Explain Product Levels. Also discuss Types of Products and Product Classification.

A product can be grouped into three levels basis the meaning it holds for different people.

1) Level 1 forms the basic benefits a product offers. The same product can deliver different benefits to different people. A same motor bike can deliver benefit of transportation while for another person, it could be a status symbol.

2) Level 2 refers to the product attributes like style, quality, packaging, branding, etc. For example, Harley Davidson or Royal Enfield offers style, quality, etc. which adds to the basic satisfaction of owning a bike.

3) Level 3 is the extended product which includes the benefits that surpass the benefits a product offers. These include after sales service, warranty, free installation or delivery, etc. The marketers try to exceed the expectations of the buyer.

According to Prof. Kotler, marketers need to consider 5 levels of product which add more customer value, and these 5 levels are considered as Customer Value Hierarchy.

1) A customer has a need that he needs to satisfy or gain benefit from. This is referred to as Core Benefit. For example, a person buying a cell phone wants a core benefit of making a call from any place, a person buying an MP3 player wishes to listen to songs.

2) At the second level the marketer offers a Basic product like a cell phone, a MP3 player.

3) At the third level the marketers prepare an Expected product like a cell phone that has durability, is easy to handle, etc., and similarly same expectation of playing songs from MP3 player which is easy to operate, carry, etc.

4) At the fourth level, the marketer creates an Augmented Product which offers features that exceed expectations of the buyer. For example, a cell phone with a camera and an MP3 player, etc.

5) At the fifth level, marketers create a Potential product that a customer can expect in the future. The organisations create features in products to satisfy customers better than the competition. For example, a cell phone with added security like finger print scanner, iris security. Frequent fliers are offered services like an upgrade to first class travel, etc. The element of surprise and delight is added to the offering by exceeding the expectations of the customers.

Types of Products/ Product Classification –
There are similar marketing strategies for certain products that can be arranged in groups. This has resulted in classifications for consumer goods and Industrial goods. Products can be classified in different ways. Sometimes these are referred to as Product Categories by marketers.

I. The most common classification is based on the products durability and tangibility. Either consumers or businesses can buy these products. These are as under-

1) Non-Durable goods – these tangible products are usually used or consumed in a short duration – single use or used for few occasions. Their life cycle is short and they wear out in a short period. The use duration can be from minutes to a couple of months. For example, ice-cream, vegetables, socks, etc. Common strategy followed by marketers for non-durable goods is easy availability, reasonable price with less profit margin, intense communication (advertising, etc.).

2) Durable goods – these tangible goods are not frequently purchased and have a good life cycle as compared to non-durable goods. These don’t quickly wear out and are used over a period. For example, motor bikes, cars, computers, refrigerators, kitchen appliances. Common strategy followed by marketers is highlighting product characteristics via personal selling, demo, etc., priced adequately to ensure higher profit margin to cover costs, after sales service, and to gain customer loyalty.

3) Services (Pure services) – these are intangible offers for customer satisfaction, benefit, experience, and are perishable and does not result in ownership. For example, air travel, banking services, consultancy services, hotel services, repairs, etc. Common strategy followed by marketers are – aligning tangibility to intangible elements of services, focus on quality, matching the demand, and increase in productivity of service providers. The services have additional 3 marketing mix variables or have 7P’s – product, price, place, promotion, people, physical evidence and process.

II. The other common way of classifying the products is based on buying behaviour of consumers. (The following discussion is based on McCarthy and Perreault, Jr., Basic Marketing, 8th edition, Homewood, III.: Richard D. Erwin, 1984).

1) Consumer Goods – Understanding how consumers behave when buying certain products gives opportunity for marketers to formulate strategies to influence sales of their products. On this behaviour, consumer goods are classified as –
• Convenience goods
• Shopping goods
• Speciality goods
• Unsought goods

Convenience goods are bought by customers without investing much time and effort, like soaps, candy bars, grocery items, etc. Consumer goods can be subdivided into Staple goods, Impulse goods and emergency goods.

• Staple goods are routinely and frequently purchased, and regularly used, and generally triggered by initial requirement to buy them. For example, milk, bread, drugs, etc.
• Impulse goods are bought at sight and without much thought and planning. For example, a chocolate, an ice-cream, etc. These products are displayed prominently to influence buying.
• Emergency goods are bought when the need is urgent or there is an emergency. For example, a tyre for vehicle, a mobile phone battery, ambulance service, etc.
One requirement to put a product in Convenience goods category is to have it easily available on short notice (Convenience stores).

Shopping goodsare products and services that are evaluated and compared with competing goods before they are bought. Television sets, air conditioners, motor bikes are examples of shopping goods. The consumer may do evaluation basis different product characteristics like features, price, etc. Homogenous shopping goods are seen as similar. For example, the consumer will consider buying a refrigerator from different brands as similar. Here the consumer may limit the comparison to price factor. Here marketers stress on design factor, easy financing, warranty, after sales service to overcome competition and influence the consumers. Heterogeneous shopping goods are considered to have major differences other than price. The consumers evaluate various features like quality, durability, etc. For example, consumers trying to buy cars, flats, jewellery, etc. will evaluate not only on price but also on other features.

Speciality goods are goods and services for which consumers make special efforts to buy them, like branded goods of special significance to the consumer. There is hardly any comparison done and such products are not intensely made available in markets. They are mostly sold highlighting quality and branding. For example, Omega watches, Adidas accessories, Ray-Ban glasses.

Unsought goods are goods that the consumers is not compelled to buy, for example, life insurance, lawyer’s service, etc. These products require excessive marketing and sales people to influence people to buy them. These goods can be Regular unsought products that are existing in the market and New unsought products that have been introduced in the market like a new insurance policy linked to stocks, Doctors services introduced in the market, etc.

2) Industrial goods – These are classified into below categories based on how industrial buyers relate to the use of such products –

Capital itemsare Installations and Equipment that an organisation buys not as part of the final product but to help make the products. For example, building, major plant equipment, portable factory equipment and tools, and office equipment like desks, computers, etc. These do not form part of buyer’s final product.

Raw materials are items that become part of a physical product. These are processed to an extent that can be easily stored, economically transported to next stage or end use. These are natural products (iron ore, crude oil, fish, etc.) and farm products (livestock, crops, etc.).

Component parts and materials are goods that have undergone processing to meet buyer’s needs. They become part of finished products. Component parts are ready to be assembled into a finished products (automobile parts like body, spark plugs, doors, etc.) whereas materials need further processing (yarn, paper, etc.)

Supplies include maintenance, repair and operating items. These are used up but are not part of the final product. For example, grease, nails, typing paper, etc.

Services are sought by organisations from specialists to support the operations of the firm. For example, market research, accountancy, audit services, consultants, lawyers, etc.