Product Management Terminology
With a non-standardized list of industry terms, we thought it would be helpful to define the terminology. If you have any questions or wish to add to the list, contact us.
Configuration
An instance of a product with all the feature choices, which the customer can select.
Configuration Volatility
The period-to-period fluctuation in the configuration level demand, due to the large number of "a la carte" choices offered to customers.
Demand Fragmentation
The number of ordered configurations for a product line over a given period. The number of configurations can be very large if the customers have a large number of ‘a la carte’ choices. High demand fragmentation leads to high frequency one-of-kind configurations, high configuration volatility and high error in forecasting.
Demand Variability
The percentage of demand that changes period-to-period at the configuration level.
Demand Driven Product Management (DDPM)
An integrated approach to product management that delivers the power to maximize sales velocity by optimizing the product configuration mix based on customer sales.
Demand Driven SKUs
Constantly emerging SKUs driven by customers ever changing feature choice combinations.
Feature
A feature is an attribute of a product that a customer can select. For example: in a car you could have a CD player, Blue Tooth, satellite radio, etc. Within a feature there may be multiple levels of choices or options.
Match Rate
Percentage of orders that can be satisfied with the current product mix. A high match rate implies that the feature choice on the product mix aligns with the customer choice. A high match rate translates to higher order fulfillment and improved inventory turns.
Option
A feature may have many alternate choices. These choices are called options. For example: Seat is a feature of a car. The choices for seat within the "Seat feature" are cloth seat, leather seat, electric seat, heated seat, etc.
Option Cluster
Customers buy products based on feature choices available on the product. The option cluster is a group of options that have a strong customer-buying pattern. For example: sports sedan with leather seats, high-end stereo, 6-cylinder engine and Blue Tooth.
Option Trend
The change in adoption rate for a particular option of a product. The option trend is a strong metric for customer preference trend and demand change.
Product Complexity
The impact of product proliferation on a business. The impact is in additional processes, personnel, etc.
Product Mix
Set of distinct configurations offered to the customers in the product portfolio or product offering. This is also called "customer orderable combinations."
Sales Velocity
The time from when a product hits the point of sale to the sales transaction. This is a proxy for customer demand in a build-to-stock market. Products with the right feature selection will sell fast and hence have a high sales velocity, High sales velocity results in high inventory turns.
SKU
Stock Keeping Unit; also known as a finished good or unique configuration, it is the end product available to the customer.
Take Rate
The percentage of orders with a certain option. For example: if 45% of the orders have DVD player, the take-rate for DVD player is 45%. This is also called Attach-rate or Penetration-rate.