five-product-levels

Kotler’s Five Product Levels Model In A Nutshell

Marketing consultant Philip Kotler developed the Five Product Levels model. He asserted that a product was not just a physical object but also something that satisfied a wide range of consumer needs. According to that Kotler identified five types of products: core product, generic product, expected product, augmented product, and potential product.

Understanding the Five Product Levels model

Kotler defined a product as anything that could meet consumer needs or wants. It’s important to note that a lot of needs and wants are not related to product functionality.

That is, the needs and wants of the consumer are more abstract.

Offering products with abstract value should be the goal of any business. Since the consumer receives this value on top of the functional value of the product, they tend to be more satisfied after making a purchase.

Satisfaction also increases when the perceived value of a product matches the actual value of owning it. 

Once a product has high perceived value, the brand behind the product forms an emotional bond with the consumer.

This increases brand equity and ensures that a business is top-of-mind the next time a consumer needs to make a purchase.

In the next section, we’ll look at each of the five levels in more detail.

The five basic levels of all products

1. Core level products

Core products address fundamental consumer needs such as food, water, or shelter.

A consumer who rents a hotel room has a core need for sleep.

Others buy cars because of their core need to get from one place to another in a satisfactory amount of time.

2. Generic level products

Generic products do offer some benefits over and above their functionality, but they lack differentiation.

Therefore, businesses offering generic-level products are often competing on price instead of building brand equity. 

Generic products are often thought of as commodities and have the bare minimum of features required to make them functional.

Examples include bottled water, insurance, mirrors, and beds.

3. Expected level products

Expected level products have value-adding features that seek to differentiate them both in the marketplace and from core and generic products.

The danger with expected-level products is that they become normalized over time and potentially revert to core-level products.

When Wi-Fi was first offered in hotels, it created a high amount of value and was priced accordingly.

Nowadays, Wi-Fi is so ubiquitous as to be free in most establishments – therefore relegating it to a core or generic product at best.

4. Augmented level products

Augmented products are truly differentiated in their respective markets.

A consumer may not directly seek out the extra features that make a product augmented, but these features do contribute to competitive advantage, nonetheless. 

For example, a new laptop bundled with Microsoft Office and a five-year warranty for no extra cost adds abstract value in the form of consumer peace of mind and value for money.

5. Potential products

Potential products are simply the transformations an augmented product might undergo in the future.

Businesses must aim to surprise and delight consumers to sustain brand equity through innovation.

This also ensures that augmented products are continually updated so that they avoid falling to lower levels of the model

Adobe’s photo editing software is one such example, with engineers constantly adding new features and ensuring that the software is compatible with new camera releases.

Five Product Level model examples

The Coca-Cola Company Five Product Level Model Example

Below is a look at how Coca-Cola stacks up in terms of Kotler’s model:

  1. Core product – at the core level, Coca-Cola drinks aim to quench a consumer’s thirst.
  2. Generic product – drinks are either carbonated or non-carbonated and come in various flavors, types, and packages. 
  3. Expected product – in terms of value-adding, Coca-Cola sells some drinks cold to entice consumers. Low or no-calorie drinks are another form of expected product that has become increasingly prevalent in recent years. In fact, these drinks are so commonplace that they may transition to a generic product at some point.
  4. Augmented product – it could be argued that Coca-Cola sold in glass bottles is an example of an augmented product in regions where plastic bottles are the norm. The ‘Share A Coke’ campaign, which printed the most popular 150 names on bottles, was another initiative that differentiated the company’s drinks in the market.
  5. Potential product – due to significant brand equity and value, there is little risk of Coca-Cola’s augmented products falling to lower levels of the model. But this has not caused the company to become complacent. In 2019, Coca-Cola launched a holiday theme promotion with its first-ever large-scale augmented reality experience. Consumers could scan Coke bottles and cans with a mobile app to view the immersive, computer-generated world of the company’s polar bear mascot called “arctic home”.

Nike Five Product Level Model Example

Let’s now take a look at sports footwear and apparel company Nike.

  1. Core product – in terms of Nike footwear, the core product aims to make all forms of physical exercise comfortable and safe for consumers. 
  2. Generic product – Nike’s generic products are the range of footwear and sports apparel it sells, including running shoes, sneakers, t-shirts, socks, hats, backpacks, and balls.
  3. Expected product – where Nike starts to excel is in the expected product. Nike is known for its superior quality, with its running shoes in particular associated with flexibility, support, cushioning, protection, and reliability. Nike’s swoosh logo, which is estimated to be worth $30 billion, is also a significant value-adding feature. 
  4. Augmented product – according to the company, 60% of its customers are wearing the wrong shoe size. To solve this problem, Nike augments its running shoes with Nike Fit, a feature that utilizes computer vision, data science, and artificial intelligence to properly measure the shape of both feet. Using this approach, the company claims it can measure accurate foot size to within 2 millimeters, As more consumers shop for clothing and apparel online and are wary of purchasing the wrong size, Nike Fit is one augmented product that seems likely to provide a competitive advantage.
  5. Potential product – Nike By You is an initiative that allows consumers to design and personalize their own Nike merchandise, whether that be footwear or sportswear. This can be achieved online or in several studios around the world. In 2017, rival brand Adidas launched its own personalization service in an attempt to close the gap on Nike.

Key takeaways:

  • The Five Product Levels model shows that consumers have as many five different levels of need for a single product. These needs are based on psychological, emotional, and perceptual factors.
  • The Five Product Levels model argues that consumers must derive value from a product that is not directly related to its functionality.
  • The Five Product Levels model explains how a product may move through five levels of development, according to the degree of market differentiation and subsequent consumer benefits.

Connected Business Frameworks

New Product Development

product-development
Product development, known as the new product development process comprises a set of steps that go from idea generation to post-launch review, which help companies analyze the various aspects of launching new products and bringing them to market. It comprises idea generation, screening, testing; business case analysis, product development, test marketing, commercialization, and post-launch review.

BCG Matrix

bcg-matrix
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.

Ansoff Matrix

ansoff-matrix
You can use the Ansoff Matrix as a strategic framework to understand what growth strategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growth strategy can be derived by whether the market is new or existing, and the product is new or existing.

User Experience Design

user-experience-design
The term “user experience” was coined by researcher Dr. Donald Norman who said that “no product is an island. A product is more than the product. It is a cohesive, integrated set of experiences. Think through all of the stages of a product or service – from initial intentions through final reflections, from first usage to help, service, and maintenance. Make them all work together seamlessly.” User experience design is a process that design teams use to create products that are useful and relevant to consumers.

Cost-Benefit Analysis

cost-benefit-analysis
A cost-benefit analysis is a process a business can use to analyze decisions according to the costs associated with making that decision. For a cost analysis to be effective it’s important to articulate the project in the simplest terms possible, identify the costs, determine the benefits of project implementation, assess the alternatives.

Empathy Mapping

empathy-mapping
Empathy mapping is a visual representation of knowledge regarding user behavior and attitudes. An empathy map can be built by defining the scope, purpose to gain user insights, and for each action, add a sticky note, summarize the findings. Expand the plan and revise.

Perceptual Mapping

perceptual-mapping
Perceptual mapping is the visual representation of consumer perceptions of brands, products, services, and organizations as a whole. Indeed, perceptual mapping asks consumers to place competing products relative to one another on a graph to assess how they perform with respect to each other in terms of perception.

Value Stream Mapping

value-stream-mapping
Value stream mapping uses flowcharts to analyze and then improve on the delivery of products and services. Value stream mapping (VSM) is based on the concept of value streams – which are a series of sequential steps that explain how a product or service is delivered to consumers.

8 Dimensions of Quality

dimensions-of-quality
The 8 dimensions of quality are used at a strategic level to analyze the product or service quality characteristics. They were first described by Harvard Business School Professor David A. Garvin in 1987. Instead of defensive measures to pre-empt quality control, Garvin proposed that American companies take a more aggressive stance where quality itself would be the basis of product differentiation and a competitive strategy to secure market share.

Product-Process Matrix

product-process-matrix
The product-process matrix was introduced in two articles published in the Harvard Business Review in 1979. Developed by Robert H. Hayes and Steven C. Wheelwright, the matrix assesses the relationship between: The stages of the product life cycle (from ideation to growth or decline), and The stages of the process (technological) life cycle.

Premium Pricing Strategy

premium-pricing-strategy
The premium pricing strategy involves a company setting a price for its products that exceeds similar products offered by competitors.

Fast Follower Strategy

fast-follower
A fast follower is an organization that waits for a competitor to successfully innovate before imitating it with a similar product.

Brand Marketing

brand-marketing
Brand marketing describes the process of an organization building a relationship between its brand and customers from the target audience. Instead of marketing the features of a particular product or service, brand marketing promotes the whole brand by mentioning how those products and services support the brand’s promise.

Promotional Channels

promotional-channels
Promotional channels, sometimes referred to as marketing channels, are used by an organization to advertise its products and services and communicate with the target audience. News coverage is one of the most difficult promotional channels to secure, but it is also one of the most valuable. Editors are bombarded with pitches daily, so the brand needs a compelling and ideally topical story to tell. Other promotional channels include guest posting, influencer outreach, advertorial, and native LinkedIn feed advertising.

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