4.2 Three Kinds of Product

Products are purchased according to an individual’s needs, wants and desires. The problem is that the ability of products to fulfil these urges is only known to the individuals, which businesses can only guess at. Marketing, sales forecasting, demographics and a host of other science-based mechanisms are designed purely to assist in the guesswork.

In the latter half of the twentieth century, technology was applied to improve the art of guesswork, or to increase the effectiveness of the instruments measuring guesswork. A new value proposition has emerged for technology with the advent of the Internet; that of reducing or eliminating the guesswork in sales forecasting and other marketing activities. However, this seemingly exciting value proposition entails developing an in-depth understanding of the changing behaviours of customers around the world. Our current product/desire fulfilment behaviour is a result of sales and marketing efforts during the course of the twentieth century, most of which were heavily influenced by western culture. These efforts centred on making individuals aware of a product, then convincing them that the acquisition of these products or services was a necessity. What is or is not a necessity is at the heart of Internet technology’s value proposition, requiring us to understand the buying habits of customers worldwide.

Necessity and luxury go hand in hand; defining one leads to a definition of the other. Werner Sombart puts the issue in the following context:

Luxury is an expenditure in excess of the necessary. Obviously, this is a relative definition which becomes intelligible only when we know what constitutes ‘the necessary.’ This again may be determined in either of two ways. We may view ‘the necessary’ subjectively, with reference to some judgement of value (for example ethical or aesthetic), or we may attempt to establish an objective standard to serve as the measure of ‘the necessary.’ Such a yard stick is found either in man’s physiological needs or in what may be called his cultural wants. The former vary according to climate; the latter, according to the historical period. As regards cultural wants, or cultural needs, the line may be drawn at will; however, this arbitrary act should not be confused with the above-mentioned subjective evaluation of ‘the necessary.’ In this case, luxury has two aspects: qualitative and quantitative.^[122]

Sombart’s discussion about the importance of culture in the context of purchasing is extremely relevant to firms which, because of the use of the Internet, now find themselves in a global environment in which North American models find difficulty meeting the expectations of customers in diverse geographies. Different types of product, such as commodities, luxuries and staples, are influenced to a greater or lesser degree by cultural idiosyncrasies. Table 4.1 combines the concept of necessary and luxury with implications of cultural differentiation.

Product types – or product classes – can be grouped by a variety of attributes related to the use of that product by customers within geographic or cultural boundaries. On the Internet, products and services fall into three broad categories of products, according to consumer behaviour:

Products you will buy because you already know them (such as stationery, airline tickets, CDs, books and so on)
Products you have to experience once, such as a shirt where you experience the attributes of the product (that is, quality of material, colour and so on) and you purchase the second item via the Internet

Products that you will not buy until you experience them (such as a car and so on) but you will price compare, search for features or options, make the final purchase decision once you have experienced the product and then use the Internet to facilitate the transaction (that is, register at the Department of Motor Vehicles, purchase insurance and so on).

Table 4.1: Luxury versus necessary goods
			Necessary		Luxury
		Physiological	Cultural	Qualitative	Quanitative
Culture	United States	Means of transportation due to long distances between home and work	Basic car	Luxury car	Luxury car plus urban vehicle plus motorbike
	Europe	Means of transportation due to long distances between home and work	Train or car	Luxury car	Two luxury cars
	Africa	Distances between home and work are small	Bicycle	Car	Two cars
	Asia	Distances between home and work are small	Bicycle of old car	New car	Luxury car

Many important lessons can be learned from how consumers typically behave, and how products need to be structured. As I argued elsewhere,^[123] the last few years of eCommerce revealed that consumers often migrate between these categories as their level of trust increases. Consumer product- selection behaviour can be correlated with product categories to design the overall customer experience or level of customer engagement. Each type of product can be purchased using Internet technologies: products you know, products you have to experience once using the Internet to resupply, and products that you may not buy, but the Internet will facilitate their purchase with information. Each type of product has an optimum corresponding level of customer engagement: interactivity, intimacy and immersion.

‘Products you know’ are products and services with which you are familiar (such as a book or a CD which you may want to purchase); in this case, you go to the Internet simply to make the purchase or place a future order. Retailers such as Amazon.com have found that product-linking presents the consumer with additional choices for cross-selling. For example, when you buy a book, Amazon’s website suggests other titles which you may consider buying. For financial services, this can be a powerful cross-selling tool in which a customer can be advised that other customers in the same income, lifestyle and/or financial position recently purchased a home and a certain insurance on the property, contents and liability, establishing a beneficial connection between buyers, owing to their common interests or purposes.

‘Products that need to be experienced once’ centre on developing a tactile relationship or, in the case of services, an experience in order to inform and make oneself acquainted with the product, for example purchasing clothes, shoes and other accessories. Given that the size and make of clothes vary from vendor to vendor, it is useful to try online shopping once, select one’s size and then remember this size for future purchases (websites could help customers by always remembering their last purchases and sizes for future references). The UK’s Top Shop and Debenhams have websites which do not allow much customer choice when online shopping. Past Times, on the other hand, has a much wider variety of products, which can be purchased in store or online, and the website provides the necessary information to make the customer confident in the purchase.

‘Products you select and facilitate’ require a longer consumer education process and typically characterize higher priced items in which visual examination and tactile experience of the product are essential to the purchase, but the decision to purchase can be helped by additional information, and the transaction of the purchase can be accompanied by the need for other services. For example, the purchase of a car does not necessarily require physical inspection. However, people often want to test drive a car before buying it. The Internet can be used to find the car of choice, limit the options and pinpoint a dealer or person wanting to sell the vehicle. Using the Internet, car registration with the national or local authorities can also facilitate additional transactions that support the purchase, car insurance policy can be obtained, and financing can be prearranged. Firms such as CarMax and Autobytel were pioneers in this process.

Product Types and Customer Experience

In summary, these three product categories relate directly to the customer experience in transacting with the providing organization, and are composed of a variety of customer-driven fulfilment preferences. Obviously, as the complexity of the product increases, the need to educate the customer rises, and the underlying technologies to deliver these products can be vastly different.

Organizations in the retail industry have developed ‘click-and-mortar’ strategies. Retail customers adopt technology at a rate slightly ahead of banking technologies, and their buying habits are more impulsive for low-cost items and planned for higher priced, durable goods. Consumer and small business transactions take place within three types of environments surrounding a transaction: the interactive, the intimate and the immersed. Each environment offers the background for the customer experience by providing details on the item to be purchased, communicating pricing, displaying shipping options and in many cases describing the way in which the product can be used or applied. The environment is divided into two distinct domains: cyberspace and terraspace. Let us now turn to the levels of customer engagement in these domains.

^[122]W. Sombart, Luxury and Capitalism (Ann Arbor: University of Michigan Press, 1967) p. 59.

^[123]J. DiVanna, Redefining Financial Services: The New Renaissance in Value Propositions (Basingstoke: Palgrave Macmillan, 2002) pp. 201–3.