In the realm of business, understanding your products often comes naturally. However, comprehending your customers' needs and preferences can be a different challenge altogether. For companies that tend to be more product-centric than customer-centric, the concept of differentiation can take on a new dimension. This is where the 5 Levels of Product model by Philip Kotler comes into play. This model delves deep into the idea that a product is more than just a tangible item or service – it's a response to a need or desire. Let's explore how this model can offer a fresh perspective on creating value and differentiation.
It's a common scenario – businesses know their products inside out, yet they might not be equally familiar with their consumers' opinions, motivations, and preferences. In such cases, a strategy based on existing products rather than consumer-focused market research might be more suitable. Enter the 5 Levels of Product model, developed by Philip Kotler, a framework that unveils five distinct levels that products can offer to create value for customers.
This model operates on the premise that a product extends far beyond a mere physical object or service. In fact, it's a brand's response to a need or desire, which can be categorized into 5 levels: core benefit, generic product, expected product, augmented product, and potential product. Each of these levels adds value for the customer and collectively forms a value hierarchy.
Understanding the Details of Each of the 5 Product Levels
According to Kotler, customers choose a product based on the perceived value they have of that product. And they will only be satisfied if the actual value of the product or service matches or exceeds their expectations. This framework of expectations can be evaluated through 5 levels. The greatest differentiation happens when the brand surpasses expectations, starting from the 4th level related to the added product. Next, let's delve into the specifics of each of these levels:
CORE BENEFIT LEVEL
At the heart of this model lies the core benefit, which represents the fundamental need or desire a consumer seeks to fulfill when purchasing a brand. Consider a hotel guest, for instance. Their core benefit might be the need for rest. This core benefit forms the basis for developing a basic product.
BASIC PRODUCT LEVEL
The basic product is a simplified response to the core benefit that customers are looking for. In the hotel example, it could be a room with a bed – a direct answer to the guest's basic need for rest. However, customers typically have higher expectations, pushing the brand to offer more than just the basic product. This is where the expected product comes into play.
EXPECTED PRODUCT LEVEL
The expected product includes all the attributes and features that meet customers' expectations to fulfill their needs. Returning to the hotel context, customers might expect amenities like air conditioning, comfortable bedding, a quiet environment, and a private bathroom. This is the level where attributes are aligned with customer expectations, but differentiation hasn't yet emerged.
AUGMENTED PRODUCT LEVEL
The augmented product goes beyond meeting expectations; it offers attributes and functionalities that exceed customers' desires. This is the point where differentiation starts to play a pivotal role. For example, offering free access to streaming platforms like Netflix or Disney Plus in hotel rooms goes beyond expectations, creating an augmented product. As this feature becomes more common among competitors, it transitions from being an augmentation to becoming an expectation. To maintain differentiation, brands need to think about their potential product.
POTENTIAL PRODUCT LEVEL
The potential product encompasses attributes that are innovative and unique in the market. This level involves improvements and enhancements that could be introduced in the future. For instance, a holiday hotel might provide free Uber vouchers for convenient transportation, enhancing the overall experience. The goal is to surprise customers with unexpected levels of service that exceed their expectations.
Added Product and Potential Product: When Magic Unfolds
It's at the Augmented and Potential Product levels where magic happens. When something becomes an expectation, brands require something more to stand out – an Augmented Product and a Potential Product. This constant pursuit of differentiation occurs primarily at the fourth and fifth levels of the model.
It's within the dimensions of the Augmented Product and the Potential Product that the true enchantment of brand differentiation comes to life. As customer expectations evolve and mature, products that were once novel can quickly become ordinary. This is where the concept of the Augmented Product steps in. Brands that innovate by offering attributes that exceed what's anticipated by customers create a sense of delight and surprise. For instance, think about a hotel that not only provides comfortable accommodations but also offers complimentary access to premium entertainment platforms like Netflix or personalized concierge services. These unexpected extras elevate the brand's value proposition and foster a deeper emotional connection with customers.
As brands continue to evolve and strive for uniqueness, the Potential Product takes center stage. This level encapsulates the visionary realm where brands envision and explore new dimensions that transcend current market norms. It's about anticipating customer needs before they even arise and creating offerings that not only fulfill those needs but also elevate the overall experience. Imagine an eco-friendly hotel that incorporates cutting-edge sustainable technologies and offers guests exclusive access to local cultural experiences, providing a truly immersive stay. The Potential Product represents the pinnacle of differentiation, where brands pioneer new territories and set the stage for future market trends.
In essence, the Augmented Product and the Potential Product represent the apex of a brand's ingenuity and its commitment to going beyond ordinary offerings. These levels mark the juncture where brands cease being mere products or services and become memorable experiences that captivate and inspire.
Applying the 5 Levels of Product Model to Your Brand
Now that you're familiar with each of the five levels, let's see how to put the 5 Levels of Product model into action for your brand. Here's a step-by-step approach:
STEP 1
DETERMINE THE CORE BENEFIT
Begin by identifying the core benefit your product satisfies.
STEP 2 FROM BASIC TO POTENTIAL PRODUCT Advance to the subsequent levels of the model, listing attributes that define your basic, expected, augmented, and potential products.
STEP 3
ANALYSE COMPETITORS Apply the same analysis to your main competitor's brand or the leading brand in the market, to differentiate your offerings.
STEP 4 PARITIES AND DIFFERENCES Identify points of parity and difference between your brand and competitors, comparing attributes from the previous steps.
STEP 5 ESTABLISH DIFFERENTIATION STRATEGY Develop an action plan that introduces new attributes or strategies to amplify differentiation and mitigate points of parity.
Creating Your Own Differentiation Matrix
Translating the steps above into a differentiation matrix allows you to visualize opportunities to differentiate your brand and identify where your product might fall short of customer expectations. It might reveal gaps in attributes that customers consider essential. For example, a 4- or 5-star hotel lacking reliable Wi-Fi might find itself below customer expectations at the Expected Product level. In such cases, addressing these gaps should take precedence over adding attributes at the Augmented Product level.
The 5 Levels of Product model can be converted into a differentiation matrix. Use the example provided in the image above and adapt it to suit your brand. By understanding and applying the 5 Levels of Product model, you can tailor your offerings to meet and exceed customer expectations, ultimately driving brand differentiation and growth.
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