There are several general categories of products. Some are new to the market (e.g., DVD players into the home movie market), some are new to the company (e.g., Game consoles for Sony), some are completely novel and create totally new markets (e.g., the airline industry).
The types of products can be studied under the following heads:
A. Consumer Product – 1. Convenience Goods 2. Speciality Goods B. Industrial Product – 1. Capital Plant and Equipment 2. Accessories 3. Materials and Components C. Services – 1. A Pure Service 2. A Major Service 3. A Tangible Good 4. A Pure Tangible Product.
Some of the other types of products are:
i. Tangible ii. Intangible Product iii. Differentiated Product iv. Customised Product v. Potential Product vi. Core Product vii. Actual Product viii. Augmented Product ix. Generic Product x. Expected Product xi. Potential Product.
Types of Products: Consumer Products, Industrial Products and Services
Types of Products – 3 Main Types: Consumer Products, Industrial Products and Services
There are a number of useful ways of classifying products. One of the most basic way was the different ways of making a journey. These included travelling in a car owned by the traveller, in a hired car, and by train, bus or plane. It was clear from this that the journey could be made by using purchased physical objects, i.e. the car, petrol and so on, or by purchasing the service offered by the car hire company or one of the organisations providing one of the alternative modes of transport.
This is an interesting example since although the use of a hire car or other transport provider involves purchasing a service, the use of the traveller’s own car involves purchasing in addition to the essential physical objects at least two mandatory service products.
The first of these is vehicle insurance and the second is that offered by the Vehicle Licensing Authority which collects the Road Fund Licence Fee on behalf of the Government and issues the Road Fund Licence or tax disc. In addition, the car user will usually require other services such as those offered by garages who supply and service cars, sell petrol and provide toilet facilities.
Thus while it would at first sight seem possible to separate products or product offerings into physical objects and services, in practice it is useful to see this as a continuum, with any specific product offering being either a service or a combination of a service and a physical object.
Another way in which products may be classified is by the type of customer. Some products such as heavy machinery, cooling towers, factories, ships and lorries are with few exceptions purchased by industrial organisations. Such products can thus be classified as industrial products. Other products such as shoes, tea, visits to the cinema, cans of soft drink and so on are typically purchased for use or consumption by individuals. These products are accordingly generally classified as consumer products.
Unlike industrial products which are only occasionally purchased by individuals, most consumer products are also purchased for use within organisations. Thus hotels need to buy essentially the same food and household products as are purchased for use in the home. The difference is the quantities in which these products are typically purchased.
For instance, whereas toilet tissue might be purchased in packets of one to nine rolls for use in the home they could well be purchased by the 100 or 1000 rolls for a hotel or hotel chain.
Consumer products are classified by how they meet the need for which they are purchased and by the way they are purchased rather than on the basis of the characteristics of the products themselves.
The three main categories of consumer product are consumables, durables and services. Consumables are those products which are used up in the process of satisfying the need for which they were purchased. Thus a thirsty person who buys a bottle of Coca-Cola needs to drink the contents to benefit from that purchase. If it is a large bottle and only half is drunk the remainder may be saved for later or discarded.
Durables are purchased for the benefit they provide in themselves. Thus a bicycle purchased to take part in the London to Brighton cycle ride will, providing there are no mishaps, be essentially the same at the end of the journey as it was at the beginning or at any stage in between.
Providing it is looked after it could be used year after year for the same purpose. Over time it will suffer from use until eventually it will need to be overhauled or discarded and replaced. It may then be considered to have come to the end of its useful life.
The third main category of consumer products is consumer services. These are essentially different from the other two categories.
Consumable consumer products can be further divided into:
i. Convenience goods and
ii. Speciality goods.
i. Convenience Goods:
These represent the majority of frequently purchased consumer goods, bought with little effort or deliberation, e.g., newspapers, breakfast cereals, coffee, soap and cosmetics. These are all classic mass-market products which can be purchased from any supermarket or corner shop.
It is often useful to further differentiate products within this category using the following subcategories – staples, impulse, and emergency. Staples are those products which are usually bought as part of an everyday shopping-list. Impulse goods are those purchased on sight without being considered previously, e.g., special offers or the chocolates, sweets and magazines sold at supermarket checkouts.
Emergency goods are those consumable products for which buyers are likely to make a special visit to the shops when supplies run out or are low. Disposable nappies, milk, coffee, and cigarettes are all products likely to come within this category.
ii. Speciality Goods:
These are consumable products which can only be purchased from specialist retailers and which consumers select deliberately. Examples are prescription medicines, alcoholic beverages, and hobby consumables including DIY products such as paint, photographic processing chemicals and artist supplies. In a second category would be food products purchased for a special occasion or, as a gift, cosmetics and personal care products.
Consumer durable products can be further divided into the following three categories:
a. Shopping Goods – These are those products which are usually selected after ‘shopping around’ to compare price, quality, design or colour. Clothes, white goods (washing machines, refrigerators, etc.), brown goods (television, stereo systems, etc.), furniture, and motor vehicles are typical of products in this category. Buyers generally exhibit dissonance-reducing buying behaviour when purchasing this type of product.
b. Speciality Goods -These are generally products which are only available from a limited number of outlets. Car spares, text books, foreign maps, specialist tools, lamp shades and musical instruments are examples of products in this category.
c. Emergency durable goods – These are those products which buyers are likely to need without delay. Typical of this category would be replacement windscreens, exhausts and tyres.
Industrial products, sometimes termed business products, are products bought by organisations manufacturing or supplying products or providing services. Unlike consumer goods, they are bought not for their own sake or for personal consumption, but in order to contribute to an organisational objective.
For the economist they are considered intermediate products or inputs, which means that the demand for this type of product will ultimately depend upon that of the final market being served by the organisation. This relationship is termed ‘derived demand’. For this reason the markets for most types of industrial product are subject to greater fluctuations in demand and periodic cycles of activity than is usual for consumer products.
The major industrial product categories depend upon the relationship between the product and the purchasing organisation. Thus, depending upon the user, a computer may be classified either as a capital equipment item or as an accessory.
The importance of recognising this difference will be seen in the detailed sections discussing these different categories:
i. Capital Plant and Equipment:
This category includes those products which are required by an organisation to carry out the objective for which it exists and which thereby increase the organisation’s revenue-generating capacity. Thus items of power station equipment such as boilers or turbine generator units come into this category for an electricity utility.
A power press, transfer or assembly line would be within this category for a vehicle manufacturer. Similarly an airliner such as an Airbus A300 would be a capital item for an airline since it would enable this organisation to carry more passengers or freight and thus earn more revenue.
These are also capital items but differ from plant and equipment in that accessories do not directly increase the capacity of the organisation to carry out the objective for which it exists or by which it generates revenue. Thus investment by a vehicle manufacture in electricity generating plant may be cost-effective but since it does not increase the organisation’s capacity to manufacture vehicles it should be classed as an accessory.
Likewise the airline purchasing a computer system to schedule passengers or a hanger in which to service their new Airbus A300s is investing in accessories not capital plant.
Recognising the difference between capital plant and equipment and accessories is important to suppliers since organisations purchasing capital plant and equipment tend to be extremely knowledgeable regarding their requirements. These requirements will thus normally be specified very precisely and suppliers will be expected to comply with these specifications.
Accessories, in contrast, although often involving items of similar value to capital plant and equipment, are generally specified less rigorously and the specifications are more likely to be changed on the recommendation of the supplier. Clearly, by correctly classifying a product from the customer’s point of view as either plant and equipment or as an accessory, a supplier can make an offer which is more likely to meet the customer’s actual requirements.
Both of these product categories normally involve carefully prepared production plans, design investigations and trials, protracted supplier discussions and negotiations. Marketing such products involves direct links with prospective purchasers, specialist-to- specialist technical contacts, presale service, and often contractual relationships extending far beyond the installation and commissioning stage.
In marketing terms, equipment markets will be characterised by the number of competing manufacturers who deal directly with their major corporate customers and specialist stockholding dealers who serve the market at large.
iii. Materials and Components:
These represent the physical inputs to the production and delivery of the final product. This category includes raw materials, processed materials and components. Raw materials are often bought direct from domestic or overseas suppliers on long-term contracts. Processed materials such as chemical formulations, cloth or sheet steel are sourced either directly or through intermediaries as finished materials which are then used to manufacture the product being produced for instance detergents, vehicle components or clothing.
Contractual arrangements may be preferred by customers when justified by the volumes involved to ensure continuity of supply and quality standards. Promotional elements are unlikely to feature heavily in the marketing of materials, as standard grading systems may limit competition to differences in price, technical support and distribution arrangements.
Components vary from standard items such as nuts, bolts and other fasteners, valves, pumps and switches, to more specialist customised items such as fabrications and subassemblies. While standard items may be bought in by volume-contract arrangements, or multiple-sourced distributors, key components and customised parts may be subject to individual contracts.
Such subcontractor relationships increasingly involve close collaboration between customer and supplier. Following practices pioneered in Japan, increasingly this collaboration can include implementing JIT (just-in-time) systems, quality vetting programmes and single sourcing agreements.
Unlike materials and components which form part of the product produced by the organisation, supplies are those products which are used within the production process.
These include the materials used in production such as lubricants, abrasives and cleaning materials, office sundries such as paperclips and note pads, and a whole miscellany of other items needed for various functions within the organisation such as the food supplied in the canteen and the refills needed to stock the vending machines. Generally these are standard, easily substituted, products purchased through intermediaries who often compete as much on the basis of the service provided as on price.
Very few ‘products’ are purely 100 per cent service or 100 per cent tangible product. Usually they involve a mix of the two.
Kotler suggests there are four categories of products:
i. A pure service
ii. A major service with accompanying minor goods and services
iii. A tangible good with accompanying service
iv. A pure tangible product.
Sometimes customer services are sub-classified as service products and product services. Service products are those directly offered to individuals such as hairdressing, healthcare, transportation, education and insurance, a pure service or major service component. Product services are those associated with a physical object such as car repairs, property repairs and plumbing services, each of these involving tangible goods.
Industrial and business service products can vary from those above where there is a legal requirement, such as accountants and civil aviation inspectors, to those providing peripheral services such as cleaners and the catering contractors who provide canteen services.
Some industrial service companies provide an essentially financial benefit, as, for instance, the contract car leasing companies who are often the legal owners of the cars provided by employers to their employees. Such companies have developed the service offered so that for their customer organisations it is significantly cheaper to lease these cars than it would be to own them.
However, Kotler’s categories can apply and be used to enhance the benefit offered. For instance, servicing of key equipment and installations such as photocopiers or computers is often integral to the supply contract for the equipment. Pure services can be exemplified by technological developments which have created new industrial markets for advisory services in specialist fields such as expert-systems software development.
Like vehicle leasing, haulage and distribution services are likely to involve contract arrangements. Other specialist business services such as market research, advertising or management consultancy are likely to be selected and managed by the relevant functional managers.
It is possible to put products and services on this model to produce a continuum of tangibility.
While it is generally accepted that the marketing of services involves fully appreciating those characteristics which are fundamental to this type of product, and often involves some element of a tangible product, it is useful to otherwise consider services as simply a specific product category.
The key aspect of services is that they are intangible.
There are three other distinctive features that must be considered:
i. Inseparabiliity – The fact that the production of a service takes place at the same time as its delivery.
ii. Perishability – Services cannot be stored or kept in a warehouse. Time is part of services and once that time has not been used then the service opportunity has gone.
iii. Variability – Because each delivery is unique there is no standardisation of output. The product and delivery depend on the two parties involved at the time of delivery.
Because of this, services have to be considered in great detail when it comes to marketing. They are part of the total product offered to customers and can be a vital ingredient to gain advantage over competition.
Types of Products – 2 Basic Types: Tangible Product and Intangible Product
Products are basically of two types, namely:
1. Tangible product, and
2. Intangible product.
1. Tangible Product:
A tangible product is a physical object that can be perceived by touch such as a building, vehicle, gadget, or clothing.
2. Intangible Product:
An intangible product is a product that can only be perceived indirectly such as an insurance policy.
Intangible Data Products can further be classified into Virtual Digital Goods (“VDG”) that are virtually located on a computer and are accessible to users as conventional file types, such as JPG and MP3 files, without requiring further application process or transformational work by programmers.
There are different types of products which are classified under different categories on the basis of their features.
Types of Products – 6 Major Types: Differentiated Product, Customised Product, Potential Product, Core Product, Actual Product and Augmented Product
Type # 1. The Differentiated Product:
The differentiated product differs from other similar products or brands in the market. The differential claimed by the product, may be ‘real’, on account of ingredient, quality, utility, or service, or it may be ‘psychological’ on the basis of perception of the buyer.
Type # 2. The Customised Product:
Customer specific requirements are taken into account while developing the product. The manufacturer and the user are in direct contact and the product gets customised as per the requirements of the customer.
Type # 3. The Potential Product:
The potential product means product for future, it carries all the improvements and finesse possible, under the given technological, economic and competitive condition. There are no limits to the ‘potential product’. Only the technological and economic resources of the firm set the limit.
Type # 4. The Core Product:
It is not the tangible physical product as it cannot be touched. The benefit of the product makes it valuable to the buyer. For example, in case of a car, the benefit is convenience that is, the ease at which one can drive and another core benefit is speed. Therefore, a core product is not the actual product but can be defined as the benefit of the product that makes it useful to the purchaser.
This benefit might be an intangible idea or concept connected with convenience, status or the ability to achieve a certain task quickly. This benefit gives the product value and meets the needs of the intended customer.
Type # 5. The Actual Product:
It is the tangible, physical product that can be seen and touched by the buyer, which has some use. The actual product is what the average person would think of under the generic meaning of product. Taking the same example of a car, it is the vehicle that you test drive, buy and then collect is the actual product.
Type # 6. The Augmented Product:
It refers to the non-physical part of the product. It usually consists of added value, for which premium may or may not be paid. To continue with the example of the car, the augmented product would be the warranty, the customer service support offered by the manufacturer and any after-sales service. The augmented product is an important way to tailor the core or actual product to the needs of an individual customer.
To understand the meaning of core product, actual product and the augmented product, an example of a camera, can be taken. In case a buyer purchases a camera, the core product would be the ability to take a high quality picture conveniently, quickly and in a variety of circumstances. This solves the main problem for the buyer.
The actual product is the camera bought by the customer, which includes attributes such as brand, style and colour. The augmented product, in this example would include customer service and warranty in addition to the other features.
Philip Kotler defined five levels of a product namely core product, generic product, expected product, augmented product, and potential product.
1. Core product
2. Generic Product
3. Expected Product
4. Augmented Product
5. Potential Product
Kotler states that translating the list of core product benefits into a product can involve deciding on the quality level, product and service features, styling, branding and packaging. For example Apple’s iPhone design has enabled it to become a smart phone market leader by launching various versions of i-Phone, going up to iphone-5, and as of, now i-phone-6, which is the 6th version of this product.
There are other smart phones in the market but Apple has managed to design a product which people order in advance and purchase overnight outside Apple’s retail stores so that they can be the first ones to buy the product.
Types of Products – 2 Broad Categories: Consumer Goods and Industrial Goods
Product or goods can be classified into two broad categories depending upon the use for which they are meant.
These categories are:
1. Consumers’ goods and
2. Industrial goods
Type # 1. Consumers’ Goods:
Consumers’ goods are meant for final consumption by the ultimate consumers. Bread, butter, TV sets, cosmetics and garments are all consumer goods. On the other hand industrial goods are meant for use in the commercial production of other goods or in connection with carrying out some business activities. Machine tools, iron-ore, and electronic computers are all industrial goods. It should be observed that all goods cannot be classified exclusively as consumers’ goods or industrial goods.
For example, typing paper is used for both personal and business correspondence and therefore is both a consumers’ and an industrial goods. The distinction between consumers and industrial goods is necessary in order to understand the behaviour of their purchasers. The purchasers of industrial goods have an altogether different approach as compared to the purchasers of consumers’ goods.
Consumers’ goods can be further classified into convenience goods, shopping goods, and speciality goods.
A brief description of these is given below:
(i) Convenience Goods:
These include items which the consumers buy frequently, immediately, and with minimum shopping efforts. Cold drinks, cigarettes, magazines and newspapers, drugs and most grocery items are the examples of convenience goods. These goods are non-durables i.e., they are consumed or used up rapidly. At the time of buying these goods, the habit of the consumer dominates his behaviour. He does not take much item in marking the buying decision.
(ii) Shopping Goods:
These include items which consumers select and buy after making comparisons on such criteria as suitability, quality, price and style. In case of a shopping goods, a substantial number of consumers habitually make shopping comparisons before they take a buying decision. Furniture items, dress materials, shoes, and how appliances should are the examples of shopping goods. A shopping goods is durable and is used up slowly. The consumer has to compare different stores offerings and devote considerable time and effort to take the buying decision.
(iii) Speciality Goods:
As the name implies, the consumers have to make a special purchasing effort to purchase speciality goods. Items in this category must possess unique features or have a number of brand names or both. Fancy goods, stamps and coins for collectors and prestige brands of men’s suits may be termed as speciality goods.
The consumers are already aware of the product or brand they want and they are willing to make a special purchasing effort to find the outlet handling it. Thus, in case of speciality goods, the consumers do not compare the desired speciality goods with others. But they may take considerable time in deciding to start the special search required because goods are often in the luxury price class.
Type # 2. Industrial Goods:
Industrial goods are those meant for use in making other products or for rendering a service in the operation of a business organisation. For a comprehensive analysis, industrial goods may be classified on the basis of use (instead of buying habits as in case of consumers goods) into five categories, namely, raw materials, fabricating parts and materials, installations, accessory equipment and operative supplies.
A brief description of these is given below:
(i) Raw Materials:
Raw materials are those industrial goods which will become part of another physical product and which have received no processing at all than that necessary for economy or protection in physical handling. Raw materials may be divided into natural products – Minerals, land, and products of the forests and the seas – and agricultural products – Wheat, cotton, tobacco, fruits, live-stocks and animal products such as eggs and raw milk. Raw materials are usually graded for standardised quality.
(ii) Fabricating Materials and Parts:
These are partial or complete items which become part of the final product. They have already been processed to some extent. Fabricating materials undergo further processing, e.g., pig iron going into steel, yarn being woven into cloth, leather being shaped into shoes, and flour becoming a part of cake or bread. Fabricating parts are assembled with no further change in form e.g., spark plugs in an automobile, barrel of a rifle and buttons on a coat.
(iii) Accessory Equipment:
Accessory equipment includes industrial goods usually less expensive and having shorter life than installations. They are required for the manufacture of final product though they do not form part of the finished products, e.g., portable drills, hand tools, work-lift trucks, etc. these items are highly standardised.
Installations are long-life and expensive major equipment of an industrial user. These are necessary for further production of goods, but they do not form part of those products, e.g., heavy machinery, diesel engines, trucks, factory sites and production lines.
(v) Operating Supplies:
Operating supplies are short lived and low priced items usually purchased with a minimum of effort. They are the ‘convenience goods’ of industries. They do not have a significant impact on the long run profitability of an organisation. Supplies include floor wax, lubricating oils, heating fuel and office stationary like pins, pens, pencils, papers, etc. Operating supplies do not become a part of finished product.