Product Strategy evolves from Corporate growth strategy
Product strategy emanates from the corporations growth strategy. Decisions taken at the corporate level, on whether the firm should pursue stability, intensification, diversification, or divestment as the case may be, set the contours of the product strategy. In other words product strategy is delimited /governed by the growth strategy decided at the corporate level. Product strategy has to be worked out by marketing in tune with corporate guidelines in this regard.
Classification of Products: We have seen that Product is an umbrella term for any item offered for sale by a firm. It may take different forms, meet different purposes and serve different types of buyers. And only based on these dimensions, strategies governing the product can be formulated. In other words, the broad entity called ‘Products’ needs to be classified suitably so as to facilitate the strategy formulation task.
Traditionally, products have been classified into consumer products and industrial products, based on the use of the product. Products meant for direct consumption/personal use of consumers were termed consumer products and those that went into the manufacturer of other products were termed industrial products. This was a broad classification and there were grey areas in it. In recent times, a modified classification has emerged, classifying products into consumer goods and business goods, based on who buys the goods and for what purpose.
Consumer Goods and business: Under this classification, consumer goods are products purchased for personal/household consumption by individual consumers. And, business goods are products purchased for either reselling, remaking, manufacturing other products, or for consuming as utilities in the running of a business enterprise. According to this classification, a bottle of Dettol purchased by an individual for his personal use is a consumer product, and a carton of Dettol purchased by a hospital is a business good. The marketer will apply one strategy for selling Dettol to individual consumers and another to sell it to the business buyers.
Classification of Consumer Goods: The range of consumer goods is actually very large. So one needs to classify them further. One classification divides consumer goods consumer softs, consumer durables and services. A can of coke is a consumer soft, a TV set is a consumer durable and air travel is a service. Another classification divides consumer products into: convenience goods, shopping goods and specialty goods.
Classification of business Goods: Business goods also constitute a wide spectrum. Based on their nature of use, they have been broadly grouped into five categories: raw material, fabricating materials and parts, installations, accessory equipment and operating supplies.
There is a lot of difference between business products and consumer products in buying motives, buying process and buying habits. It is because the compulsions of the business buyer differ from those of the individual consumer. There are also differences between the two, markets in the size and nature of demand, size of purchase, pricing, sales force effort, role of promotion.
Services a Distinct Category: Products can also be classified from yet another angle. There are tangible, physical/material products and intangible services. Both are products for sale. Services constitute a distinct category.
Classification of Products is related to Marketing Strategy: Why classify products in different ways?
Classification of products is closely related to marketing strategy formulation. The classification of products into consumer goods and business goods, and the sub categorization of consumer goods into convenience goods, shopping goods, and specialty goods have their bearing on the marketing strategy to be followed. The very fact that the classification basically revolve around the nature of the buyer, the nature of use to which the product is put to and the method of purchase points to its relevance in marketing strategy formulation. Services, as a product category, gives rise to a whole lot of new dimensions, covering the nature of the ‘product’ and buyer related issues, including the buyer seller relationship. Naturally, one of the important tasks for the marketer is to confront the differences among the various product categories and evolve the right strategies for them. And within consumer goods, he has to modify the strategies based on whether he is dealing in a convenience good, a shopping good, or a specialty good.