Product (business)

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In marketing, a product is anything that can be offered to a market that might satisfy a want or need.[1] In retailing, products are called merchandise. In manufacturing, products are bought 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.

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.

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.

Product classification[edit]

A product can be classified as tangible or intangible. A tangible product is a physical object that can be perceived by touch such as a building, vehicle, gadget, or clothing. An intangible product is a product that can only be perceived indirectly such as an insurance policy.

Intangible Data Products can further be classified into Virtual Digital Goods ("VDG") that are virtually located on a computer OS and accessible to users as conventional file types, such as JPG and MP3 files, without requiring further application process or transformational work by programmers, and as such the use may be subject to license and/or rights of digital transfer, and Real Digital Goods ("RDG") that may exist within the presentational elements of a data program independent of a conventional file type, commonly viewed as 3-D objects or a presentational item subject to user control or virtual transfer within the same visual media program platform. Open Source Code, GNU Linux, or even Android, may manipulate and/or convert base Virtual Digital Goods ("VDG") into process-oriented Real Digital Goods ("RDG"), as part of an application process or manufactured service that may be viewed on Personal Data Assistant ("PDA") or other hand-held tangible devices or OS computer.

A third type in this is services. Services can be broadly classified under intangible products which can be durable or non durable.Services need high quality control, precision and adaptability. The main factor about services as a type of product is that it will not be uniform and will vary according to who is performing, where it is performed and on whom/what it is being performed.

By use[edit]

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.[2] 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.[3]

By association[edit]

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."[4] 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".[5] Within the insurance industry, product lines are indicated by the type of risk coverage, such as auto insurance, commercial insurance and life insurance.[6]

National and international product classifications[edit]

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).[7] The European Union uses a "Classification of Products by Activity" among other product classifications.[8] The United Nations also classifies products for international economic activity reporting.[9]

The Aspinwall Classification System [10][11] 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)[12] developed a commodity and services classification system for use by state and local governments, the NIGP Code.[13] 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.[14] Applications of the NIGP Code include vendor registration, inventory item identification, contract item management, spend analysis and strategic sourcing.

Product Model[edit]

A manufacturer usually provides an identifier for each particular type of product they make, known 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.[15] 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).[16]

Because of the huge amount of similar products in the automotive industry, there is a special kind of defining a car with options (marks, attributes), that represent the characteristics features of the vehicle. A model of a car is defined by some basic options like body, engine, gear box and axles. The variants of a model are built by some additional options like color, seats, wheels, mirrors, trims, entertainment and assistant systems etc. Options, that exclude each other (pairwise) build an option-family. That means, that you can choose only one option by each family and you have to choose exactly one option. This kind of product definition fulfill the requirements of an ideal Boolean Algebra and can be helpful to construct a product configurator.[17] Sometimes, a set of options (car features) are combined to an automotive package and are offered by a lower price. A consistent car definition is essential for the production planning and control in the automotive industry, to generate a master production schedule,[18] which is the fundamental for the enterprise resource planning.

In addition, a specific unit of a product is usually (and has to be) identified by a serial number, which is necessary to distinguish products with the same product definition. In the case of automotive products it's called the Vehicle Identification Number VIN, an international standardized format.

Literature[edit]

  • Herlyn, W.: PPS im Automobilbau - Produktionsprogrammplanung und -steuerung von Fahrzeugen und Aggregaten. Hanser Verlag, München, 2012 - ISBN 978-3-446-41370-2

See also[edit]

References[edit]

  1. ^ Kotler, P., Armstrong, G., Brown, L., and Adam, S. (2006) Marketing, 7th Ed. Pearson Education Australia/Prentice Hall.
  2. ^ Sears online, sears.com.
  3. ^ 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.
  4. ^ Kotler, Philip; Gary Armstrong (1989). Principles of Marketing, fourth edition (Annotated Instructor's Edition). Prentice-Hall, Inc. pp. 639 (glossary definition). ISBN 0-13-706129-3. 
  5. ^ "2002 Economic Census, Finance and Insurance" US Census Bureau, 2002, p.14.
  6. ^ Insurance carrier product lines at DMOZ
  7. ^ North American Product Classification System, U.S. Census Bureau
  8. ^ Eurostat classifications, ec.europa.eu.
  9. ^ United Nations product classifications, unstats.un.org.
  10. ^ Leo Aspinwall, 1958, Social Marketing AED Resource p. 45
  11. ^ 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
  12. ^ National Institute of Governmental Purchasing, nigp.org
  13. ^ NIGP Code
  14. ^ NIGP Code sample
  15. ^ Dyson: Help with your Dyson
  16. ^ SOTW, Celebird, et al. "Model Number Vs. MPN". Google Merchant Center: Help forum. August 31, 2009, accessed September 6, 2011.
  17. ^ Herlyn: PPS im Automobilbau, Hanser Verlag, München, 2012, S. 81-120
  18. ^ Herlyn: PPS im Automobilbau, Hanser Verlag, München, 2012, S. 122 ff.

External links[edit]