In case of a car, the 5 levels of a product are:

1. Core product : Transportation from one place to another.

2. Actual Product : Brand of the car, looks and design of the car etc.

3. Expected Product : Decent mileage, proper engine, inflated tyres etc.

4. Augmented Product : After-sale services, insurance policy etc.

5. Potential Product : May run more smoothly as it wears off a little.

In the 1960's, the economist Philip Kotler changed the perception of marketing. He described what marketing is rather than what marketers do, thereby changing marketing from a departmental specialisation into a corporate wide doctrine. For Kotler, marketing was a 'social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others'.

For him, a product is more than physical. A product is anything that can be offered to a market for attention, acquisition, or use, or something that can satisfy a need or want. Therefore, a product can be

a physical good, a service, a retail store, a person, an organisation, a place or even an idea. Products are the means to an end wherein the end is the satisfaction of customer needs or wants.

Kotler distinguished three components:

need: a lack of a basic requirement;

want: a specific requirement for products or services to match a need;

demand: a set of wants plus the desire and ability to pay for the exchange.

Customers will choose a product based on their perceived value of it. Satisfaction is the degree to which the actual use of a product matches the perceived value at the time of the purchase. A customer is satisfied only if the actual value is the same or exceeds the perceived value. Kotler defined five levels to a product:

1. Core Benefit

the fundamental need or want that consumers satisfy by consuming the product or service.

2. Generic Product

a version of the product containing only those attributes or characteristics absolutely necessary for it to function.

3. Expected Product

the set of attributes or characteristics that buyers normally expect and agree to when they purchase a product.

4. Augmented Product

inclusion of additional features, benefits, attributes or related services that serve to differentiate the product from its competitors.

5. Potential Product

all the augmentations and transformations a product might undergo in the future.

Kotler noted that much competition takes place at the Augmented Product level rather than at the Core Benefit level or, as Levitt put it: 'New competition is not between what companies produce in their factories, but between what they add to their factory output in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing, and other things that people value.'

Kotler's model provides a tool to assess how the organisation and their customers view their relationship and which aspects create value.

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The exchange between the organisation and the customer forms the model's heart, so the model can be used in both a commercial and non-commercial environment.

In the 1960's, the economist Philip Kotler changed the perception of marketing. He described what marketing is rather than what marketers do, thereby changing marketing from a departmental specialisation into a corporate wide doctrine. For Kotler, marketing was a 'social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others'.

For him, a product is more than physical. A product is anything that can be offered to a market for attention, acquisition, or use, or something that can satisfy a need or want. Therefore, a product can be a physical good, a service, a retail store, a person, an organisation, a place or even an idea. Products are the means to an end wherein the end is the satisfaction of customer needs or wants.

Kotler distinguished three components:

need: a lack of a basic requirement;

want: a specific requirement for products or services to match a need;

demand: a set of wants plus the desire and ability to pay for the exchange.

Customers will choose a product based on their perceived value of it. Satisfaction is the degree to which the actual use of a product matches the perceived value at the time of the purchase. A customer is satisfied only if the actual value is the same or exceeds the perceived value. Kotler defined five levels to a product:

1. Core Benefit

the fundamental need or want that consumers satisfy by consuming the product or service.

2. Generic Product

a version of the product containing only those attributes or characteristics absolutely necessary for it to function.

3. Expected Product

the set of attributes or characteristics that buyers normally expect and agree to when they purchase a product.

4. Augmented Product

inclusion of additional features, benefits, attributes or related services that serve to differentiate the product from its competitors.

5. Potential Product

all the augmentations and transformations a product might undergo in the future.

Kotler noted that much competition takes place at the Augmented Product level rather than at the Core Benefit level or, as Levitt put it: 'New competition is not between what companies produce in their factories, but between what they add to their factory output in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing, and other things that people value.'

Kotler's model provides a tool to assess how the organisation and their customers view their relationship and which aspects create value.

assets:

five levels of marketing

ProvenModels

editor PM

version 0.1

51 KB

pros:

The exchange between the organisation and the customer forms the model's heart, so the model can be used in both a commercial and non-commercial environment.

Three Levels of a product

The concept of “three levels of a product” actually comes in play when you are finalizing a product for your business or when you want to analyze a product. Just like any business, a product too has its hierarchy. A product can be divided into a series of different features and benefits which helps in its segmentation targeting and positioning. Thus the three levels of the products are the ones which help to define the product in a better manner. These three levels are

Image courtesy - marketingteacher.com

1) Core product

2) Actual product

3) Augmented product

The terms “Core product” and “Actual product” have a very slight differentiation between them but it is vital that marketers understand this difference. Only by defining your core product clearly, you can achieve marketing excellence. Core product is also known as benefits and is general intangible in nature. Lets take an example.

Supposing you are planning on launching your own car manufacturing unit. What would be your core product? Would it be the car itself? NO. The core product would be convenience to your customers. Your customers can also travel by bus or taxi. But they prefer cars because of convenience as well several times because of status symbol. Thus the core product in case of Tata cars will be convenience and value for money whereas in case of BMW it will be Status symbol.

Thus the concept of core product is simple. The Actual product is the one which is manufactured after a decision has been taken on what your core product is going to be. Thus, from the above example, if your core product is a status symbol, your actual product will be a very high quality product with high pricing. On the other hand if the product is a convenience product, the production would be on the basis of

Value for money. Actual products are quantifiable in nature and have properties like color, branding, quality etc.

The Augmented product, as the name suggests, arise by themselves and are by products of the core and actual products. These might be complete products within themselves. Again taking the above example, if you are manufacturing a car, it needs regular servicing, warranty etc. Thus these become tertiary products or augmented products. There are business which are dedicated completely in providing augmented products such as service centers, AMC centers etc.

Also remember that the three levels of product are not only useful for Tangible products but for Intangible product like services as well. For example – If an IT company makes a software, the core product could be better operations and management for their customers. The actual product may be dedicated to multiple facets of the organization for which the software needs to be programmed, and the augmented product may be the maintenance of this software and regular up gradation. Thus even the service products have their own three levels.

These three product levels play a vital part in product management and are also important while deciding the marketing mix of a company. This is mainly because, if there was an augmented product attached to the actual product, then the promotions, placing and pricing of even these augmented products needs to be decided. Thus product decisions are generally the primary decisions of the marketing mix.

Levels of a Product

• One can strip a product down to its core, much like an onion, layer by

layer

• Consider the case of a car

Core Benefit

• the need that is satisfied by the product

• Transportation

Basic or Generic Product

• the fundamental element(s) that make(s) the product what it is

• here, the body, the chassis, the engine

Expected Product

• the basic product alone is not enough

• consumers expect some features

• a trunk, a dashboard

Augmented Product

• Certain Features that go beyond customer expectations

• for example, high power and high mileage

• similar to customer delight

5

Management Science II Dr. S.Bharadwaj

Indian Institute of Technology Madras

• today’s augmented product will become tomorrow’s expected

product e.g. airbags

Potential Product

• all possible enhancements a marketer can add to value package

• futuristic in nature

• computerized directions, cars running on water

• One should never rest on one’s laurels

• At the same time, one must be consumer-centric

A bit of marketing - it won't hurt!

According to my experiences, nowadays most of the people feel a little bit of antipathy when it comes to marketing, as most of us identify this word with the big, baaad companies that want to make us buy their products and are exploiting us and the environment.

In reality, the word marketing covers a much bigger topic than that and is a very interesting study. Maybe as you know I have studied marketing and I have to admit I loved to get to know the basic things that marketing also includes – like this topic, which is the 5 levels of the product.

This is one of the basics of marketing and should be very important for each company that want to know how to satisfy the needs of their customers. According to Wikipedia, a product is ‘anything that can be offered to a market that might satisfy a want or need’. So this means the word product can also mean the sweet promise/hope that the physical product in your hand can offer, like you will be as beautiful when you use the body lotion, as the women in the ad. This might be weird, but think about it: you really bought that lotion last time because you really think it will help you/make you more beautiful, etc.

The 5 levels of the product

Source: Own figure

Also, several added values can be given to each product – basically everything you can think of when speaking about a product can fit into the following categories:

The 5 product levels

Potential product – it is the final product that is available on the market and that the consumers can buy. This includes all the additional values and augmentations that the company finally included in the product to differentiate it from the competitors’ products.

Augmented product – those attributes of the product that can differentiate it from the competitors’ products and might provide a slight advantage over them for the consumers. These may include the brand name, the design, the packaging, the overall quality, the additional functions (apart from the basic features), the installation, the after-sale service, the warranty, the home delivery and the possibility to accept credit from the consumers.

Expected product – the properties that the product has and that are absolutely necessary for the consumer to think about buying the product.

Basic product – the basic product that might satisfy the inner needs of the consumer. On this stage the product only contains those values that are totally necessary for it to function.

Core benefit – the inner need that urges the consumers to buy something, no matter if it is a product or a service. The main aim of consumers is to satisfy this inner urge.

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Example of a service: a hotel room

Core benefit: the inner urge of customers to sleep and have some privacy and silence.

Basic product: a hotel room with a single bed, and basically that’s all.

Expected product: a hotel room with a bed that is neat and clean, and the room has at least a small bathroom.

Augmented product: a hotel room with a bed in a popular hotel; the room has a nice bathroom with hair dryer, is air conditioned and has a TV and a minibar.

Potential product: a hotel room with a huge double bed with water mattress, LCD television, a big bathroom with a hydro-massage shower cabin, etc.

Example of a product: car

Core benefit: the need to get from one place to another.

Basic product: a car on its own; on this level this basically means that the car has 4 wheels :).

Expected product: a car that is in working condition, so the owner can use it for transportation, it has decent mileage, etc.

Augmented product: a Ford (or any other brand for that matter) that is in fully working condition, has an attractive design, passed all safety tests, has 4-wheel steering, built-in alarm and air condition, etc. The car is also accompanied by other benefits provided by the motor company like warranty, instalments, etc.

Potential product: the car is much safer than the competitors’ products; it tends to break down less frequently than other cars, has the best mileage, etc.