Types of consumer products PDF

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Types of consumer products

Convenience products Shopping products Specialty products Unsought products

Convenience Products

Convenience products are bought the most frequently by consumers. They are bought immediately and without great comparison between other options. Convenience products are typically low-priced, notdifferentiated among other products, and placed in locations where consumers can easily purchase them. The products are widely distributed, require mass promotion, and are placed in convenient locations.

Sugar, laundry detergent, pencils, pens, and paper are all examples of convenience products.

Characteristics of Convenience Products

Purchased frequently At a low price point Easily available Not commonly compared with other products

Shopping Products

Shopping products are bought less frequently by consumers. Consumers usually compare attributes of shopping products such as quality, price, and style between other products. Therefore, shopping products are more carefully compared against, and consumers spend considerably more time, as opposed to convenience products, comparing alternatives. Shopping products require personal selling and advertising and are located in fewer outlets (compared to convenience products) and selectively distributed.

Airline tickets, furniture, electronics, clothing, and phones are all examples of shopping products.

Characteristics of Shopping Products

Purchased less frequently At a medium price point Commonly compared among other products

Specialty Products

Specialty products are products with unique characteristics or brand identification. Consumers of such products are willing to exert special effort to purchase specialty products. Specialty products are typically high priced, and buyers do not use much time to compare against other products. Rather, buyers typically spend more effort in buying specialty products compared to other types of products.

Take, for example, a Ferrari (a specialty product). Purchasers of a Ferrari would need to spend considerable effort sourcing the car. Specialty products require targeted promotions with exclusive distribution; they are found in select places.

Sports cars, designer clothing, exotic perfumes, luxury watches, and famous paintings are all examples of specialty products.

Characteristics of Shopping Products

With unique characteristics or brand perception Purchased less frequently At a high price point Seldom compared between other products Only available at select/special places

Unsought Products

Unsought products are products that consumers do not normally buy or would not consider buying under normal circumstances. Consumers of unsought products typically do not think about these products until they need them. The price of unsought products varies. As unsought products are not conventionally thought of by consumers, they require aggressive advertising and personal selling.

Diamond rings, pre-planned funeral services, and life insurance are all examples of unsought products.

Characteristics of Shopping Products

Not top-of-mind of consumers Requires extensive advertising and marketing efforts

Importance of Understanding the Types of Consumer Products

Understanding whether products are convenience, shopping, specialty, or unsought is very important. As noted above, each type requires different marketing efforts.

For example, it would not make sense to expend considerable marketing efforts on sugar. There is little differentiation between different brands of sugars and spending money on advertising would not play a role in changing consumer perception.

On the other hand, unsought products would require considerable marketing efforts. As a consumer, purchasing life insurance is not top-of-mind; consumers do not normally think about it. Therefore, considerable marketing and advertising efforts are required to make unsought products known and to warrant a purchase by consumers.

1.

Product

•

It is a bundle of physical, service and symbolic attributes designed to satisfy a customers’ wants and

needs. •

It is a good (physical product capable of being delivered to a purchaser and involve the transfer of

ownership from seller to customer) or service (non-material action resulting in a measurable change of state for the purchaser caused by the provider) that is a result of a process and that is intended for delivery to a customer or end user. •

From the firm’s point of view, the product element of the marketing mix is what is being sold. From

the customer’s point of view, a product is a solution to a problem or a package of benefits. •

Product issues in the marketing mix will include such factors as: design (size, shape); features; quality

and reliability; after-sales service (if necessary) and packaging.

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Convenience Products – refer to goods and services consumers want to purchase frequently,

immediately & with minimal effort. There are required very little buying efforts when drawing a comparison to buying these products. These consumer products are low priced. Due to widespread distribution, these are available in different convenience locations according to consumer wants and needs. Producers adopt mass promotion strategies.



Shopping Products – products consumers purchase after comparing competing offerings.

Shopping products are a consumer product that the customer usually compares on attributes such as quality, price and style in the process of selecting and purchasing. Thus, a difference between the two types of consumer products presented so far is that the shopping product is usually less frequently purchased and more carefully compared. Therefore, consumers spend much more time and effort in gathering information and comparing alternatives. Types of consumer products that fall within the category of shopping products are: furniture, clothing, used cars, airline services etc. As a matter of fact marketers usually distribute these types of consumer products through fewer outlets, but provide deeper sales support in order to help customers in the comparison effort. 

Specialty Products – offer unique characteristics that cause buyers to prize those particular brands.

Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of consumers is willing to make a special purchase effort. As you can see, the types of consumer products involve different levels of effort in the purchasing process: the specialty product requires a special purchase effort, but applies only to certain consumers. Examples include specific cars, professional and high-prices photographic equipment, designer clothes etc. A perfect example for these types of consumer products is a Lamborghini. In order to buy one, a certain group of buyers would make a special effort, for instance by travelling great distances to buy one. However, speciality products are usually less compared against each other. Rather, the effort must be understood in terms of other factors: Buyers invest for example the time needed to reach dealers that carry the wanted products. To illustrate this, look at the Lamborghini example: the one who wants one is immediately convinced of the choice for a Lamborghini and would not compare it that much against 10 other brands. Unsought products Unsought products are those consumer products that a consumer either does not know about or knows about but does not consider buying under normal conditions. Thus, these types of consumer products consumers do not think about normally, at least not until they need them. Most new innovations are unsought until consumers become aware of them. Other examples of these types of consumer products are life insurance, pre-planned funeral services etc. As a consequence of their nature, unsought products require much more advertising, selling and marketing efforts than other types of consumer products. Unsought Products Examples include Life Insurance, Smoke detectors, Home alarms and pre-planned funnel service. Unsought product pricing and distribution varies, and promotion strategies need aggressive marketing efforts i.e. more advertising and personal selling than other types of products.

Business products - contribute directly or indirectly to the output of other products for resale. Business products are the goods and services needed in the process of creation of other goods and services.

Classifications under business products •

Installations

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Accessory equipment

•

Component Parts and Materials

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Raw Materials

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Supplies

•

Business Services

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Installations – business products such as factories, assembly lines and large machinery that are major

capital investments. They are of two types- (a) machinery used to process raw materials or manufacture final products from fabricated materials, (b) equipment used to conduct operation of a service business. Installations are large, expensive capital goods. They determine the nature, scope and efficiency of an enterprise.

There is large machinery or heavy equipment employed to produce the finished products or service. For example, blast furnaces are installations in a steel mill. Aeroplanes are equipments in an airline offering air transport service. Desks and chairs are equipments in a school. Installations (plant and machinery) are forms of fixed durable assets and they represent permanent capital of an enterprise. There may be multipurpose machines or single-purpose machines.

Accessory Equipment – capital items such as desktop computers and printers that typically cost less and last for shorter periods than installations. Examples of such light equipments or accessories are hand tools, forklift trucks in a factory, cash register in a retail store, calculating machines, computers, accounting machines in an office establishment. Installations have longer life and higher cost than that of accessory equipment. Component Parts and Materials – finished business products of one producer that become part of the final products of another producer. Fabricated parts and materials such as spare parts, spark plugs, batteries, steering wheels, tires, speedometer, yarn, steel, etc. These are also called components and parts which are assembled (without further change) in the manufacturing of a final product such as refrigerator, motor car, computer, etc. These components are recognisable in the final product. Many manufacturers prefer to buy (instead of making) these fabricated parts.

Raw Materials – natural resources such as farm products, coal, copper or lumber that become part of a final product Supplies – regular expenses a firm incurs in its daily operations. There is a lot of similarity between operating supplies and convenience goods bought by consumers. They have low price, short life and they are bought with minimum efforts. They are consumable items used up rapidly and hence, they are replaced frequently. Though operating supplies help the operations of an enterprise, please note that they do not become a part of the final product (like components). Office stationery, ink, erasers, ball pens, are examples of operating supplies required by any enterprise. Sweeping compounds, detergents, lubricants, fuel are best examples of operating supplies in a factory or workshop. Business Services – intangible products firms buy to facilitate their production and operating processes.

In all industries, numerous services are necessary to plan, help or support the working and operations of an enterprise. They include everything from cleaning and sanitation services to highly skilled and professional services. Among the more common professional services are management consultancy services, protection services, maintenance services, advertising agencies, marketing research agencies, credit intelligence services, marketing information services. Small and medium firms cannot maintain experts on a permanent basis. Such services can be hired for a certain fee, whenever occasion demands.

Marketing mix - PRICE Price • It is the exchange value of a good or service. • Price is influenced by many factors including economic factors (supply and demand), competitor’s prices and payment terms.

Product Pricing Model -

A.) ECONOMIST’S MODEL - is based on the principle of scarcity of resource

& rationality of men b.

PREMIUM PRICING - resides on the psychology of the market participants

High price is used as a defining criterion. Such pricing strategies work in segments and industries where a strong competitive advantage exists for the company. Example: Porche in cars and Gillette in blades.

Premium pricing can be employed with the profit margin maximisation or quality leadership pricing objectives. The premium price charged for the uniqueness and quality of your product allows you to generate large profit margins on each item sold. Your product will also demonstrate your commitment to quality, and customers will think of you when they desire such quality. CONTROLLED MARKET-BASED PRICING - based its prices on governmental regulations or implied agreements among key players in the market Market Based Pricing is defined as a process of setting prices of goods/services based on the current market conditions. A critical analysis of the product’s features is done and then depending on whether the product has more or less features than the competitor’s product, the price is accordingly set higher or lower than the price of the competitor’s product. d. TARGET PRICING - the company looks at the market, determines the prevailing market price, establishes its desired profit, then computes the should be amount of cost to be incurred in producing and selling a product In target pricing, the selling price for a product is determined first. Based on the insights from the marketing department and other market intelligence data, the most competitive price that the customers would be willing to pay is fixed as a selling price. Now, the desired profit margin is deducted from this selling price to arrive at a cost within which the production department would have to produce the product or procurement department would have to procure the product. For example, ABC Ltd. is in the business of manufacturing prom dresses for high school girls. The average price at which the prom dresses sell in the market is P100. So, ABC Ltd. also fixes the selling price of P120 for its up-scale range of prom dresses. Now, the desired markup is 25% on selling price. So the profit margin is P30 per dress. Hence, the cost price within which the manufacturing department would have to manufacture every single dress will be P90 (P120-P30). In order for that product line to be profitable, ABC Ltd. has to ensure that its total cost per unit doesn’t exceed P90. And the lower is able to bring down the cost per unit; higher will be its profit per dress. e. LIFE-CYCLE-BASED PRICING - a price is established that would be applicable over the life-span of a product Introduction Stage:

f. PENETRATION-BASED PRICING - is applied when a company wants to enter a market where entry is relatively easy due to minimal amount of investment needed, absence of high-level technological requirements and a market not controlled by one or few players Used to gain entry into a new market, the objective for employing penetration pricing is to attract and grow market share. Once desired levels for these objectives are reached, product prices are typically increased. Penetration prices will not store up the profit that you may want; therefore, this pricing strategy must be used strategically. Let’s say you have created a new hot and spicy mustard product. Your market research indicates that the price range for competitors’ mustards is $1.89 to $2.99.

Since numerous mustards are already available and you are new to the mustard market, you decide to use penetration pricing to entice customers to purchase your mustard. Therefore, you price your mustard at $1.85 for the first six months because it covers your cost of production yet is lower than what you believe is a good price for your product and is below the lower end of the market range, which should entice people to purchase your mustard over the other higher-priced mustards.

g. SKIMMING-BASED PRICING - is applicable in a seller’s market Price skimming involves initially charging the highest price your market will accept for your product, then lowering it over time. The logic behind this is that you attempt to “skim” off the top market segment to which you appeal, at the time when your product is freshest, thereby maximizing your profit early on.

Example of price skimming - The latest iPhone This might not strictly be SaaS, but Apple’s approach to product pricing epitomizes price skimming in a way that almost anyone will recognize. With each new product offering, Apple’s prices for newly released products seem to be so high that they’re almost dissuasive — and yet, there are always queues outside Apple stores on iPhone release days. h. PREDATORY (OR ANTI-COMPETITION) PRICING - a company sets a very low price purposely to gain greater share of and ultimately control the market Predatory pricing involves charging very low prices, the aim being to get rid of competitors so that the supplier can charge considerably higher prices later. The predator is willing to sell at a loss – below cost – for a period, in the hope that its rivals either go bust or decide stop selling that product. When competing companies have left the market, the predator pushes prices back up. Ex. A legal team setting up in a new area offers prices 20% less than the norm for other firms. A printer manufacturer innovates a new and better machine and prices it 10% less than their machine which is already a market leader. i.

LOSS LEADER PRICING - applies when there is a main product with subsequent sales of parts and services -

Refers to products having low prices placed on them in an attempt to lure customers to the business and to make further purchases. For example, grocery stores might use bread as a loss leader product. It you come to their store to purchase bread, you are very likely to purchase other grocery items at their store rather than going to another store. The goal of using a loss leader pricing strategy is to lure customers to your business with a low price on one product with the expectation that the customer will purchase other products with larger profit margins.

j.

PRODUCT BUNDLING - is packaging the interrelated products together to make a complete set and

offered to customers at a temptingly low price occurs when different offerings are sold together at a price that’s typically lower than the total price a customer would pay by buying each offering separately. Combo meals and value meals sold at restaurants are an example. Companies such as McDonald’s have promoted value meals for a long time in many different markets. k. PRICING WITH ADDITIONAL FEATURES - main products are sometimes sold with additional features or “extras” l. TIME PRICING - considers time as the basis in setting a price. The term time based pricing refers to a method of pricing that charges its customers according to time. This stands differs from value based pricing – whereby the company charges its customers according to value delivered. The Time-Based Pricing Method is the standard in the tourism industry where customers are
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