Lecture 08: Product Classification

Welcome back friends. Let me take you further

into some more concepts related to  product and product management. And,

let us look at this as concept building exercise  because after this, we would be moving into the

management side of the product and we will be  going into the application part as I said.

So, this is the last session in the sequence of  terminologies and classifications and concepts and

you would have noticed, that terminologies  are coming forward in terms of supporting us

in developing our understanding about  the concepts and the conceptual build

up associated with product management. So, let us  talk a bit about product classification schemes,

because we have to categorize, how to look at our  products. We have talked about forms, attributes,

characters, and characteristics and you would  see these terms coming back to us now.

So, the classification of products is essential,  because of the different categories of products

aiming at different target markets. Here again,  I would mention line , those five circles and

all those things should be recalled when we are  talking of aiming at different target markets,

and if you look at a product, then definitely  those things come in front of us otherwise, if you

have a differentiation in the products itself by  a marketer or several kinds of products available

by different marketers, then definitely different  classifications are based on characteristics like

(and this is again an evolving aspect  although these are some fundamental elements,

but, you can think of this to be, segregated  in different kinds of terminologies as per your

convenience in due course of time and there  is lots of literature on that) tangibility

and durability wherein, durable as compared to  non-durable versus services also comes to fore

then, there is a use-based classification,  that is consumers and industrial usage.

Product tangibility can be seen with  reference to product being a physical good

whereas, we cannot see the tangibility in  services for example, that is why they are

termed as intangible. So, here the physical  form differentiates the non-physical form,

although we have to look at services as products  as well, although service management talks about

services with a different kind of perspective,  but still we have seen the definitional frame of

the product, wherein experiences related  to products and, other aspects and ideas

are also categorized as products and so on. And I have been continuously telling you that,

there is a strong overlap in our conceptual  understanding of so many things that there cannot

be a very strongly compartmentalized understanding  on services versus products. But here, literature

demarcates them with reference to elaborating  upon the concept on one side and on the other

side application also demarcates these things  to an extent and then there is a convergence

of the concepts when we look at them together. So, apart from intangibility services, as opposed

to goods have three more distinct characteristics.  Product is a separate entity, though it has

personality, it speaks to you. It has persona and  services element is related to inseparability.

Inseparability of a service wherein  production and consumption are more or less

carry forward the element of  inseparability for example,

a trip on a train which cannot be separated  from the related consumption by the customer.

So, the trip is sold as a product,  it generates an experience,

but it is related to being a service as  such. This service comes alongwith with

products as well. You have tangible products  to eat there and the rest of the experience

which you gain in a restaurant is related to the  service you get. It is not so complex. It is a

matter of experience and compartmentalization or  demarcation or categorization whichever we want

to look at it with respect to heterogeneity of a  service, wherein same service may have differences

from where and how the services are provided,  for example, room service in a hotel is offered

somewhat differently depending on the  person providing service and so on.

That can also be an element perishability  of a service. Services are not long lasting

many times. You may remember the service given  to you by someone, but it has a particular life

of its own in terms of time. For example, a  free seat on a flight from Delhi to Mumbai

cannot be added to the seats available on the next  flight to the same destination and it has gone.

So, it is a product element, though it is a  service. A particular service which includes

hot meal served on a flight can be discontinued,  but you may remember that particular hot meal

and the associated service. So, that  is what I am trying to imply here

and that is why we are taking these as concepts  and classifications, so that when they come back

to us in terms of decision making, we can think  of these as strategic elements to be projected

propelled and so on. Durability:

Depending upon their durability products can  be classified as durables and non-durables.

Products that satisfy a certain need for a  long period of time for example, refrigerators

nowadays, they do not serve the needs for a very  long-time people do often change refrigerators,

machine tools, etc. But still refrigerator is a  durable machine, basically, it has a component of

strength and durability. Now, you see here,  it reminds me to tell you that many times

when we categorize products with the durability  perspective, the timeframe with reference to the

original product or the initial product in terms  of durability keeps on changing in due course of

time with all the technological or material  innovation and associated product choices

associated with the customer usage and so on. Non-durables or fast-moving consumer goods or

products are those, that satisfy a need once  or in few uses for example, processed eatables,

personal care items, detergents, soaps and so on.  So, they vanish in due course of time as products

after their usage. And this is how it is a very  natural categorization. This is very common. You

would feel that why it is being emphasized upon so  much? Just because that when we look at this kind

of a categorization, then whole lot of perspective  associated with reaching to the customer changes.

Customer concentration, customer approach  all those elements they change actually and

that is what product management is all about. We must look at the classification and then we

must look into the strategy we would use to  approach the customer for example, if you

are selling non-durable goods, then definitely  however, high priced or low priced it may be,

but your approach would be different  in terms of when you are marketing

or presenting durable goods to the customer. Then as per the usage, when you talk of a product

use, one of the most common and widely  used classification of products is between

consumer and industrial goods. A categorization  in terms of marketing comes in when you talk of

consumer goods. So you say that it is business  to consumer b2c marketing and when you talk of

industrial goods, the categorization may  come into b2b or business to business,

because most of the time industrial goods are not  purchased by individuals they are purchased by

the people who would use them for different  kind of a purpose to produce something

to use as a part of something and so on. So, consumer goods classification is related to

consumer, wherein consumer products are bought  in order to satisfy personal and family needs

and so on as we all know. And, this classification  is on the basis of shopping habits also,

again, because product has to be marketed and a  marketing perspective has to be associated with

product management. So, shopping habits must be a  reason to classify the products when we say that

these goods are convenience goods, shopping goods,  specialty goods, many a times unsought goods also.

We will see that and I am not digressing  towards, the kind of demands, which are there

in marketing management text. You will  find different kinds of demands.

So, there you would find some resonance with  the classification of the goods, which we are

referring here. Please just go to that segment of  any marketing management book where in demands are

explained and you will realize that, that  can be a resemblance with or is connected

with the discussion we are having here. Industrial products are bought from companies or

organizations in order to be used as an input to  produce other products, for example, raw material

for company use or sale to other companies.

Classification in terms of the relative cost  and the way they enter the production process

can be with respect to those goods being  material and parts, capital items, which

are used as machinery to produce something,  supplies and business services also.

So, once you look at, this kind of a  classification perspective all around

immediately the thought which comes to your mind

is, related to what you would say to the  customer. What would you tell the customer

and that is where positioning perspective  comes in. How would you create the image of

a product in the minds of the customer is  also associated with the classification

and the categorization of the goods which you are  producing or products which you are producing.

Just before I go into the subsequent  details of, what we have seen just now,

just imagine that you are thinking in terms of,

a soap, which can be a consumer good and  that falls under the category of let us say,

a convenience good probably it is also a shopping  good, but, convenience is much better thing, it is

not so, price sensitive and you see here a target  and a positioning perspective simultaneously

is coming to you. This is the beauty of Product  Management and Marketing Management actually,

wherein you think of target, you  have a product in mind and you can

generate a positioning perspective all around. And from the other side, you think of the product,

you classify it, you create a perspective  around it and then you create a story,

a tagline, a punch line, a statement around  the product to tell to the customer and I am

not talking of the feature-based positioning, I am  talking of the classification-based positioning.

So, that is, what we are discussing at this moment  and that is why, it is a very important part of

our understanding in terms of product and later  on, you would realize that this is very useful

for us to project a product or develop a  product in terms of being a brand because all

these elements would emanate into something  which is related to brand development.

For example, when we would be referring to  something like marketing program investment

in brand development and brand value chain  and I would not distract you by talking about

that at this moment but that is again a very  interesting kind of a discussion for later,

where in several elements would be discussed. But, these elements would actually traverse

through our discussion there into, when we talk of  that basically, and then you would realize that,

a simple tennis ball also can  be seen with the perspective of

a brand. Does any name come to your mind? There  are several important, sporting goods companies

which have been projecting themselves as a brand  and we have been using their products at large.

And then comes in consumer goods classification,  we have just talked about that, now, let me

extend some, aspects to it and elaborate  it. Consumer goods classification as we saw

first is related to a good being or  our product being a convenience good

which is purchased frequently,  obviously and we can see that

immediately and with minimal effort that it  is related to availability and distribution.

But because we are categorizing that (convenience)  good as a convenience good, we assure

that it reaches to the large number of customers,  because we have seen that good with respect to

its convenience actually, for example,  staples are purchased on a regular basis.

Let us say ketchup, toothpaste, crackers,  chips, wafers, soaps, salt and sugar and

we remember that portion of the departmental  store, wherein you purchase convenience goods,

that is what we are referring to here, then, that  can further traverse into again a characteristic

and a trait of the consumer. Here, we are talking of convenience,

we are talking of frequency, we are talking  of immediacy, we are talking of accessibility

and we are talking of impulse also. So, there are  some impulse goods purchase without any planning

or search effort such as candy bars, snacks,  chocolates, again, do you remember the section

of the departmental store when you are just moving  out, or you are entering in and you find those

goods wherein you do not have to put up so much  of energy and thinking whether you want those or

no and especially when you are moving out you are  just about to, pay the bill, there you find these

refrigerators, wherein you find a deep-freezed  or frozen products, you find vegetables, you

find fruits, you find chocolates, you find several  other things like toffees and many a times at that

particular moment you feel hungry, and there are  some patties and samosas and breads all around,

in that corner, and then you just purchase some  of those because you now want to pay the bill,

go to your car and start eating while driving.  That is that is the perspective of impulse.

Emergency goods are purchased, when need is  urgent, umbrellas, during a rainstorm, and so

on. So, they are also related to something when  you do not think twice basically you need those.

And that is the categorization, which  actually helps us in positioning and

marketing the products at the end of the day. And  that is why classification and concepts are more

important, because in today's competitive era, we  cannot lose any chance to reach to the customer.

Shopping goods: Now, those goods that consumers  characteristically compare on such basis as

suitability, quality, price and style, for  example, furniture, clothing and appliances.

Now, again, you look at your own behavior when  you go for purchase for example, a shirt, so,

you not only compare a particular shirt you  have in mind with the shirts which are being

displayed there, you also have the other shop  besides or another brand in your mind. You may

just go through those products which are being  offered there and then you leave the shop and go

to the other shop and then you may come back  and purchase the same shirt which you were

surfing through for the first time. Now, that is where that that kind of a

comparison, that kind of perspective,  suitability, quality, price and those

kinds of things are there for us to understand,  and this categorization is hinting upon the fact

that, that actually is associated with the  behavioral reflection of the consumer. So,

this categorization actually directs our attention  towards how to address, first to understand

and then to classify and then to address the  behavior of the consumer through communication.

So, and for that, you can think of an  integrated marketing communication course

and there you will find those elements. Now, there are elements of homogeneity

and heterogeneity here. So, when we talk of  homogeneous shopping goods, those are similar in

quality, but different enough in price to justify  shopping comparisons and in case of heterogeneity,

shopping goods, are being seen with reference  to different product features and services

that may be more important than price. So, that  is how classification actually traverses.

Now, comes in specialty goods, wherein, specialty,  special usage or special positioning and potential

of the product are the important elements. So,  that is all that comes together now, wherein

premium is associated with these type of goods  which have unique characteristics or brand

identification for which buyers are willing to  make a special purchasing effort for example a

unique watch or a specific model of a car, a  special edition of a product, diaries or pens,

shoes, special model of a shoe, which in  general would solve the similar purpose,

but definitely it is highly prized  and is a high premium product. So,

there are several models available and so on and  that is why these are called as specialty goods.

Then, and I do not take it that it is just a  general kind of a thing which is implied and

everyone understands, (though we do understand  these terms and these things), but here, when I

am talking about these, please keep that in mind  that the strategic perspective of understanding

and reaching to the customer is associated  with this classification from this side.

So, if there is a specialty good, it  would not be available everywhere,

then there would be a price perspective associated  with that, then that price has to be justified.

And that is what we are going to talk about in  whole of the product management all through.

Then there are unsought goods many times,  consumer does not know about for example,

fire extinguishers, your mind does not go there,  because you never expect fire to be around you,

but somehow, we are becoming more aware, and  there are norms and rules and regulations,

which are actually motivating us to  put a fire extinguisher everywhere in

every home or every building. But otherwise,  if you will see that people do not have a sight

of those products in their minds basically. So, many times there are specific health policies,

which you feel are important, but somehow you  are not looking for those kinds of policies

and especially at a specific age  when health and life is with you,

there is a time when for the first-time blood  pressure fluctuates and one goes to a doctor

and doctor says that you are taking stress and  that particular moment person feel likes getting

insured against ailments. So, that  is a need-based kind of a thing. But

emergencies come from all the sides and then  shouldn t we all be taking good care of ourselves

by ensuring ourselves also? We should but  again, our sight does not go there.

Now, then again, there is a very  important term which comes back to us

when we talk of classification  that is called category.

Product category is a particular group of related  products, as given by Cambridge dictionary wherein

product categories are typically created by  industry organizations or firms or brands to

focus their promotional efforts effectively  by grouping similar items together. Product

categories are sometimes confused with product  classification, which we have just talked about.

Both are organizational  strategies, are perspectives

and both help in guiding marketing  decisions, but classifications are

much broader. For example, convenience goods,  shopping goods, specialty goods and so on.

For example, Dove skincare, Dove personal care and  beauty care and Dove Hair Care, Dove fragrances,

Fast Track men watches, Fast Track women  watches and faster universal watches.

So, that is where category comes into being,  wherein, you have to tell about your products

cumulatively to the customer and looking at the  limitation of the message, the size, the space

or let us say you want to go to the customer  with all the product offerings you have

so, you categorize those products and that  is why it should not be somehow mixed up with

the understanding of classification. Then industrial goods wherein, materials and

parts and goods that enter a manufacturer s domain  of products fall into classes like raw materials,

for example, farm products, like wheat, cotton,  livestock, then there are natural products, fish,

crude petroleum, iron ore and then there are  manufactured materials and parts, components, for

example, these are usually fabricated for example,  raw iron is made into steel and yarn is woven into

a cloth. Then manufactured material and parts  are differentiated into component parts as well

where in, they enter the finished  product with no further change in form.

So, these are classifications of  industrial goods because here the purpose

would be to differentiate the positioning  and the negotiations and the further approach

and for this you can look for  any industrial marketing course

and that will take you deeper into that, so, it  is a different kind of perspective which has to

be built around though, I will be focusing upon  these elements as well in due course of time.

Examples of component parts are small  motors, tires, castings, etc and so on.

Then come in capital items which, are  long lasting goods that facilitate

developing or managing the finished product  and fall into two groups, installations and

equipment. Installation is related to  factories and offices, that is buildings

and heavy equipment, for example, generators,  drill presses, mainframe computers and so on.

So, you are looking at them as installations  you have to install those somewhere to be

used for further processing being part of  further processes and so on. Equipment includes

portable factory equipment, tools and office  equipment and so on. This type of an equipment

does not become part of a finished product.  We all know what equipment is, but again,

just to elaborate briefly in front of you and  also again, this is a categorization that leads

towards marketing efforts. Then there are supplies and business services.

These are short term goods and services that  facilitate developing or managing the finished

product. Supplies are of two kinds; maintenance  and repair items, like paints, nails, brooms,

and operating supplies, lubricants,  coal, writing paper pencils and so on

and business services include maintenance  and repair services that is window cleaning,

copier repair, business advisory services or  legal management consulting, advertising and so on

and also to remember that maintenance and repair  services are usually supplied under contract by

small producers or from the manufacturers of the  original equipment and so on. So, categorization

as I said, would lead to the negotiations  as well to a mutual understanding of how

the services would be served or how the  products would be taken to the customer.

Here comes the culmination after going through  an emphasizing journey ladies and gentleman.

Emphasizing because we talked about the terms,  terminology, classification, concepts philosophy

with a particular emphasis on the usage  of these elements in the decision making

and product management in due course of time. So, here is the culmination, wherein

there are three aspects, which you should  remember, one is product acceptance, customer

must or should willingly accept what we  have to offer, and that is the objective of

every producer, manufacturer, marketer, product  manager and so on. The other two elements are

product strategy and planning, that is about how  to take the product through a due course of life

while becoming the part of the life of a customer.  And when I say life of a customer, it can be seen

with the perspective of becoming the part of  the lives of the customers generationally,

and that is where product strategy and planning  comes in. And both these elements take us towards

product management. And this is what this

subject is all about. I will now be initiating  a discussion in my subsequent sessions on

Product Management at the core. And there, we  would have a wonderful mix of an understanding on

strategic and application perspective in relation  to product management decision making. So,

keep thinking, keep learning. I will  meet you next time, till then. Goodbye!