth level is the potential product. It encompasses all transformations the product might undergo in future. On this level where the companies continue to innovate to satisfy customers and distinguish their product in the market.
Classification of Products – Durability and Tangibility, Consumer-Goods Classification and Industrial Goods Classification
Marketers have classified products on the basis of characteristics- durability, tangibility and use (consumer or industrial)
Durability and Tangibility:
Products can be classified into three groups according to durability and tangibility:
(a) Non-durable goods – these are tangible goods. Because these goods are consumed quickly and purchased frequently the appropriate strategy is to make them available in as many locations as possible.
(b) Durable goods – these are also tangible goods and survive longer durations. Washing machines, refrigerators are examples of durable products.
(c) Services – these are intangible, inseparable, variable and perishable products. As a result they require more quality control, supplier credibility and adaptability.
The goods consumers buy can be classified on the basis of shopping habits.
(a) Convenience goods – These are the ones consumers usually purchase frequently, immediately and with a minimum effort.
i. Staple – these fall under buyers’ regular shopping list.
ii. Impulse goods – are purchased without any planning – cold drinks, candy.
iii. Emergency goods – purchased when a need is urgent – umbrella for rainy season.
(b) Shopping goods – These are the goods that the customer in the process of selection and purchase characteristically compares on such bases as suitability, quality, price and style. Here the purchasers’ involvement in the purchase process is higher and this will take more of his time and money.
(c) Speciality goods – These goods have unique characteristics or brand identifications for which a sufficient number of buyers are willing to make a special purchase effort. Speciality goods do not involve making comparisons, buyers invest time to get to specific dealers handing such products – special branded products such as designer suits.
(d) Unsought goods – These goods the consumers does not know about or does not normally think of buying, like smoke detectors, life insurance policies etc.
Industrial Goods Classification:
Industrial goods can be classified in terms of how they enter the production process and their relative costliness.
(a) Materials and parts – Industrial products that enter the manufacturer’s product completely, including raw materials and manufactured materials and parts.
(b) Capital items – Industrial products that partly enter the finished product, including installation and accessory equipment.
(c) Supplies and services – Industrial product that does not enter finished product at all.