Hierarchical Analysis of Industries
Classes, categories, forms, brands Product hierarchy is a term which defines the way a product is relative to other products in the same industry. It guides the path and process a consumer takes to determine the products we choose and we eventually purchase. To start off we look at a basic need that our ultimate choice serves. After we identify the need and determine which industry will satisfy it we are faced with decisions. Which class of products in that industry will deliver that type of product?
The different classes all serve a need that is relative to each other but may not serve the specific need. This is where we identify which category of product we are looking for. Here we will find products that serve similar functions and may be marketed to the same customer groups. To further narrow down our choices we must then select a product form that may serve a specific function. This is where we find the exact product that fills the ultimate need. Finally we make our end choice by choosing the brand of that product that will purchase.
The actual number of levels in the hierarchy depends on how much more detailed or defined the need is. For example if someone wants soap and their only need is to clean something generic, they wouldn’t dig deeper into the types of soap they are looking for rather than looking for a specific type of cleaning agent for granite counter tops for example. To further explain and give examples of how a product falls into a product hierarchy I will look at five different industries. 1. In the first instance the consumer’s end goal is to open a checking account and the basic need is security.
A consumer would first decide which area of the industry they need. The industry is divided into 4 classes: Savings, Diversified Investments, Insurance and Real Estate. Since our need falls under the first class of “Savings” it is not necessary to break down the other branches of the industry and explain all the choices they have.
In order to open a checking account for example they would decide at the class level what type of institution would suit their needs. At the category level there are choices such as, should you use a credit union or a traditional commercial bank. Both serve the same general service but credit unions tend to be smaller and more community or organization oriented. They might be affiliated with a certain geographic area or group of professionals like teachers for example. They are also non-profit financial institutions owned by their members and run by a board of directors which are typically their members.
They appear to offer a more personal service which is their point of marketing it. Banks could be as small as community based or as large as national organizations but they are for-profit businesses. The board of directors of a bank is chosen by the stockholders (private investors). Also will you need on-line or in-person services. There are many institutions which advertise to fill the needs of one or the other (or both) of these consumers. For example a business professional that travels often would not have the time to physically stop by a bank branch to take care of their needs.
In this case, a full service on-line institution would better serve that customer. The customer who needs to sit down with a customer service representative to assist them in some way would possibly choose a bank branch for in-person service. Once that decision is made a customer would determine which specific form of the product is necessary. In this industry for example, a customer might be looking for service in checking, savings, certificate of deposits, mortgages or bill paying, etc.
At this level I believe the company uses marketing strategies to show the benefits of their brand and the attributes of their products which ultimately will help the consumer choose a specific brand or in this case institution such as CHASE BANK for example. 2. The end goal is to purchase running shoes but the basic need we are looking to fill here is to clothe ourselves. The general industry that running shoes are in is the Apparel industry. The class that this need falls into could be either men’s, women’s or children’s apparel. A similar need can be met in either of these classes but for a different target market. There is no substitutability at this level. In this particular instance it would be a straight forward decision based on the gender of the person who needs the product. At the next level a consumer will have specific categories that their item will fall under. All the items at this level serve a more defined function; in this case they would be to clothe us, but just at the overall level.
This is a good example of how an industry hierarchy can have many levels. Within each of the different items that fall in this category there are many choices you may have to get to fulfill the ultimate need before you even pick the specific form of the item. For example, Clothing is one type in this category but within this you may have to decide from outerwear, underwear, pants, skirts, dresses, shirts, etc. Accessories are even broader encompassing everything from hats to belts, scarves, ties, socks and so on. The category level that running shoes fall into is shoes. Once we know exactly what we want we decide on the specifics.
This is the product form and where our running shoes fall. If we were looking for casual shoes, dress shoes, sandals or athletic shoes we would make that decision at the form level. You cannot substitute different forms at this level because they would not serve the purpose intended. You could not wear dress shoes to go jogging. Once again the detail of this level is open for discussion because there technically are more options once we select the athletic footwear since running shoes are just one type. There are endless types available based on the activity they are being used for.
Finally we may choose a brand such as Asics based on brand awareness. 3. The basic need we are looking to fill here transportation but the end goal is to purchase an automobile. The transportation industry is broken down into 3 main classes: ground transportation which is auto, rail or bus; sea/ships or air/planes.
All choices result in the movement of goods or people but depending on the purpose one might choose one over another. In this instance the end result is to purchase a car so we will just look at ground transportation. The main categories within the auto class are cars, trucks, vans and motorcycles. Since these different forms of transportation are pretty cut and dry we know that vehicle we wish to purchase will be met in the car category. The Form level is where substitutability is introduced. We now have choices of the type of vehicle we wish to purchase such as cars/trucks/vans/SUV/motorcycles, etc.
Of course, we can further break down the type cars by 2 door, 4 door, sedan, hatchback, etc. There is great substitutability at this level depending on our need and taste. Finally our ultimate choice is based on brand which has strong customer loyalty in the auto industry. 4. The basic need in the publishing industry is to inform and educate the consumer and our purpose is to purchase a newspaper for example.
All the items in the class category of publishing serve a need that is similar to each other which is to inform us but in a very general way. They may not meet our specific need. We have to select the category that our meets our needs. Books are acquired and saved as entertaining or reference items whereas periodicals are used to inform us.
The commercial end of publishing usually has a different end user like a manufacturing company or business that is looking to advertise or get knowledge out to the consumer. At the next level the consumer will decide which of these categories best suits their needs. Here the choices involve which mode type of publication would be necessary. Either books/periodicals/brochures, etc. The form which is chosen will differentiate the mode by which we will use the product. There is more product substitutability at this level because consumers may us different mediums of obtaining the same information.
For example by paper print/internet/digital and finally the brand choice could be based on the loyalty of a company like a newspaper you always read and purchase. 5. The basic need is for personal care and the specific purpose in this case is to buy shampoo.
We can differentiate the personal care industry by determining wants (luxury items) and needs (essential items). There is a small margin dividing these classes based on what you perceive as an essential item. In this instance shampoo is considered essential so it falls into the personal hygiene class. The items in the category class all serve a similar function but cover a wide variety of needs. To be more specific, all skin care items may be marketed to the same consumers but they may not serve a specific or desired need.
To seek the actual product we are looking for we must determine which form of the product is required. Within the hair care line we can distinguish between moisturizing, body or dandruff shampoos for example. And ultimately we choose the brand based on pricing, product loyalty or other brand choice factors. Before we make a conscious decision to make a purchase, many of our decisions are made for us based on our needs. We decide which class and category of a product we choose to fill our basic need and then differentiate our choices based on what form of the product we eventually purchase.
Finally we choose a brand based on how these products are marketed to us.
References
- http://en. wikipedia. org/wiki/Global_Industry_Classification_Standard
- http://www. citeman. com/1587-product-hierarchy-and-product-line-length. html https://getsatisfaction. com
- http://www. msci. com/ http://www. wdfi. org/wca/consumer_credit/credit_guides/DifferencesBanksCreditUnionsSavingsInstitut
- http://www. ions. htm http://www. prospects. ac. uk/industries_publishing_overview. htm
