7.2: Classifications of product
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It should be apparent that the process of developing successful marketing programs for individual products is extremely difficult. In response to this difficulty, a variety of classification systems have evolved that, hopefully, suggest appropriate strategies. The two most common classifications are: (a) consumer goods versus industrial goods, and (b) goods products (i.e. durables and nondurables) versus service products.
Consumer goods and industrial goods
The traditional classification of products is to dichotomize all products as being either consumer goods or industrial goods. When we purchase products for our own consumption or that of our family with no intention of selling these products to others, we are referring to consumer goods. Conversely, industrial goods are purchased by an individual or organization in order to modify them or simply distribute them to the ultimate consumer in order to make a profit or meet some other objective.
Classification of consumer goods
A classification long used in marketing separates products targeted at consumers into three groups: convenience, shopping, and specialty.1 A convenience good is one that requires a minimum amount of effort on the part of the consumer. Extensive distribution is the primary marketing strategy. The product must be available in every conceivable outlet and must be easily accessible in these outlets. Vending machines typically dispense convenience goods, as do automatic teller machines. These products are usually of low unit value, are highly standardized, and frequently are nationally advertised. Yet, the key is to convince resellers, i.e. wholesalers and retailers, to carry the product. If the product is not available when, where, and in a form desirable by the consumer, the convenience product will fail.
From the consumer's perspective, little time, planning, or effort go into buying convenience goods. Consequently, marketers must establish a high level of brand awareness and recognition. This is accomplished through extensive mass advertising, sales promotion devices such as coupons and point-of-purchase displays, and effective packaging. The fact that many of our product purchases are often on impulse is evidence that these strategies work. Availability is also important. Consumers have come to expect a wide spectrum of products to be conveniently located at their local supermarkets, ranging from packaged goods used daily, e.g. bread and soft drinks, to products purchased rarely or in an emergency such as snow shovels, carpet cleaners, and flowers.
In contrast, consumers want to be able to compare products categorized as shopping goods. Automobiles, appliances, furniture, and homes are in this group. Shoppers are willing to go to some lengths to compare values, and therefore these goods need not be distributed so widely. Although many shopping goods are nationally advertised, often it is the ability of the retailer to differentiate itself that creates the sale. The differentiation could be equated with a strong brand name, such as Sears Roebuck or Marshall Field; effective merchandising; aggressive personal selling; or the availability of credit. Discounting, or promotional price-cutting, is a characteristic of many shopping goods because of retailers' desire to provide attractive shopping values. In the end, product turnover is slower, and retailers have a great deal of their capital tied-up in inventory. This combined with the necessity to price discount and provide exceptional service means that retailers expect strong support from manufacturers with shopping goods.
Specialty goods represent the third product classification. From the consumer's perspective, these products are so unique that they will go to any lengths to seek out and purchase them. Almost without exception, price is not a principle factor affecting the sales of specialty goods. Although these products may be custom-made (e.g. a hairpiece) or one-of-a-kind (e.g. a statue), it is also possible that the marketer has been very successful in differentiating the product in the mind of the consumer. Crisco brand shortening, popular in the US, may be considered to be a unique product in the mind of a consumer and the consumer would pay any price for it. Such a consumer would not accept a substitute and would be willing to go to another store or put off their pie baking until the product arrives. Another example might be the strong attachment some people feel toward a particular hair stylist or barber. A person may wait a long time for that individual and might even move with that person to another hair salon. It is generally desirable for a marketer to lift her product from the shopping to the specialty class (and keep it there). With the exception of price-cutting, the entire range of marketing activities are required to accomplish this goal.
Classification of industrial goods
Consumer goods are characterized as products that are aimed at and purchased by the ultimate consumer.2. Although consumer products are more familiar to most readers, industrial goods represent a very important product category, and in the case of some manufacturers, they are the only product sold. The methods of industrial marketing are somewhat more specialized, but in general the concepts presented in this text are valid for the industrial marketer as well as for the consumer goods marketer.
Industrial products can either be categorized from the perspective of the producer and how they shop for the product or from the perspective of the manufacturer and how they are produced and how much they cost. The latter criteria offers a more insightful classification for industrial products.
Farms, forests, mines, and quarries provide extractive products to producers. Although there are some farm products that are ready for consumption when they leave the farm, most farm and other extractive products require some processing before purchase by the consumer. A useful way to divide extractive products is into farm products and natural products, since they are marketed in slightly different ways.
Manufactured products are those that have undergone some processing. The demands for manufactured industrial goods are usually derived from the demands for ultimate consumer goods. There are a number of specific types of manufactured industrial goods.
Semi-manufactured goods are raw materials that have received some processing but require some more before they are useful to the purchaser. Lumber and crude oil are examples of these types of products. Since these products tend to be standardized, there is a strong emphasis on price and vendor reliability.
Parts are manufactured items that are ready to be incorporated into other products. For instance, the motors that go into lawn mowers and steering wheels on new cars are carefully assembled when they arrive at the manufacturing plant. Since products such as these are usually ordered well in advance and in large quantities, price and service are the two most important marketing considerations.
Process machinery (sometimes called "installations") refers to major pieces of equipment used in the manufacture of other goods. This category would include physical plant (boilers, lathes, blast furnaces, elevators, and conveyor systems). The marketing process would incorporate the efforts of a professional sales force, supported by engineers, technicians, and a tremendous amount of personalized service.
Equipment is made up of portable factory equipment (e.g. fork lift trucks, fire extinguisher) and office equipment (e.g. computers, copier machines). Although these products do not contribute directly to the physical product, they do aid in the production process. These products may be sold directly from the manufacturer to the user, or a middleman can be used in geographically dispersed markets. The marketing strategy employs a wide range of activities, including product quality and features, price, service vendor deals, and promotion,
Supplies and service do not enter the finished product at all but are never the less consumed in conjunction with making the product. Supplies would include paper, pencils, fuel, oil, brooms, soap, and so forth. These products are normally purchased as convenience products with a minimum of effort and evaluation. Business services include maintenance (e.g. office cleaning), repairs (e.g. plumbing), and advisory (e.g. legal). Because the need for services tends to be unpredictable, they are often contracted for a relatively long period of time.
Goods versus services
Suggesting that there are substantial differences between goods, products, and service products has been the source of great debate in marketing. Opponents of the division propose that "products are products", and just because there are some characteristics associated with service products and not goods products and vice-versa, does not mean customized strategies are generally necessary for each. Advocates provide evidence that these differences are significant. It is the position in this book that service products are different than goods products, and that service products represent an immense market sector.
Service products are reflected by a wide variety of industries: utilities, barbers, travel agencies, health spas, consulting firms, medical care, and banking, to name but a few, and they account for nearly 50 per cent of the average consumer's total expenditures, 70 per cent of the jobs, and two-thirds of the US Gross National Product (GNP). Clearly, the service sector is large and is growing. While all products share certain common facets, service products tend to differ from goods products in a number of ways.
Characteristics of service products
Like goods products, service products are quite heterogeneous. Nevertheless, there are several characteristics that are generalized to service products.
As noted by Berry: "a good is an object, a device, a thing; a service is a deed, a performance, an effort." With the purchase of a good, you have something that can be seen, touched, tasted, worn or displayed; this is not true with a service.
Although you pay your money and consume the service, there is nothing tangible to show for it. For example, if you attend a professional football game, you spend USD 19.50 for a ticket and spend nearly three hours taking in the entertainment.
Simultaneous production and consumption
Service products are characterized as those that are being consumed at the same time they are being produced. The tourist attraction is producing entertainment or pleasure at the same time it is being consumed. In contrast, goods products are produced, stored, and then consumed. A result of this characteristic is that the provider of the service is often present when consumption takes place. Dentists, doctors, hair stylists, and ballet dancers are all present when the product is used.
AD 1: Shoes are a traditional good products
Because service products are so closely related to the people providing the service, ensuring the same level of satisfaction from time to time is quite difficult. Dentists have their bad days, not every baseball game is exciting, and the second vacation to Walt Disney World Resort may not be as wonderful as the first.
High buyer involvement
With many service products, the purchaser may provide a great deal of input into the final form of the product. For example, if you wanted to take a Caribbean cruise, a good travel agent would give you a large selection of brochures and pamphlets describing the various cruise locations, options provided in terms of cabin location and size, islands visited, food, entertainment, prices, and whether they set up for children. Although the task may be quite arduous, an individual can literally design every moment of the vacation.
It should be noted that these four characteristics associated with service products vary in intensity from product to product. In fact, service products are best viewed as being on a continuum in respect to these four characteristics. (See Exhibit 17)
The point of this disclaimer is to suggest: (a) that service products on the right side of the continuum (e.g. high intangibility) are different from good products on the left side of the continuum, (b) that most marketing has traditionally taken place on the left side, and (c) service products tend to require certain adjustments in their marketing strategy because of these differences.
Exhibit 17: Characteristics that distinguish goods from services.
While this discussion implies that service products are marketed differently than goods products, it is important to remember that all pr0ducts whether they are goods, services, blankets, diapers, or plate glass, possess peculiarities that require adjustments in the marketing effort. However, "pure" goods products and "pure" service products (i.e. those on the extreme ends of the continuum) tend to reflect characteristics and responses from customers that suggest opposite marketing strategies. Admittedly, offering an exceptional product at the right price, through the most accessible channels, promoted extensively and accurately, should work for any type of product. The goods/services classification provides the same useful insights provided by the consumer/industrial classification discussed earlier.