Product Characteristics and Classifications

A product is anything that can be offered to a market to satisfy a want or need, including physical goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.

Product Levels: The Customer-Value Hierarchy

In planning its market offering, the marketer needs to address five product levels (see Figure 9.1).2 Each level adds more customer value, and together the five constitute a customer-value hierarchy. The fundamental level is the core benefit: the service or benefit the customer is really buying. A hotel guest is buying rest and sleep. Marketers must see themselves as benefit providers. At the second level, the marketer must turn the core benefit into a basic product. Thus, a hotel room includes a bed, bathroom, and towels. At the third level, the marketer prepares an expected product, a set of attributes and conditions buyers normally expect when they purchase this product. Hotel guests expect a clean bed, fresh towels, and so on.

At the fourth level, the marketer prepares an augmented product that exceeds customer expectations. In developed countries, brand positioning and competition take place at this level. At the fifth level stands the potential product, with all the possible augmentations and transformations the product or offering might undergo in the future. Here companies search for new ways to satisfy customers and distinguish their offering.

Differentiation arises and competition increasingly occurs on the basis of product augmentation. Each augmentation adds cost, however, and augmented benefits soon become expected benefits in the category. As some companies raise the price of their augmented product, others

FiGURE 9.1 Five Product Levels

offer a stripped-down version for less. Marketers must be sure, however, that consumers not see lower quality or limited capability versions as unfair.3

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