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Distinguishing between companies according to whether they market services or goods has only limited utility. A more useful way to make the same distinction is to change the words we use. Instead of speaking of services and goods, we should speak of intangibles and tangibles. Everybody sells intangibles in the marketplace, no matter what is produced in the factory.
A version of this article appeared in the May 1981 issue of Harvard Business Review.
In marketing terms, the word “product” essentially refers to anything that the organization sells to the market. As you can guess, a product is an output of the firm’s production system. As a result, there is a general perception that a product is a physical good.
But in marketing terms, a product can also be extended to services, ideas, locations, people, and so on. Please review the article on ‘what can be marketed?’ in order to see the full list of the scope of a product.
Formal definitions of a product
To better understand what is a product, let’s look at some formal definitions of a product found in marketing textbooks. Here are three example definitions of a product in marketing terms:
- A product is the need-satisfying offering of a firm. Perreault, Cannon and McCarthy
- A product is anything that is of value to a consumer and can be offered through a voluntary marketing exchange. Grewal and Levy
- A product is a good, service or idea consisting of a bundle or tangible and intangible attributes that satisfies consumers’ needs and is received and exchanged for money or something else of value. Kerin, Hartley and Rudelius.
What do these product definitions have in common?
At first glance, these definitions of a product may seem quite different, but let’s now look more closely at the two key similarities between these definitions.
Meets a consumer need or provides value to a customer
The first commonality is that a product is designed to meet a customer’s need and to provide value (benefits) to the consumer. Please note the similar phrases in each product definition, as follows:
- “Of value to a consumer”
- “The need-satisfying offering”
- “Satisfies consumers’ needs”
Consumers can obtain through an exchange
The second point of agreement is that a product is made available for customers to obtain via a marketing exchange (nearly always exchanging money and sometimes information and time), as highlighted in the following excerpts from the definitions.
- “Offering of a firm”
- “Offered through a voluntary marketing exchange”
- “Is received and exchanged”
A straightforward definition of a product
A simple definition of a product (in marketing terms) is “anything that meets a consumer and provides value that can be obtained by a customer through a marketing exchange”.
RELATED TOPICS
Product as the center of the marketing mix
Demand, cost, profit, and competition influence the initial consideration of the approximate price level for a product or service. Demand-oriented pricing approaches stress consumer demand and revenue implications of pricing and include eight types: skimming, penetration, prestige, price lining, odd-even, target, bundle, and yield management. Cost-oriented pricing approaches emphasize the cost aspects of pricing and include three types: standard markup, cost-plus, and experience curve pricing. Profit-oriented pricing approaches focus on a balance between revenues and costs to set a price and include three types: target profit, target return-on-sales, and target return-on- investment pricing. And finally, competition-oriented pricing approaches stress what competitors or the marketplace are doing and include three types: customary; above-, at-, or below-market; and loss-leader pricing. Although these approaches are described separately, some of them overlap, and an effective marketing manager will consider several in searching for an approximate price level.