Before understanding product categories, it is important to understand the meaning of a product. A product, according to many people, is a physical thing that looks a particular way, has a defined shape and color, and of course certain features.
But this is not how a marketer looks at a product.
According to marketers, a product is a means of delivering a certain benefit to a customer. It is predominantly the benefit rather than the looks and physical features. It is a way by which the needs of customers are satisfied.
For example, when people buy a luxury car, what are they expecting from a car?
Yes, while it is important for the car to move people from one place to another, but that is not the only expectation from a luxury car. Luxury cars give the customers a sense of pride because of the brand name, the luxury, speed and pleasure.
A luxury car will be able to make a person feel good from inside and give them a sense of achievement and success.
Here the marketer is not just thinking of the luxury car as a car, but as a status symbol.
What Are Product Categories?
A group of products that offer similar benefits can be referred to as pr0duct categories. Products from a particular product category offer same benefits to its customers.
Products from a same product category will have similar physical features and will offer similar benefits. Just like in luxury cars product category, cars such as the BMW, Mercedes and Audi compete with each other.
Product categories can be organized as a hierarchy of categories that resemble a tree structure or can be a flat structure such as a list of product types. The following are common types of product category.
All the companies relating to your product category will be pursuing the same set of customers and will have the same competitors.
Importance of Product Category Analysis
Category analysis will help you to take control over your business plan. Once you have enough data and understanding about your brand, you will be in a position to beat the competition. It will allow you to take control over factors that are in your control and thereby give you the ability to plot your course.
Category analysis will bring clarity on certain aspects about the market and competition. It will answer some of the important questions such as:
- What is the range of products offered in the category?
- What are the emerging trends?
- What is the size of the market?
- What are the sales and distribution channels?
- Who are your main competitors?
- What are the products sold by your competitors?
When you have answers to the above questions, you will be in position to take control over numerous factors that are under your control:
Better promotion strategies
With detailed understanding about the demographics of your customers, available distribution channels and the strategies of your competitors, you will be well positioned to design better promotion strategies.
Based on the analysis, you will be able to know more about the market trends, various market segments and the competition. This will become the base for improving your product.
Set the right price
With the help of the information around competitors and profits, you will be able to set the right price for your product.