Thus, the overriding objective of Phase I of the initiative is to systematically explore the development of
a formal classification system for service products that can be used throughout the public and private
communities of users to coordinate the collection, tabulation, and analysis of data on the value of the
detailed products sold or produced for final consumption by selected service industries and on the prices
charged for those products. Although preliminary, the results from Phase I will be available to guide the
collection of data for service products in the affected industries during the 2002 Economic Census. In
contrast to Phase I, the ultimate objective of Phase II of the initiative will be to develop an agreed-upon,
integrated, and comprehensive list of products, product definitions, and product codes that (1)
encompasses the products of both goods- and service-producing industries alike and (2) accommodates
a demand-side/market-oriented classification framework for grouping and aggregating these products.
Guiding Principles
The ECPC is proposing three general principles to guide the overall process of classifying the products
produced by industries:
1. An understanding of the production process of the reporting units included in the respective industries
is a required first principle for identifying and defining the product(s) actually produced for final
consumption by those industries.(5)
2. The aim of the product classification process should be to identify, define, and classify the final
products produced and transacted by the reporting units within each industry. The final products of
reporting units in an industry are those that are created and transacted (sold or transferred) by the
reporting units to economic entities outside of the individual reporting units.
3. The classification of products produced by industries should be based on a market-oriented, or demand-based,
conceptual framework.(6)
With respect to the first principle, the ECPC believes it is necessary to approach the process of product
classification for industries from the perspective of the production process because it provides the
necessary conceptual framework for: (a) identifying the activities performed by a given industry, (b)
facilitating an ordered consideration of information and competing hypotheses about the role of any
products derived from those activities in the production process, (c) developing informed judgements
about the final products produced by the industry, and (d) providing insights into the transaction unit that
is appropriate and feasible for measuring the respective products and the reporting unit that is
appropriate for collecting the data. Put simply, in order to satisfy the second principle, it is necessary to
distinguish the final products produced by a given industry's production process from the intermediate
outputs produced and consumed by that process. While this approach has significance for industries
generally, it is especially important in the case of service industries where, in contrast to
goods-producing industries such as manufacturing, there exists much confusion about what many service
industries do and how they do it.
Finally, once the products of the industries have been identified and defined, it is necessary to organize
those products according to a consistent classification principle that is acceptable and useful to all
segments of the data using community. The third principle reflects the ECPC's commitment to satisfy this
requirement in a manner that reflects the consensus reached on this issue by the three NAICS countries.
The guiding role of the third principle in classifying and grouping products was enunciated by Triplett
[1994a, p. 6], who noted that a product grouping system "should incorporate, and facilitate the analysis
of, the relationships among products - demand relations, substitution relations, marketing relationships,
uses by consumers or by other ultimate purchasers."
Guidelines for Product Identification in Service Industries
Identifying the final products of each industry is the first step in developing a product classification
system. Recognizing that this step can be difficult for many service industries, the ECPC intends that
private sector respondents to this Initiative and the classification committees will formulate proposals for
the products of a given service industry in the context of the following definitions and guidelines.
- Conceptual Definition of a Service Product: A service is a change in the condition of a person, or
a good belonging to some economic entity, brought about as the result of the activity of some other
economic entity, with the approval of the first person or economic entity.(7)
To correctly define the product(s) of a service industry it is essential to specify exactly what the
producer agrees to sell and what the customer agrees to buy. That is, a determination must be made of
what is implicitly or explicitly "contracted for" when a transaction takes place. Further, it is important to
distinguish between the output the industry produces and the activities carried out by the industry to
produce the output.(8)
- Final Service Product: The final products of reporting units in an industry are the service products
(simple, composite, or bundle) that are created and transacted (sold or transferred) by the reporting
units to other reporting units, enterprises, institutions or persons; domestic or international.
- Types of Service Products: The final service products may include one or more of the following broad types:(9)
(a) simple service: a standard service whose real output can often be measured in physical units or
counts; e.g., a traditional haircut or basic phone service.
(b) composite service: a product that embodies several distinct services that are produced together (by
virtue of regulations, production process, safety or hygiene requirements, or industry practice). The
customer is not free to pick and choose among the several services in the composite -- the consumer
buys all or none; e.g., a conventional hotel room rental includes maid service, salon haircuts include
shampooing, or the final product (diagnosis or course of treatment) created by a doctor's office visit may
embody a variety of required diagnostic services (see related discussion in section C below).
(c) service bundle: a product containing a collection of services negotiated between the service
provider and the customer and whose composition may vary by customer; e.g., traditional phone service
plus call waiting and/or caller ID, etc., a bundle of information services that can be transmitted through a
common medium (cable, satellite) and that may include voice, data and/or visual services, etc., or
different bundles of janitorial services, or legal services, or accounting services, etc.
- Product Detail: Identify and define products for your selected industry at a level of detail that
accords with prevailing marketing practices and record keeping practices in the industry.
Classification Committees
Phase I of the initiative will be accomplished through the creation of four classification committees (one
per sector) that will operate simultaneously and draw on the combined talent and resources of the
Federal statistical agencies. The ECPC also will strive to provide each committee with consultancy
support from private sector industry experts. The committees will implement a comprehensive product
classification process for each NAICS service industry in the Industry Appendix below. The process
will include:
1. Developing a model/description of the production process for each industry;
2. Identifying/defining the final products sold by each industry;
3. Developing formal definitions for the identified products; and
4. Proposing suggestions for organizing the products identified for each sector into a market-oriented
classification system that will allow users to:
a. identify the quantity and price(s) of each product produced by each industry,
b. aggregate common products across all industries, and
c. group and aggregate products in a manner that satisfies the demand-side classification framework
adopted by the three NAICS countries.
In addition, each classification committee will consider issues related to the unit of measurement and to
the feasibility of measuring and reporting data on output and prices for the products identified for the
respective service industries, including industry record-keeping practices and reporting units.
Donald R. Arbuckle,
Acting Administrator and Deputy Administrator,
Office of Information and Regulatory Affairs.
References
Chadeau A. [1997], "Prices of Services to Enterprises," paper presented in Twelfth Meeting of
Voorburg Group on Service Statistics, Copenhagen: Denmark, September 15-19, 1997.
Economic Classification Policy Committee [1994], "Standard Industrial Classification Replacement,"
Federal Register, July 26, p. 38092-96.
_______ [1993a], "Issue Paper No. 6, Services Classifications," Bureau of Economic Analysis
(BE-42), U.S. Department of Commerce, Washington: DC, September.
_______ [1993b], "Issue Paper No. 1, Conceptual Issues," Federal Register, March 31,
pp. 16991-17000.
Hill, T. P. [1977], "On Goods and Services," Review of Income and Wealth, vol. 123 (4),
pp. 315-38.
Office of Management and Budget [1998], North American Industry Classification System,
United States, 1997, Bernan Press: Lanham, Maryland.
_______ [1997], "1997 North American Industry Classification System-1987 Standard Industrial
Classification Replacement," Federal Register, April 9, pp. 17287-17337.
_______ [1992], Economic Classification Policy Committee Charter, Washington: DC, July, letter with
two pages.
Sherwood, M. J. [1997], "Output of the Property and Casualty Insurance Industry," paper (revised
February 1998), presented at the Centre for the Study of Living Standards Conference on Service
Sector Productivity and the Productivity Paradox, Ottawa, April 11-12, 1997.
Triplett, J. E. [1994a], "Economic Concepts for Economic Classifications, Survey of Current
Business, November, pp. 45-49.
_______ [1994b], "Economic Classification in the New North American Industry Classification System
(NAICS)," paper presented at Seminar on New Directions in Statistical Methodology, Washington,
DC, May 25, 1994.
_______ [1990], "The Theory of Industrial and Occupational Classifications and Related Phenomena,"
in 1990 Annual Research Conference, Proceedings in Arlington, Virginia, March 18-21, 1990, by
the Bureau of the Census, Washington, DC: U.S. Government Printing Office), pp. 9-25.
United Nations [1998], Central Product Classification (CPC), Version 1.0, Statistical Papers,
Series M, No. 77, Very 1.0, Department of Economics and Social Affairs, Statistics Division, New
York.
Industry Appendix
U.S. Industries Arranged by NAICS Sectors, Subsectors, and Industry Groups
51 INFORMATION
511 Publishing Industries
5111 Newspaper, Periodical, Book, and Database Publishers
51111 Newspaper Publishers
51112 Periodical Publishers
51113 Book Publishers
51114 Database and Directory Publishers
51119 Other Publishers
511191 Greeting Card Publishers
511199 All Other Publishers
5112 Software Publishers
51121 Software Publishers
512 Motion Picture & Sound Recording Industries
5121 Motion Picture & Video Industries
51211 Motion Picture & Video Production
51212 Motion Picture & Video Distribution
51213 Motion Picture & Video Exhibition
512131 Motion Picture & Theaters (except Drive-Ins)
512132 Drive-In Motion Picture Theaters
51219 Postproduction Services and Other Motion Picture and Video Industries
512191 Teleproduction and Other Postproduction Services
512199 Other Motion Picture and Video Industries
513 Broadcasting & Telecommunications
5131 Radio & Television Broadcasting
51311 Radio Broadcasting
513111 Radio Networks
513112 Radio Stations
51312 Television Broadcasting
5132 Cable Networks & Program Distribution
51321 Cable Networks
51322 Cable & Other Program Distribution
5133 Telecommunications
51332 Wireless Telecommunications Carriers (except Satellite)
513321 Paging
513322 Cellular & Other Wireless Telecommunications
51333 Telecommunications Resellers
51334 Satellite Telecommunications
51339 Other Telecommunications
514 Information Services & Data Processing Services
5141 Information Services
51411 News Syndicates
51412 Libraries & Archives
51419 Other Information Services
514191 On-Line Information Services
514199 All Other Information Services
5142 Data Processing Services
51421 Data Processing Services
52 FINANCE & INSURANCE
521 Monetary Authorities - Central Bank
5211 Monetary Authorities - Central Bank
52111 Monetary Authorities - Central Bank
522 Credit Intermediation & Related Activities
5221 Depository Credit Intermediation
52211 Commercial Banking
52212 Savings Institutions
52213 Credit Unions
52219 Other Depository Credit Intermediation
5222 Nondepository Credit Intermediation
52221 Credit Card Issuing
52222 Sales Financing
52229 Other Nondepository Credit Intermediation
522291 Consumer Lending
522292 Real Estate Credit
522293 International Trade Financing
522294 Secondary Market Financing
522298 All Other Nondepository Credit Intermediation
5223 Activities Related to Credit Intermediation
52231 Mortgage & Nonmortgage Brokers
52232 Financial Transactions Processing, Reserve, & Clearinghouse Activities
52239 Other Activities Related to Credit Intermediation
523 Securities, Commodity Contracts & Other Financial Investments & Related Activities
5231 Securities & Commodity Contracts Intermediation & Brokerage
52311 Investment Banking & Securities Dealing
52312 Securities Brokerage
52313 Commodity Contracts Dealing
52314 Commodity Contracts Brokerage
5232 Securities &Commodity Exchanges
52321 Securities & Commodity Exchanges
5239 Other Financial Investment Activities
52391 Miscellaneous Intermediation
52392 Portfolio Management
52393 Investment Advice
52399 All Other Financial Investment Activities
523991 Trust, Fiduciary & Custody Activities
523999 Miscellaneous Financial Investment Activities
525 Funds, Trusts & Other Financial Vehicles
5251 Insurance & Employee Benefit Funds
52511 Pension Funds
52512 Health & Welfare Funds
52519 Other Insurance Funds
5259 Other Investment Pools & Funds
52591 Open-End Investment Funds
52592 Trusts, Estates & Agency Accounts
52593 Real Estate Investment Trusts<>
52599 Other Financial Vehicles
54 PROFESSIONAL, SCIENTIFIC & TECHNICAL SERVICES
541 Professional, Scientific & Technical Services
5411 Legal Services
54111 Offices of Lawyers
54112 Offices of Notaries
54119 Other Legal Services
541191 Title Abstract & Settlement Offices
541199 All Other Legal Services
5412 Accounting, Tax Preparation, Bookkeeping & Payroll Services
54121 Accounting, Tax Preparation, Bookkeeping & Payroll Services
541211 Offices of Certified Public Accountants
541213 Tax Preparation Services
541214 Payroll Services
541219 Other Accounting Services
5413 Architectural, Engineering & Related Services
54131 Architectural Services
54132 Landscape Architectural Services
54133 Engineering Services
54134 Drafting Services
54135 Building Inspection Services
54136 Geophysical Surveying & Mapping Services
54137 Surveying & Mapping (except Geophysical) Services
54138 Testing Laboratories
5414 Specialized Design Services
54141 Interior Design Services
54142 Industrial Design Services
54143 Graphic Design Services
54149 Other Specialized Design Services
5415 Computer Systems Design &Related Services
54151 Computer Systems Design & Related Services
541511 Custom Computer Programming Services
541512 Computer Systems Design Services
541513 Computer Facilities Management Services
541519 Other Computer Related Services
5416 Management, Scientific, & Technical Consulting Services
54161 Management Consulting Services
541611 Administrative Management & General Management Consulting Services
541612 Human Resources & Executive Search Consulting Services
541613 Marketing Consulting Services
541614 Process, Physical Distribution & Logistics Consulting Services
541618 Other Management Consulting Services
54162 Environmental Consulting Services
54169 Other Scientific & Technical Consulting Services
5417 Scientific Research & Development Services
54171 Research & Development in the Physical, Engineering & Life Sciences
54172 Research & Development in the Social Sciences & Humanities
5418 Advertising & Related Services
54181 Advertising Agencies
54182 Public Relations Agencies
54183 Media Buying Agencies
54184 Media Representatives
54185 Display Advertising
54186 Direct Mail Advertising
54187 Advertising Material Distribution Services
54189 Other Services Related to Advertising
5419 Other Professional, Scientific, and Technical Services
54191 Marketing Research & Public Opinion Polling
54192 Photographic Services
541921 Photography Studios, Portrait
541922 Commercial Photography
54193 Translation & Interpretation Services
54194 Veterinary Services
54199 All Other Professional, Scientific & Technical Services
56 ADMINISTRATIVE AND SUPPORT AND WASTE MANAGEMENT AND
REMEDIATION SERVICES
561 Administrative & Support Services
5611 Office Administrative Services
56111 Office Administrative Services
5612 Facilities Support Services
56121 Facilities Support Services
5613 Employment Services
56131 Employment Placement Agencies
56132 Temporary Help Services
56133 Employee Leasing Services
5614 Business Support Services
56141 Document Preparation Services
56142 Telephone Call Centers
561421 Telephone Answering Services
561422 Telemarketing Bureaus
56143 Business Service Centers
561431 Private Mail Centers
561439 Other Business Service Centers (including Copy Shops)
56144 Collection Agencies
56145 Credit Bureaus
56149 Other Business Support Services
561491 Repossession Services
561492 Court Reporting & Stenotype Services
561499 All Other Business Support Services
5615 Travel Arrangement & Reservation Services
56151 Travel Agencies
56152 Tour Operators
56159 Other Travel Arrangement & Reservation Services
561591 Convention and Visitors Bureaus
561599 All Other Travel Arrange & Reservation Services
5616 Investigation & Security Services
56161 Investigation, Guard & Armored Car Services
561611 Investigation Services
561612 Security Guards & Patrol Services
561613 Armored Car Services
56162 Security Systems Services
561621 Security Systems Services (except Locksmiths)
561622 Locksmiths
5617 Services to Buildings & Dwellings
56171 Exterminating & Pest Control Services
56172 Janitorial Services
56173 Landscaping Services
56174 Carpet & Upholstery Cleaning Services
56179 Other Services to Buildings & Dwellings
5619 Other Support Services
56191 Packaging & Labeling Services
56192 Convention & Trade Show Organizers
56199 All Other Support Services
562 Waste Management & Remediation Services
5621 Waste Collection
56211 Waste Collection
562111 Solid Waste Collection
562112 Hazardous Waste Collection
562119 Other Waste Collection
5622 Waste Treatment & Disposal
56221 Waste Treatment & Disposal
562211 Hazardous Waste Treatment & Disposal
562212 Solid Waste Landfill
562213 Solid Waste Combustors & Incinerators
562219 Other Nonhazardous Waste Treatment & Disposal
5629 Remediation & Other Waste Management Services
56291 Remediation Services
56292 Materials Recovery Facilities
56299 All Other Waste Management Services
562991 Septic Tank & Related Services
562998 All Other Miscellaneous Waste Management Services
1. The provisional CPC has since been replaced by version 1.0; see United Nations [1998].
2. See Economic Classification Policy Committee [1994], 59 FR 38094.
3. Nonetheless, the ECPC's product classification objectives with respect to investment goods were
largely achieved.
4. In addition to these four sectors, NAICS service sectors also include: Real Estate and Rental and
Leasing (Sector 53); Management of Companies and Enterprises (Sector 55); Educational Services
(Sector 61); Health Care and Social Assistance (Sector 62); Arts, Entertainment, and Recreation
(Sector 71); Accommodation and Food Services (Sector 72); and Other Services (except Public
Administration) (Sector 81).
5. The ECPC recognized the dual importance of this principle for classifying both service industries and
the products produced by such industries early on; see Economic Classification Policy Committee
[1993a], Section 6.5.
6. This classification principle was first established in several papers by Triplett [1990, 1994a, and
1994b]; see also Economic Classification Policy Committee [1993b].
7. See Hill [1977, p.318].
8. See Sherwood [1997, p.3].
9. These service product types were suggested by Chadeau [1997, p.2].