Business Studies Part I
Business Studies Part II

Classification of Products

Products may broadly be classified into two categories — (i) consumers’ products, and (ii) industrial products.

The consumer products may further detailed below:

CONSUMER PRODUCTS

Products, which are purchased by the ultimate consumers or users for satisfying their personal needs and desires are referred to as consumer products. For example, soap, edible oil, eatables, textiles, toothpaste, fans, etc. which we use for our personal and nonbusiness use are consumer goods. The consumer products have been classified on the basis of two important factors: (A) the extent of shopping efforts involved, and (B) durability of the product. These have been explained below:

A. Shopping Efforts Involved On the basis of the time and effort buyers are willing to spend in the purchase of a product, we can classify the consumer product into the following three categories as hereunder:

  1. Convenience Products: Those consumer products, which are purchased frequently, immediately and with least time and efforts are referred to as convenience goods. Examples of such products are cigarettes, ice creams, medicines, newspaper, stationery items toothpaste. etc. These products have low unit-value and are bought in small qualities. Some of the important characteristics of such products are: These products are purchased at convenient locations, with least efforts and time; (b) Convenience products have a regular and continuous demand, as these generally come under the category of essential products; (c) These products have small unit of purchase and low prices. For example, the eggs are sold at Rs. 28 per dozen and the customers (f) Sales promotion schemes or short-term incentives such as sales contests, discount offers, etc play an important role in the marketing of such products.
  2. Shopping Products: Shopping products are those consumer goods, in the purchase of which buyers devote considerable time, to compare the quality, price, style, suitability, etc., at several stores, before making purchase them in small numbers; (d) Convenience products have standardised price as most of these products are branded products; (e) The competition in these products is high as the supply is greater than the demand. The marketers have, therefore, to heavily advertise for these products; and final purchase. Some of the examples of shopping products are clothes, shoes, jewellery, furniture, radio, television, etc. The important characteristics of shopping products are as below: (a) The shopping products are generally of durable nature, i.e., they normally survive many uses; (b) The unit price, as well as profit margin of shopping products, is generally high; (c) As these products have high unit price, customers compare the products of different companies before making selection; (d) Purchases of shopping products are generally pre-planned and there is little degree of impulse buying in these products; and (e) Retailers generally play an important role in the sale of shopping products as lot of persuasive effort is needed to convince the buyers to purchase them.
  3. Speciality Products: Speciality products are those consumer goods which have certain special features because of which people make special efforts in their purchase. These products are such, which have reached a brand loyalty of the highest order, with a significant number of buyers. The buyers are willing to spend a lot of time and efforts on the purchase of such products. For example, if there is a rare collection of artwork or of antiques, some people may be willing to spend a lot of shopping effort and travel long distance to buy such products. In our day-to-day life, we see people going to a particular hair-cutting saloon or restaurant, or a tailor. The demand for these goods is relatively inelastic, i.e., even if the price is increased, the demand does not come down. Some of the important characteristics of the speciality products may be summed up as follows: (a) The demand for speciality products is limited as relatively small number of people buy these products; (b) These products are generally costly and their unit price is very high; These products are available for sale at few places as the number of customers is small and are willing to take extra efforts in the purchase of these products; (d) An aggressive promotion is required for the sale of speciality products, in order to inform people about their availability, features, etc.; and (e) After sales services are very important for many of the speciality products.

B. Durability of Products On the basis of their durability, the consumer products have been classified into three categories— Durable, Non-durable and Services.

  1. Non-durable Products: The consumer products which are normally consumed in one or few uses are called non-durable products. For example, we purchase products like toothpaste, detergents, bathing soap and stationary products etc. From the marketing point of view, these products generally command a small margin, should be made available in many locations and need to be heavily advertised.
  2. Durable Products: Those tangible consumer products which normally survive many uses, for example, refrigerator, radio, bicycle, sewing machine and kitchen gadgets are referred to as durable products. These goods are generally used for a longer period, command a higher per unit margin, require greater personal-selling efforts, guarantees and after sales services, on the part of the seller.
  3. Services: The durable and nondurable goods are tangible in the sense that these have a physical existence and can be seen and touched. Services are intangible in form. By services we mean those activities, benefits or satisfaction, which are offered for sale, e.g., dry cleaning, watch repairs, hair cutting, postal services, services offered by a doctor, an architect and a lawyer. Some of the distinguishing characteristics of services are as follows: (a) By their very nature, services are intangible, i.e., we can not see, feel or touch them; (b) A service is inseparable from its source. That means we cannot separate the service from the person providing the service; (c) The services cannot be stored. They are highly perishable. For example, if a tailor does not work for one week, the services he would have provided during such period go waste; and (d) Services are highly variable as their type and quality depends on the person providing them. That is why, there is a difference in the extent of satisfaction we get from the services provided by different people.

INDUSTRIAL PRODUCTS

Industrial products are those products, which are used as inputs in producing other products. The examples of such products are raw materials, engines, lubricants, machines, tools, etc. In other words, industrial products are meant for nonpersonal and business use for producing other products. The market for industrial products consists of manufacturers, transport agencies, banks and insurance companies, mining companies and public utilities. The important characteristics of industrial products are given below:

  1. Number of Buyers: As compared to consumer products, the numbers of buyers of industrial products are limited. For example, sugarcane is purchased by few producers of sugar, but sugar, which is a consumer product, is purchased by crores of people in our country.
  2. Channel Levels: Because of limited number of buyers, the sale of industrial products is generally made with the help of shorter channels of distribution, i.e., direct selling or one level channel.
  3. Geographic Concentration: Because of location of industries at certain points or regions, industrial markets are highly concentrated, geographically. For instance, the demand for power loom comes from Bombay, Sholapur, Bangalore, etc. where the textile industry is concentrated in our country.
  4. Derived Demand: The demand for industrial products is derived from the demand for consumer products. For  example, the demand for leather will be derived from demand for shoes and other leather products in the market.
  5. Role of Technical Considerations: Technical considerations assume greater significance in the purchase of industrial products because these products are complex products, bought for use in business operations.
  6. Reciprocal Buying: Some big companies from basic industries like oil, steel, rubber, and medicines resort to the practice of reciprocal buying. For example, Ashok Leyland may buy tyres and tubes from MRF, which in turn may buy trucks from Leyland, whenever it feels the need for the same.
  7. Leasing Out: A growing trend in industrial product market is to lease out rather than to purchase the products on outright basis because of the heavy price of these products. Classification The industrial goods are classified into the following major categories: (i) Materials and Parts: These include goods that enter the manufacture’s products completely. Such goods are of two types: (a) Raw material: including farm products like cotton, sugar cane, oil seed and natural products such as minerals (say crude petroleum, iron ore), fish and lumber; and (b) manufactured material and parts. These are again of two types – component materials like glass, iron, plastic and component parts such as tyre, electric bulb, steering, and battery. (ii) Capital Items: These are such goods that are used in the production of finished goods. These include: (a) installations like elevators, mainframe Computers, and (b) equipments like Hand Tools, Personal Computer, Fax Machines, etc. products have different buying motives and have different attitudes and use different approaches in the purchase of the products. For example, an industrial buyer is expected to be more rational who will study the cost of different available ii) Supplies and Business Services: These are short lasting goods and services that facilitate developing or managing the finished product. These include: (a) maintenance and repair items like Paint, Nails, etc., and (b) operating supplies like Lubricant, Computer Stationary, Writing Paper, etc. The difference in the nature of consumer products and industrial products is important because of the fact that the buyers of the two sets of brands, their technical specifications and the goodwill of the supplier. Whereas, the buyer of a consumer product may be more impulsive and emotional who is susceptible to advertising and various sales promotion schemes.

Classifications of Products in Marketing: Consumer and Industrial Products

A. Consumer Products:

Consumer products are the products purchased for ultimate consumption by the consumers for satisfying their needs. For example soaps, shoes, clothes, tooth pastes etc. They can further be divided on the basis of durability and shopping efforts involved.

1. Durability of Products:

The consumer goods can be classified into three parts on the basis of durability:

(a) Non Durable Products:

Non durable products are those consumer products which are consumed in one or few uses for example soap, toothpaste, shampoo, salt etc. These goods have a small profit margin, need heavy advertisement and should be easily available.

(b) Durable Products:

Durable products are the products with longer consumption period and uses. For example TV, refrigerator, coolers etc. These goods provide high profit margin, require greater personal selling efforts, after sales services etc.

(c) Services:

Services are intangible in form and refer to those activities, benefits or satisfaction which are offered for sale. For example postal service, hair cutting, tailoring, transportation etc.

Consumer products can be categorized into following three parts on the basis of the time and efforts buyers are willing to spend for the purchase of a product:

(a) Convenience Products:

These products require minimum time and effort and are purchased frequently by the customers. For example bread, medicines, salt, sugar, jam etc.

(i) These products are easily available and require minimum time and effort.

ii) They are available at low prices.

(iii) These are essential goods; so their demand is regular and continuous.

(iv) They have standardized price.

(v) The supply of these goods is more than the demand; therefore competition for these products is very high.

vi) Sales promotion schemes such as discount, free offer, rebate etc. help in marketing of these products.

(b) Shopping Products:

These are the products that require considerable time and effort. For example clothes, jewellery, televisions etc. Before making final purchase, a consumer compares the quality, price, style etc. at several stores.

 Industrial Products:

The products which are used as inputs to produce consumer products are known as industrial products. For example raw material, machinery, tools, lubricants etc. These products are used for non personal & business purposes. Manufacturers, transport agencies, banks & insurance companies, mining companies etc. are the main parties involved, in marketing of industrial products.

Following are the main features of Industrial products:

(i) Number of Buyers:

Industrial Products have limited number of buyers as compared to consumer goods.

(ii) Channel Levels:

Since the number of buyers is limited, the sales take place with the help of shorter channels of distribution.

(iii) Geographic Concentration:

The demand for industrial products is concentrated at certain fixed geographical locations.

(iv) Derived Demand:

The demand for industrial products depends upon the demand for consumer goods, therefore the demand for industrial products is known as derived demand. For example demand for cotton fibre increases when there is increased demand for cotton suits, bed sheets etc.

(v) Role of Technical Considerations:

Technical consideration plays an important role in the purchase of industrial goods because these products are purchased for use in business operations.

(vi) Reciprocal Buying:

A company may purchase some raw material from another company and also may sell its finished good to the same company. Such a practice is known as reciprocal buying. For example, Tata may buy tyres and tubes from Ceat which may in turn purchase Tata’s trucks.

(vii) Leasing Out:

The prices of the industrial products are very high; therefore the companies prefer to take them on lease instead of buying.