Published by MBA Skool Team, Last Updated: July 13, 2022
What is Product?
Product is an offering which may be produced by a manufacturer, collected from nature or created virtually to provide a certain benefit or value to the customer. A product may be a physical or a non-physical good or service, made by a company to be sold to a customer fulfilling specific customer's stated or unstated needs. It has a benefit which completes a customer's need for which a customer pays. A finished set of goods or input materials or even services are classified as products.
Products may have different meanings in different contexts. In typical manufacturing scenario, products are finished goods which are kept in inventory after being processed from raw materials. For retail, they may be merchandise. For Software companies, products may be virtual offerings like ERP/CRM etc.
Products have been in the business since we remember. Products as commodities like flour, rice, cardamom etc. have been traded over hundreds of years. Different types of products are used by billions of people across the globe to meet needs and derive value. From food to clothing and from travel to care, products are integrated in our system. Every customer cannot create a solution for their need hence created and packaged products which are sold are so important to meet those needs in return of value e.g. Money.
The main objective of a company is to fulfill the need of a customer. Products are made by companies to be sold to customers, who find some utility in using those goods or services.
A product can be formed by multiple ways:
1. There is a customer need which is fulfilled by building a product around it.
2. A certain good or commodity is produced already and then the customer market is created.
Each and every product has a defined lifecycle depending upon its usage, industry, market conditions, competition etc. A toothpaste, detergent or biscuits are FMCG produced goods which are used up completely in a period of one month. On the other hand, a shirt, watch car etc. may last for multiple years. A concept called PLC or product life cycle is used to understand the life time of a product.
Types of Products
There are many ways to classify products. They can be grouped based on their physical appearance or utility.
The two broad types in terms of physicality are tangible & intangible.
1. Tangible products
These are physical goods which a person can touch & interact with. These products can be tried, tested and can be experienced.
For example, a car, pen, book etc. are tangible or physical goods which a person can touch, hold etc.
2. An intangible product
This is one which doesn’t have any physical presence. In modern times, mobile apps, software, MP3 songs, images etc. can be defined as intangible goods which are not present in the actual physical world but one can interact with them in virtual world.
On the other hand, products classified based on utility are known as consumer or industrial goods.
1. Consumer goods
These products are directly used by customers. E.g., TV, FMCG goods, cars, shirts etc. These are also known as B2C products.
2. Industrial goods
These products include raw materials, fabricating goods, equipment & accessories used for manufacturing. These may also be classified as B2B products.
Levels and Examples of a Product
When manufacturing goods or creating a service, the 5 main layers are:
1. Core product
The main benefit for which a customer pays for. This would include the core feature of the product which makes it the product to meet the need.
Example: A feature phone which meets the need for calling
2. Generic product
This includes the most basic version of the product with some features which meet the need of the customer. It may have some attributes but absolutely necessary for meeting the core need.
Example: A feature phone which meets the need for calling and provides basic functions like speed dial, phone book etc.
3. Expected product
This is the level which the customer would normally expect in the market from a product. It may be subjective to the customer or the market in which the product is being sold. This may have attributes related to ease of use, speed, cost etc.
Example: A smartphone with applications, games, utility etc.
4. Augmented product
This is the outer level of any goods consisting of differentiating factors like new features, warranty, services, delivery, customer care etc.
Example: A smartphone with additional features like best in class camera, stable operating system, high speed, choice of colors etc.
5. Potential product
This is a concept which shows the short term as well as long term future of the product.
Example: A smartphone with upgradable OS and features in future
Hence, this concludes the definition of Product along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
Browse the definition and meaning of more similar terms. The Management Dictionary covers over 2000 business concepts from 5 categories.