Products Classification Class 12 Notes Business Studies

Products Classification

Products are usually understood as physical or tangible things that can be bought and sold in exchange for money or anything of value. When a customer wants to buy a product they not only look at its utility or its need but also look for its brand value, its easiness of use, the reputation of the company, packaging, label, guarantee, etc.

Product is not only limited to goods but extended to services, ideas, places, people, etc. Product is thus a bundle of utilities that has various characteristics. They are:

1. Physical attributes: some products (goods) have tangibility. They can be seen and touched. For example a pen, a shirt, a mask, etc.
2. Intangible attributes: intangible attributes include psychological attributes i.e. brand name, brand value, loyalty towards the brand, packaging, newness, etc. In this category, we can also include services. Services are the ones that cannot be seen or touched by felt. Such as we can take a service in a salon.
3. Exchange value: there is an exchange value associated with the product i.e. a customer should feel like exchanging his or her money for the product or service.
4. Customer satisfaction: a product or service should be capable enough to satisfy the customers’ needs and wants. There are certain desires and aspirations of a customer before buying and it must be fulfilled to keep getting new customers and also to satisfy the existing ones.

Classification of Products

Products can be classified into two categories-

1. Consumer products
2. Industrial products.

Consumer products

As the name suggests, consumer products are those products that are purchased by the consumers directly for their personal use and are not meant for resale. They will be purchased for fulfilling unsatisfied needs such as soap, a pen, a mobile, etc.

Consumer products are further classified based on the shopping efforts involved in purchasing them and on the durability of the products.

A. Shopping efforts involved

A consumer puts some time and effort into purchasing the product and this effort can be more or less depending on the type of product.

• • Convenience products: there are certain products that are purchased by the consumer on daily basis or very frequently and they involve the least time and effort. These products are available locally and can be bought conveniently. The products have regular demand as they are generally essential commodities. They do not involve a huge amount of money.
    Usually, the products have high demand but also high supply as there are several brands competing in the market for sale. However, these products also have a standardized price system as mostly these products are branded and the schemes for promotions are also running on a daily basis to attract more and more customers.
    Examples of these products are vegetables, eggs, soap, bread, cigarettes, newspaper, medicines, etc.
  • Shopping products: these products are the ones that involve more devotion of time and effort so that the consumer can make a good choice amongst the available competing products in the market based on the quality, quantity, shape, size, easiness of use, etc. These products are usually those which can be used for a long period of time i.e. they are not for single use. The price of these products is usually high that is why a consumer needs a fair deal. A consumer usually plans beforehand to buy the product and the convincing ability of the retailer also plays a major role.
    For example washing machines, laptops, television, jewelry, etc.
  • Specialty products: these products involve a high level of investment of time and effort as these are products which unique characteristics and are usually bought because of brand value and brand loyalty. Demand for these products is usually low as there are limited customers. These products have high prices and are also not available easily at convenient places and thus extra efforts are involved in purchasing them. But, after-sales services are also provided for these products, and aggressive promotion is also required to inform people about the availability of the products along with the uniqueness of the product.
    For example designer clothes, exotic perfumes, high-end cars, etc.

B. Products based on the durability

Durability is also an important factor for the products. They can be classified as durable, nondurable, and services.

• • Durable products: the products which are used for a long period of time i.e. t services many uses. These products generally have after-sales services. For example: radio, refrigerator, television, washing machine, mobile phones, etc.
  • Nondurable products: these products are usually for a few uses and many times only for single use. They do not involve high margins and are available at many locations. For example: toothpaste, toothbrush, soap, detergent, erasers, etc.
  • Services: while a product is tangible as they have a physical existence and can be seen and touched. On the other hand, services are intangible i.e. they cannot be seen nor touched. Thus, they are the experiences, benefits, satisfaction, etc. It is not possible to separate the service from the service provider i.e. the source of the service. They are perishable and cannot be stored. The quality, experience, and satisfaction depend on the service provider completely. If the service provider does not have the required skills and experience then the results are not satisfactory to the customers. For example: doctor’s consultation, dry cleaning, salon services, etc.

Industrial products

The products which are used by the business so that other finished products can be produced. These products are not meant for direct use by the customer. These products can be engines, machines, lubricants, other raw materials, etc.

Some characteristics of industrial products are as under:

• Number of buyers: number of buyers of industrial products is less in comparison to consumer products because consumer products are used by many people but industrial products are only used by the industries.
• Channel levels: in comparison to consumer products, the industrial products are sold through shorter channels of distribution to keep the cost low.
• Geographic concentration: the location of these product markets is highly concentrated at a particular point and is not located at several scattered areas.
• Derived demand: the demand for particular industrial products will depend on the demand of the consumer products which will be produced from them. For example: the demand for the engine of car X depends on the demand of car X.
• Technical considerations: technical considerations are an important factor while buying industrial products because of their complexity in nature.
• Reciprocal buying: reciprocal buying is not so common but a useful method. Wherein, the companies buy the products from another company if they find those products useful without exchange of money in particular. For example: when a stationery company and a paper producing company mutually agree to buy each other’s products then it is known as reciprocal buying.
• Leasing out: due to the high prices of industrial products, industries may not buy the products completely but take up the lease of these products, and whenever they feel the need to return the product they can do so because they have not bought the products out rightly.

Industrial products classification

Classification of industrial products can be done on three bases:

• Materials and parts: materials and parts are the industrial products wherein the raw material and manufactured materials are purchased. These can be sugar cane, cotton, fish, petroleum, tire, battery, iron, etc.
• Capital items: these goods are used for the production of finished material such as buildings, machinery, elevators, etc.
• Supplies and business services: these are some extra goods and services that are not directly used for manufacturing consumer products but for managing and maintaining the finished goods. Such as nails, lubricants, etc.

BST Chapter 11 – Marketing

1. Marketing Management
2. Marketing Management Philosophies
3. Functions of marketing
4. Marketing mix
5. Products – Classification of Products
6. Branding
7. Packaging – Levels , Functions & Importance
8. Labelling
9. Pricing – Factors affecting Price of a Product or Service
10. Components of Physical Distribution
11. Channels of Distribution
12. Advertising – Benefits, Limitations, Objections
13. Personal selling
14. Sales promotion
15. Publicity – Characteristics and Objectives