The market is categorized between customers’ needs and whomever provides products or services to meet this demand. A core product is a company’s nucleus, the main product or service a company creates to meet a specific demand. There are 3 product levels that explain the reason for creation of said product, its physical design, and what additional benefits it can provide. These levels are well intertwined through the new product development process and marketing strategies, where they share a symbiotic relationship.
The core customer value of a product involves more than just the basic solutions and physical aspects of a product, it also stands for something more intangible, abstract. Depending on the demand and its reasons, a product developed for a certain need in the market can have a notable impact on a customer’s emotional or physical burdens. This alone can keep demand for a product or service on a steady incline and, as customers will be willing to pay for it, its value can be increased for a greater profit.
The 3 Product Levels – Core Product, Actual Product and Augmented Product
There are 3 levels which products go through, all essential to a successful sales life-span.
Core Product. Is the basis for which the product was created; the idea for a product or service that comes into existence driven by the demand of a considerable portion of a population. In the simplest of terms, the core product is the benefit or advantage received from a product or service that meets the customers’ basic needs. For example, a tractor’s core product would be its ability to make farming tasks easier and more productive, aka its utility. Without a solid core product, a business cannot successfully launch.
Actual Product. The name is pretty straight forward, it’s the actual physical product that a company provides. This also includes any kind of services; as long as the 5 senses are involved (one can either see, hear, touch, smell and/or taste it) it’s at the actual product level. For instance, a historical tour is a service that you cannot own or hold, yet it has an actual product or physical element. Everything from presentation to delivery of a product or service is considered to be under this product level.
Augmented Product. The last product level encompasses all additional benefits that come with the product. It’s neither the actual product nor the core product yet it’s encompassed by elements of both. A phone’s core product is communication but our technology has enabled it to do a multitude of beneficial things (writing pad, music player, internet connection, gaming console, etc.). All of these additional benefits are the augmented product. For instance, a truck’s core product is transportation and some of its augmented products are its weight-carrying capabilities, safety measures and durability.
Product Levels in the New Product Development Process
As the product gets ready to be launched into the market, not only will it go through all 3 product levels, but it will pass through most of the 7 commonly used steps of new product development.
- The first step entails coming up with ideas for a product, focusing on recognizing people’s needs or what kind of services are in great demand. This is how the core product comes into existence, generating ideas for products that will satiate said demand.
- The second step is all about research. A business must gather all possible information about the market in which they are selling to, why, and what makes it stand out for what already exists and how it can reach other demographics.
- The third step consists of creating and testing physical prototypes of the product concept. At this step, the product is at a crude actual product level. Although it’s at a physical stage, all products need a healthy period of testing to workout the kinks and issues the starting design might have.
- After the product’s design is approved, the development moves to step 5, where a business structures their sourcing to manufacturing plans and constructing a thorough business analysis.
- At the sixth step, the last prototype should basically be the finished product ready to be tested, along with its marketing strategy, by focus groups. This feedback will include important information on the product’s core, physical and augmented levels.
- Lastly, the seventh step is the launch of the final product and its long-term commercialization plan. The product’s augmentation perks will play heavily on how the product will stand out against its competition with similar core or physical products.
Core Product Value
As aforementioned, the core product is the benefits or solutions customers derive from a product that meet their needs. Core product value is basically the same thing except it also includes the value of such solutions. This eventually translates to what the customer is willing to pay. Calculating such value will not only be influenced by the price of components and manufacturing, but by its demand.
The type of core products with the best sustainable growth are the ones that solve problems and cause an emotional response from the targeted customer base. Do the benefits help ease a burden? Does it drastically change a customer’s quality of life? Is there a considerate percentage of people with this issue or similar ones? These are the questions a company should keep in mind during product development.
Although there are many reasons involved in the failure of a startup, the most common reason always seems to be the lack of a strong core product value. This makes investors either pullout of ventures before they lose too much money, or never take the risk in the first place. Having a clear-cut core value, no the other hand, is key to success.
Product Levels in the Context of Marketing Strategy
There are many elements of marketing strategies that may be utilized to promote a product. The three product levels and especially the core product value appear in many of them.
Product Marketing. The most basic of strategies, but it’s a classic for a reason. Product marketing is specifically tailored to showcase the core and augmented products. Since this strategy can be considered as a ‘stand-alone’, the focus should be on a unique, creative way to promote the benefits this specific product or service can provide.
Customer Expectations. Making the core product the main focus of its marketing strategy will make sure it reaches its targeted audience. The most basic and critical element of a marketing strategy is that the product or service a company provides meets its customer expectations for the basic function it promotes. If it can’t perform or deliver the reason for which it was purchased, the venture will quickly fail.
Competition Comparison. Another element commonly used in marketing is to compare a new product with the ones that already exist on the market. By pointing out the differences it can create a contrast with a positive effect on the new product’s sales, as customers choose the ‘new and better’ over the old.
A marketing strategy highlighting a competitor’s product’s faults or issues is another strategy that has also been frequency used. Make sure you are aware of all marketing liabilities before using this kind of strategy.
A Few Examples
Apple Inc. The Apple corporation is one of the most popular tech businesses in the world. Its core product has evolved a bit since its creation, but in a word it’s connectivity. It started with a personal computer back in the late 1970’s. Thanks to the success of its core product, funding for new and better technology was possible allowing Apple to become the multinational technology company it is today. Apple has done a great job at meeting people’s needs, their tech products evolving to anticipate or create more benefits for their customers. Its numerous options of actual products are iPads, iPods and iPhones, which come with their own augmented products (GPS, games and music apps to name a few).
Cruises. Since its very conception, the core product service of cruises have always been both transportation and vacation tours. The actual product of a cruise is tourism. Modern cruises offer transport through different places at a leisurely pace with activities, amenities, attractions, and accommodations. A big portion of its augmented product are all of the extra services customers have access to such as room service, buffet, tours of destinations, pool access, bars, clubs, access to travel insurance, and medical facilities to name a few.
Ford Motor Company. Ford is another great example of core customer value and innovation. Ford cars’ core product is transportation. The demand for cars in the 1900s had increased beyond the production capabilities of the time. It was thanks to such demand and Henry Ford’s drive that he was able to come up with a method to meet the demand for vehicles; mass-production. Today, Ford’s Motor Company delivers quality actual products, their cars. Each design’s augmented product has numerous physical safety benefits, along with additional services such as warranties, mechanic services, etc.
To understand the core customer value of a product, a company must decipher what’s a common problem among the consumer population and then devise a product or service that can provide a solution resulting in great customer demand. The 3 product levels do a great job of showing how a product goes far beyond its basic solution connotation. The core level is the idea in which the actual product level is built upon, and the augmented product level are the additional benefits that can be derived from the original product or service.