Product (business)


Product (business)

In general, the product is defined as a "thing produced by labor or effort"[1] or the "result of an act or a process",[2] and stems from the verb produce, from the Latin prōdūce(re) '(to) lead or bring forth'. Since 1575, the word "product" has referred to anything produced.[3] Since 1695, the word has referred to "thing or things produced".[4]

In economics and commerce, products belong to a broader category of goods. The economic meaning of product was first used by political economist Adam Smith.

In marketing, a product is anything that can be offered to a market that might satisfy a want or need.[5] In retailing, products are called merchandise. In manufacturing, products are purchased as raw materials and sold as finished goods. Commodities are usually raw materials such as metals and agricultural products, but a commodity can also be anything widely available in the open market. In project management, products are the formal definition of the project deliverables that make up or contribute to delivering the objectives of the project. In insurance, the policies are considered products offered for sale by the insurance company that created the contract.

A related concept is subproduct, a secondary but useful result of a production process.

Dangerous products, particularly physical ones, that cause injuries to consumers or bystanders may be subject to product liability.

Contents

Product classification

By properties

Products can be classified as tangible or intangible. A tangible product is a physical object that can be perceived by touch such as a house, automobile, computer, pencil. An intangible product is a product that can only be perceived indirectly such as an insurance policy.

By use

In its online product catalog, retailer Sears, Roebuck and Company divides its products into "departments", then presents products to potential shoppers according to (1) function or (2) brand.[6] Each product has a Sears item-number and a manufacturer's model-number. Sears uses the departments and product groupings with the intention of helping customers browse products by function or brand within a traditional department-store structure.[7]

By association

A product line is "a group of products that are closely related, either because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges."[8] Many businesses offer a range of product lines which may be unique to a single organization or may be common across the business's industry. In 2002 the US Census compiled revenue figures for the finance and insurance industry by various product lines such as "accident, health and medical insurance premiums" and "income from secured consumer loans".[9] Within the insurance industry, product lines are indicated by the type of risk coverage, such as auto insurance, commercial insurance and life insurance.[10]

National and international product classifications

Various classification systems for products have been developed for economic statistical purposes. The NAFTA signatories are working on a system that classifies products called NAPCS as a companion to North American Industry Classification System (NAICS).[11] The European Union uses a "Classification of Products by Activity" among other product classifications.[12] The United Nations also classifies products for international economic activity reporting.[13]

The Aspinwall Classification System [14][15]classifies and rates products based on five variables:

  1. Replacement rate (How frequently is the product repurchased?)
  2. Gross margin (How much profit is obtained from each product?)
  3. Buyer goal adjustment (How flexible are the buyers' purchasing habits with regard to this product?)
  4. Duration of product satisfaction (How long will the product produce benefits for the user?)
  5. Duration of buyer search behavior (How long will consumers shop for the product?)

The National Institute of Governmental Purchasing (NIGP)[16] developed a commodity and services classification system for use by state and local governments, the NIGP Code.[17] The NIGP Code is used by 33 states within the United States as well as thousands of cities, counties and political subdivisions. The NIGP Code is a hierarchical schema consisting of a 3 digit class, 5 digit class-item, 7 digit class-item-group and an 11 digit class-item-group-detail.[18] Applications of the NIGP Code include vendor registration, inventory item identification, contract item management, spend analysis and strategic sourcing.

Model

A manufacturer usually provides an identifier for each particular type of product they make, know as a model, model variant, or model number. For example, Dyson Ltd, a manufacturer of appliances (mainly vacuum cleaners), requires customers to identify their model in the support section of the website.[1] Brand and model can be used together to identify products in the market. The model number is not necessarily the same as the manufacturer part number (MPN).[19]

A specific unit of a product is usually identified by a serial number.

See also

Footnotes

  1. ^ Random House Dictionary, 1975
  2. ^ Glossary of the terms related to quality assurance from the Tempus Joint European Project for the Development of Quality Assurance
  3. ^ Etymology of product, etymonline.com.
  4. ^ Etymology of produce
  5. ^ Kotler, P., Armstrong, G., Brown, L., and Adam, S. (2006) Marketing, 7th Ed. Pearson Education Australia/Prentice Hall.
  6. ^ Sears online, sears.com.
  7. ^ When an online Sears customer goes to the "Parts and accessories" section of the website to find parts for a particular Sears item, the "model number" field actually requires a Sears item number, not a manufacturer's model number. This is a typical problem with product codes or item codes that are internally assigned by a company but do not conform to an external standard.
  8. ^ Kotler, Philip; Gary Armstrong (1989). Principles of Marketing, fourth edition (Annotated Instructor's Edition). Prentice-Hall, Inc.. pp. 639 (glossary definition). ISBN 0137061293. 
  9. ^ "2002 Economic Census, Finance and Insurance" US Census Bureau, 2002, p.14.
  10. ^ Insurance carrier product lines at the Open Directory Project
  11. ^ North American Product Classification System, U.S. Census Bureau
  12. ^ Eurostat classifications, ec.europa.eu.
  13. ^ United Nations product classifications, unstats.un.org.
  14. ^ Leo Aspinwall, 1958, Social Marketing AED Resource p. 45
  15. ^ A history of schools of marketing thought, Eric H. Shaw, D.G. Brian Jones, Marketing theory Volume 5(3): 239–281, 2005 SAGE, p. 249
  16. ^ National Institute of Governmental Purchasing, nigp.org
  17. ^ NIGP Code
  18. ^ NIGP Code sample
  19. ^ SOTW, Celebird, et al. "Model Number Vs. MPN". Google Merchant Center: Help forum. August 31 2009, accessed September 6 2011.

Embedded links

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