Product Classification: Product is an article/substance/service, produced, manufactured and/or refined for the purpose of onward sale. It may be any item that is the result of a process or action. It can be intangible or intangible form. A product has a cost and therefore has a price, means to produce a product you have to spend money and you get your money back with profit when the product is sold out.
A mobile phone handset is a tangible product whereas the software used to run this handset is an intangible product. Service provided by the mobile operator is also a product and it is also an intangible one. To further understand, a tennis ball is a tangible product whereas an insurance policy is also a product but it is intangible.
Segregation or grouping of various products in different types is somewhat informal. In general, there is no definite or standardized procedure followed by most manufacturers but still, there are certain standardized methods of classification that exist in different parts of the word. These may include:
- GS1 Global Product Classification
- International Classification of Goods & Services (NICE)
- North American Product Classification System
- Harmonized Commodity Description and Coding System (HS)
Currently, there are so many systems to classify products but basic criteria are almost the same. Products are classified generally on the basis of Shopping Habits, Durability and Tangibility. The major classification of products may be Consumer Products and Business products.
Business Products are generally Industrial Products, whereas Consumer Products are further classified on the basis of shopping habits of consumers, Durability of product and to some extent tangibility of the products. On the basis of above-mentioned criteria, products may broadly be further classified in following different types:
1. Convenience Goods
Products that users buy as a routine matter for their daily life usage are convenience products. These are bought by the customer just habitually without having a thought for an alternative option. In fact, these are mostly low-cost items; hence there is hardly any difference between different brands. Resultantly customers keep on buying the same brand over and over without considering any other brand.
Items of daily usage such as Soap, Coffee, Candy, toothpaste, etc. may be categorized under this type. Since these products are of low-cost category, most consumers don’t bother about price and just keep on buying the same brand unless there is a visible increase in price. So the price does not matter in this category of products; it is only the trust of the consumer on a particular brand.
2. Shopping Goods
Just opposite to Convenience Goods, Shopping Goods are the products that carry relatively high costs, such as house, car and clothing, etc. Customers spend a little time on research and analysis while buying such products. Not only the price matters here, but at the same time brands and manufacturers also have to be compared before reaching a final decision.
As such the companies and manufacturers pay a lot of attention to the quality and durability of their products that can justify the price paid by the buyer. Here the producer has to keep a balance in quality and pricing. A product with almost the same quality offered at a relatively lower price will attract the customer. Similarly with the same price range, better quality as compared to the competitor will also do the trick.
3. Specialty Goods
This is a unique group of products. Price and quality don’t matters here; the only thing that matters is the uniqueness of the product and loyalty of the customers. The iPhone users will always buy an iPhone and a Ferrari rider will go for it all the time without considering anything else.
What matters here is only the specialty of the product. Since price does not have any impact, the producer has to focus only on the ever-increasing trust and loyalty of the customer, for which a consistent improvement in the product is required. Above all, a sense of status consciousness is also associated with this category of products
4. Unsought Goods
Products which are so innovative and out of the box that customer never thinks about fall under this category. Similarly, products which do not fetch any attention of the customers unless they are compelled to buy one, also fall in this category.
You will never think of buying an insurance policy unless a fear arises in your mind about your life expectancy. Similarly, most people don’t bother to buy a fire extinguisher unless they are compelled to buy one due to a mishap.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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