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Product (business)
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The noun product (prod'kt or-ukt) is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce (pr doos' or -dyoos') from the Latin produce(re), (to) lead or bring forth. Since 1575, the word "product" has referred to anything produced. Since 1695, the word has referred to "thing or things produced". The economic or commercial 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.
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Encyclopedia
The noun product (prod'kt or-ukt) is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce (pr doos' or -dyoos') from the Latin produce(re), (to) lead or bring forth. Since 1575, the word "product" has referred to anything produced. Since 1695, the word has referred to "thing or things produced". The economic or commercial 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. 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 general usage, product may refer to a single item or unit, a group of equivalent products, a grouping of goods or services, or an industrial classification for the goods or services.
Equivalent or interchangeable product
The specific meaning of generic product names varies over time and location. Some products such as bread, milk, and salt have been bartered or sold for centuries, but the meaning of "bread" or "milk" as a product varies. The technologies were not available for pasteurization and homogenization of milk until the 20th century, and these food processing technologies are not used worldwide. Bread varies by type of grain, specific recipe, and size of loaf. In 1924, Morton Salt introduced iodized table salt, a product previously unavailable. Since 1961, pork bellies have traded on the Chicago Mercantile Exchange, but due to selective breeding and changes in hog feed, today's pork belly is not exactly equivalent to a 1960s pork belly. Certain products may be considered equivalent or interchangeable for the purposes of trade, record-keeping, and reporting, despite gradual changes in the product or variations among geographical locations.
The distinction between a new product and a minor modification to an existing product is not always clear. Certain products have a product life cycle in which the supply and demand for the product increases then decreases over time. The demand for certain food products such as bread will tend to increase with population, but the supply and demand for a specific brand of bread may decline over time. In the United States, a patent for a product is recognition that the product is new in a legal sense. "Utility patents may be granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof; design patents may be granted to anyone who invents a new, original, and ornamental design for an article of manufacture; and, plant patents may be granted to anyone who invents or discovers and asexually reproduces any distinct and new variety of plant."
In business an equivalent, interchangeable or fungible product is defined by a company and its customers. A company's inventory is a set of physical products, or goods, that are usually recorded as counts of equivalent unique products, such as 50 8-oz cans of salsa. The equivalent unique products may be assigned a product code or item code, such that "50 8-oz cans of salsa" is recorded as "50 17766443" on the company's records. If the company carries two brands of 8-oz salsa, it may assign separate item codes to the brands, or it may use a single item code for both brands.
Product numbers in many businesses clearly identify the product by linking to a full description.
Product identification codes such as Universal Product Code, Global Trade Item Number and International Standard Book Number allow multiple businesses to use a single product identification code to indicate one unit of a mass-produced product.
Lots or batches
Lot numbers, batch numbers or control numbers are used in manufacturing to sub-divide equivalent product by its manufacturing batch or run. The publishing page of a book lists the printing run that produced that unique book. Industries such as pharmaceuticals,
food processing, and petroleum use some form of control number to sub-divide equivalent product for product testing or expiration dating. See also shelf life. Two separate lots may vary slightly, but they are not assigned separate product identification codes because the variation does not give them significantly different features or uses as products.
Barcode labels on vaccines in the UK contain a product code but do not currently contain the batch number or expiry date. Inventory records of controlled substances in the United States must include a "batch number or other appropriate identifying number".
Product groups
Categories
In its online product catalogue, retailer Sears, Roebuck and Company divides its products into departments, then presents products to shoppers according to (1) function or (2) brand. Each product has a Sears item number and a manufacturer's model number. The departments and product groupings that Sears uses are intended to help customers browse products by function or brand within a traditional department store structure.
Sizes and colors
A catalog number, especially for clothing, may group sizes and colors. When ordering the product, the customer specifies size, color and other variables.
example: you walk into a store and see a group of shoes and in that group are sections of different colors of that type of shoe and sizes for that shoe to satisfy your need.
Product line
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."
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". Within the insurance industry, product lines are indicated by the type of risk coverage, such as auto insurance, commercial insurance and life insurance.
Service types
National and international product classifications
Various classification systems for products have been developed for economic statistical purposes. The North American Industry Classification System (NAICS) classifies companies by their primary product. The European Union uses a "Classification of Products by Activity" among other product classifications. The United Nations also classifies products for international economic activity reporting.
The Aspinwall Classification System (Leo Aspinwall, 1958) classifies and rates products based on five variables:
- Replacement rate (How frequently is the product repurchased?)
- Gross margin (How much profit is obtained from each product?)
- Buyer goal adjustment (How flexible are the buyers' purchasing habits with regard to this product?)
- Duration of product satisfaction (How long will the product produce benefits for the user?)
- Duration of buyer search behaviour (How long will consumers shop for the product?)
The National Institute of Governmental Purchasing (NIGP) developed a commodity and services classification system for use by state and local governments, the NIGP Code. 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. Applications of the NIGP Code include vendor registration, inventory item identification, contract item management, spend analysis and strategic sourcing.
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