Product Classifications: Definition, Types and Significance

Updated March 10, 2023

Product classification is a marketing and business term that categorizes products based on how and why consumers purchase them. These distinctions can change the way companies market their products and affect other aspects of sales, such as pricing and distribution. If you're a marketing or sales professional, it's especially important for you to understand product classifications and their effects. In this article, we explain what product classification is, the four types of products and why professionals classify products.

What is product classification?

Product classification refers to the organization of the different types of products that consumers buy. Knowing these classifications can help marketers create advertisements for their company's goods and services. Product classification can help professionals in all levels of business, as it can also help determine product demand, pricing and the primary demographic to which advertisers can target with their marketing campaigns.

What are the different product classifications?

There are four main product classifications. Professionals base these categories on consumer habits, costs and their general characteristics. The four product classifications are:

1. Convenience products

Convenience products describe the items and services that customers purchase on a regular basis with little thought. Typically, consumers use the same or similar brands for convenience products unless they are compelled to do otherwise through an advertisement or availability. For example, dish soap is a convenience product. Another characteristic of convenience products is that they are easy to find. Most consumers can buy dish soap without conducting research or making a special trip to the store for it.

Marketers may use more techniques that discount other brands in their campaigns when marketing convenience products. This is because consumers may change their buying habits and switch to a different brand if convinced, such as through a comparison advertisement. For example, a company may market their dish soap to be more effective at removing grease from dishes. Marketers may also spend more time with consumer test groups, to determine how their brand compares to others or create marketing campaigns that get a consumer's attention by surprising them.

2. Informed purchases

Informed purchases, also known as shopping goods, refers to the products and services that consumers don't make often and usually perform research before doing so. These types of products can range from more expensive items, such as a house or car, or more regular purchases, such as a pair of shoes. Consumers typically take more time to make informed purchases, which can change the way marketers advertise them.

For example, because consumers typically perform more research or have higher standards for these purchases, they may include more information in their marketing campaigns and choose more specific demographic groups to target. For example, a marketing team may choose to target college-aged consumers when creating advertisements for laptops, as this demographic often needs the product. The marketing team might also include more information about the laptop's abilities, such as its graphics quality or operation speed.

3. Specialty items

Specialty items are unique products that marketers can advertise to a certain demographic of consumers without worrying about their competition. These products can include innovative goods that are one of a kind on the market or brand-name products that have a loyal fan base. While these items may be more expensive than others, consumers often feel less of a need to deliberate or research their decision to purchase a specialty item.

For example, the marketing team for a well-known luxury fashion brand wouldn't need to create advertisements that compare their clothes to other brands or even include detailed information. Instead, the brand's name and reputation alone can encourage consumers to purchase their products. These companies can focus more on building and maintaining customer relationships and brand recognition than distinguishing themselves from other companies.

4. Mandatory purchases

Mandatory purchases, also known as unsought goods, are products that consumers buy out of necessity rather than desire. Typically, these products are household or safety items that customers don't feel excited to buy, such as batteries, smoke detectors, air filters and cleaning products. Sometimes, consumers may buy these items out of fear or an obligatory response, such as buying a fire extinguisher or a car maintenance membership just in case of an emergency.

When advertising these items, marketing teams can focus more on reminding consumers of their need for these items and building brand recognition that allows consumers to purchase a specific brand with little thought. Some companies choose to feature reasons why you need these items in their advertisements, creating a sense of security through the purchase of their product. For example, a marketing team may advertise a flashlight by showing a person using one in the event of a power outage.

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Why classify products?

Professionals classify products for a variety of reasons. Product classifications can contribute to many decisions within the life cycle of a product, including the way companies market it, its price, the type of consumer who buys it and how high the demand for the product is. Here are some other reasons why professionals classify products:

Marketing

As previously mentioned, the techniques marketing teams may use to advertise a product often depends on its classification type. Product classification can change a marketing budget and the focus of a campaign. For example, when marketing a specialty item, a company is less likely to spend money on forming a focus group to test its product. Instead, they may allocate their resources to brand management.

Pricing

The type of classification a product receives can change the way retailers and distributors price the item. Convenience items and mandatory purchases are often more likely to be cheaper than a specialty item or informed purchase, as consumers value these products' availability and necessity.

Convenience and mandatory items are also often more regular in nature and include products with lower price points, such as food. Because consumers typically hold less brand loyalty to the products under these classifications, it's also more important for the companies that sell convenience and mandatory purchases to assign a lower price to these items to stay in competition with other brands.

Related: How To Calculate Selling Price

Demand

The demand for a product often varies depending on the product classification. Generally, consumers buy mandatory and convenience products more often than specialty and informed purchases. This affects how companies manufacture these items and how marketing teams advertise them. Because consumers may need more encouragement to make purchases that they need less frequently, companies selling specialty and informed purchase products may need to allocate more time and money to market their products.

Invention

When deciding which products to produce, a company might consider product classifications. Because the marketing efforts for each type of product varies, a company may aim to specialize in one type of advertisement, which limits which products they make. The demand of a product, which has a role in how professionals create product classifications, can also influence a company's decision regarding the invention of a product.