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.

Aspect	Explanation
Kotler’s Five Product Levels	– Kotler’s Five Product Levels Model, developed by marketing expert Philip Kotler, is a framework used to analyze and understand the different aspects or levels of a product or service that customers perceive and value. It helps businesses tailor their marketing strategies to meet customer needs effectively.
Level 1: Core Benefit	– The Core Benefit is the fundamental need or problem that the product or service addresses. It represents the most basic reason why a customer purchases a product. For example, a customer buying a smartphone seeks communication and connectivity. – Critical Point: Identifying and satisfying the core benefit is essential for any product’s success because it directly addresses the customer’s primary need.
Level 2: Generic Product	– The Generic Product is the basic version of the product, which includes its essential features and functions. It defines what the product is and what it does. Using the smartphone example, this level includes the device’s hardware and software capabilities. – Critical Point: Ensuring that the generic product meets customer expectations is crucial because it forms the foundation of the product.
Level 3: Expected Product	– The Expected Product represents the set of attributes and features that customers expect to be present in a product of its category. These are the features that consumers consider standard and take for granted. For a smartphone, this might include a touchscreen, camera, and internet connectivity. – Critical Point: Meeting customer expectations at this level is essential to avoid dissatisfaction. Exceeding these expectations can lead to customer delight.
Level 4: Augmented Product	– The Augmented Product includes additional features, benefits, or services that differentiate the product from competitors’ offerings. These are enhancements that go beyond what customers expect and add extra value. In the case of a smartphone, this could be extended battery life, customer support, or exclusive apps. – Critical Point: Providing augmented features can create a competitive advantage and enhance customer loyalty.
Level 5: Potential Product	– The Potential Product represents the full range of possibilities and innovations that could be added to the product in the future. It includes all potential improvements and advancements. In the smartphone example, this might involve breakthrough technologies, new functionalities, or entirely new use cases. – Critical Point: Anticipating and investing in the potential product ensures long-term relevance and innovation in the market.
Marketing Implications	– Businesses can use this model to develop marketing strategies that align with each product level. They can emphasize the core benefit to resonate with customers’ fundamental needs, promote the generic product’s features, meet or exceed customer expectations at the expected product level, differentiate through augmented features, and plan for future innovations at the potential product level. – Successful marketing involves understanding where a product stands in these levels and how to communicate its value effectively to customers.

 

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.

Principles of Kotler’s Five Product Levels Model:

1. Customer-Centricity: The model emphasizes understanding and meeting customer needs and expectations at various levels.
2. Continuous Improvement: Businesses should aim to move up the product levels, adding value and differentiation over time.
3. Competitive Positioning: By offering an augmented or potential product, businesses can gain a competitive advantage.
4. Market Evolution: The product levels may evolve as markets change, requiring adaptation and innovation.

Advantages of Kotler’s Five Product Levels Model:

1. Holistic Product Development: It encourages a comprehensive approach to product development.
2. Competitive Differentiation: The model helps in differentiating products from competitors.
3. Customer Satisfaction: Meeting or exceeding customer expectations can lead to higher customer satisfaction.
4. Innovation: It encourages continuous innovation and product improvement.

Challenges of Kotler’s Five Product Levels Model:

1. Resource Allocation: Adding features and benefits can be resource-intensive.
2. Market Shifts: Adapting to changing customer preferences and market dynamics can be challenging.
3. Customer Expectations: Meeting customer expectations at the expected product level may be demanding.
4. Over-Engineering: Overloading a product with features can be counterproductive.

When to Use Kotler’s Five Product Levels Model:

1. Product Development: During the product development phase, to design a product with a clear value hierarchy.
2. Competitive Analysis: To analyze and differentiate products in a competitive market.
3. Product Positioning: To position a product strategically within its category.
4. Market Expansion: When entering new markets, adapting the product to local expectations.

What to Expect from Using Kotler’s Five Product Levels Model:

1. Clear Product Strategy: Expect a clear product strategy that addresses customer needs and expectations.
2. Competitive Edge: Effective use of the model can provide a competitive edge in the market.
3. Innovation Culture: It encourages a culture of continuous innovation and improvement.
4. Customer Satisfaction: Meeting or exceeding customer expectations can lead to higher customer satisfaction.

Long-Term Impact of Using Kotler’s Five Product Levels Model:

1. Sustainable Growth: Businesses that consistently apply the model are better positioned for sustained growth.
2. Customer Loyalty: Meeting and exceeding customer expectations fosters loyalty.
3. Innovation Culture: An innovation culture continues to thrive, leading to ongoing product improvements.
4. Competitive Advantage: It provides a sustained competitive advantage by offering differentiated products.

Five Product Level model examples

Coca-Cola

• Core product – at the core level, Coca-Cola drinks aim to quench a consumer’s thirst.
• Generic product – drinks are either carbonated or non-carbonated and come in various flavors, types, and packages. 
• 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.
• 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.
• 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

• Core product – in terms of Nike footwear, the core product aims to make all forms of physical exercise comfortable and safe for consumers. 
• 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.
• 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. 
• 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.
• 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.

Apple

• Core Product: Apple’s core product is its devices (e.g., iPhone, iPad, Mac) that fulfill fundamental needs like communication, productivity, and entertainment.
• Generic Product: These devices come with standard features, such as a sleek design, operating system, and basic software applications.
• Expected Product: Apple enhances its products with value-adding features like security, user-friendly interfaces, and seamless integration across devices, setting them apart from generic alternatives.
• Augmented Product: Apple offers augmented products through its ecosystem, including services like iCloud for data storage, the App Store for apps and content, and AppleCare for extended support and warranty.
• Potential Product: Future innovations like AR glasses and advancements in AI-driven personalization represent potential products that could further differentiate Apple’s offerings.

Amazon

• Core Product: Amazon’s core product is its e-commerce platform, fulfilling consumers’ need for convenient online shopping and access to a vast selection of products.
• Generic Product: It offers standard e-commerce features like product listings, shopping carts, and payment processing.
• Expected Product: Amazon enhances the customer experience with features like one-click ordering, personalized recommendations, and Prime membership benefits, making it more than just a generic online store.
• Augmented Product: Amazon augments its offerings with Amazon Web Services (AWS) for cloud computing, Amazon Prime Video for streaming entertainment, and Amazon Echo for voice-activated assistance, expanding its ecosystem.
• Potential Product: Future potential products may include innovations in drone delivery, cashier-less stores, or advancements in voice assistant technology.

Tesla

• Core Product: Tesla’s core product is electric vehicles (EVs), addressing consumers’ core need for transportation.
• Generic Product: Tesla’s EVs offer standard features such as electric propulsion, navigation systems, and safety features.
• Expected Product: Tesla distinguishes itself with features like Autopilot (self-driving capabilities), over-the-air software updates, and Supercharger networks, enhancing the EV experience.
• Augmented Product: The company offers augmented products like Powerwall for home energy storage and solar solutions, creating a comprehensive energy ecosystem.
• Potential Product: Tesla’s potential products may include advancements in battery technology, autonomous taxis, and expanding its energy product offerings.

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.

Key Highlights

• Philip Kotler’s Model: Developed by marketing consultant Philip Kotler, the Five Product Levels model expands the concept of a product beyond its physical attributes. It emphasizes that a product should satisfy a wide range of consumer needs, not just functional ones.
• Product Levels: Kotler identifies five distinct product levels, each offering a different level of value and addressing specific consumer needs. These levels are Core Product, Generic Product, Expected Product, Augmented Product, and Potential Product.
• Abstract Value: The model underscores the importance of offering abstract value to consumers in addition to functional value. Abstract value includes emotional, psychological, and perceptual benefits that go beyond the product’s core functionality.
• Satisfaction and Perceived Value: When a product provides perceived value that matches or exceeds the consumer’s expectations, it leads to higher satisfaction. This satisfaction can result in an emotional bond between the consumer and the brand, increasing brand equity.
• The Five Levels:
  • Core Product: Addresses fundamental consumer needs, such as quenching thirst or transportation.
  • Generic Product: Offers basic functionality and features but lacks differentiation. Often competes on price.
  • Expected Product: Includes value-adding features that differentiate it from core and generic products but can become normalized over time.
  • Augmented Product: Truly differentiated, offering unique features that contribute to a competitive advantage.
  • Potential Product: Represents future transformations and innovations of augmented products to sustain brand equity.
• Examples: The model is applied to real-world examples such as Coca-Cola and Nike, showing how these brands and their products align with the five product levels. For instance, Nike uses innovations like Nike Fit and personalization to enhance the perceived value of its products.
• Consumer Needs: The model highlights that consumers have different levels of needs for a single product, which are influenced by psychological, emotional, and perceptual factors.
• Market Differentiation: It explains how a product can evolve through these levels based on market differentiation and the degree of consumer benefits offered.

Related Innovation Frameworks

Business Engineering

Business Model Innovation

Innovation Theory

Types of Innovation

Continuous Innovation

Disruptive Innovation

Business Competition

Technological Modeling

Diffusion of Innovation

Frugal Innovation

Constructive Disruption

Growth Matrix

Innovation Funnel

Idea Generation

Design Thinking