If you think of a product, you most likely think of a product in its simplest form – you only think of one of the three levels of product. Let’s try an example: If you think of a car, what do you think of? You probably think of the car itself: How it looks like, how it drives, how it looks. But a product is much more than what you think. Let’s have a closer look at the three levels of products: The core value, the actual product and the augmented product.
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What is a Product?
Let’s start with a simple question. What is a product? If you turn back to the example from above, what do you think of? A car clearly is a product. But so is nearly everything else you can purchase. Also a service is a product.
A product is actually anything that can be offered to a market to satisfy the needs or wants of the customer. Therefore, products can be many things – physical goods, services, experiences, events, and much more.
However, this is only one view on the definition of products. You guessed it – products can be much more than the definition may indicate. We can also think about products in terms of the three levels of product. Read on to learn what the three levels of products are and how they work.
Three Levels of Product
A product is more than what you see, touch and feel. A product is actually a multi-layer concept. Even if they are not always obvious, the three levels of products are nearly always present: the Core Value, the Actual Product and the Augmented Product. Each level adds more customer value to the total product.
When you think of a product, you nearly always envision the “actual product”. Let’s start with an example. Sticking with the car example, you probably think of the car itself. You think of the brand, the features, the design, the performance, and so on. A different person might think of other aspects first – maybe the quality level or the sound of the engine. In nearly all cases, however, consumers would think of the actual product first because it is the most visible and obvious layer of the three levels of product.
The Core Customer Value – The Inner Layer
The first and most basic level is called the core customer value, or core benefit. Although it is the first and inner layer, it is not the easiest to think of. As in the car example, you would rather think of the obvious features than of the underlying core value.
In order to identify the core customer value of a product, you need to answer a simple question: What is the buyer really buying? In other words, what is the customer really looking for? In most cases, the core value is the basic need that is satisfied by the product. This basic need differs depending on the person and the specific demand. For a car, the basic need might be the transportation from A to B. I might also be the status symbol. It might be the option to participate in car races. For a smartphone, the core value might be communication. But it might also be freedom and on-the-go connectivity. Also here, it might be the status symbol.
As you can see, the core customer value can be many things – it is the underlying need and the reason why the product is bought in the first place. It is the core problem solved by the product. In contrast, all later levels of the product add detail and potentially additional reasons for buying this specific version of the product. They are basically “add-ons”.
When a marketer designs a product in the new product development process, the core problem should always be the starting point. What does the consumer really seek? What are problems that are not ideally solved by existing products? Thereby, ideas for new products are generated that solve problems in better ways than existing products.
It is important to note that products are rarely marketed by their core value. The reason is that the core value in most cases does not really offer competitive advantage. Usually, there are several alternatives available that satisfy the most basic need – either competing products or substitutes. Imagine if a car would be advertised by its ability to offer transportation. Quite a ridiculous thought. As many alternative products offer this core value, the differentiation usually happens at later stages – at the actual product or augmented product level. For instance, the specific car might be differentiated by its powerful engine and the interior quality.
The Actual Product – the Middle and Most Obvious Layer
The second level of product is the actual product. Marketers should turn the core benefit they identified into an actual product. This involves developing product features, design, a quality level, a brand name and even a packaging. The actual product offers the best and easiest options for differentiation. Alternative products that offer the same core benefits can be set apart by different features, designs, qualities etc.
The smartphone or the car you buy are actual products. You buy the phone, the packaging, the functionality and so on. You buy the car, the powerful engine, the sporty exhaust and so further. All these factors at the middle level of product relate to the core customer value. This reveals that the levels of product build up on each other. The smartphone’s name, parts, styling, features, packaging and other attributes all have been carefully combined to deliver the core customer value of staying connected.
As the examples show, different aspects of the actual product may appeal to different customers. This is also the main reason why most products can be purchased in a number of different versions. For instance, you can choose different colors and engines for a car, and different memory sizes for a smartphone.
The Augmented Product – The Outer Layer
A product is completed by the last layer – the augmented product. While the actual product offers most differentiation potential, the augmented product adds further options to differentiate. It is usually built around the core value and the actual product. It simply offers additional consumer services and benefits.
Let’s consider an example. If you buy a tablet device, you get more than the core customer value (e.g., communication), and also more than the actual product (brand, design, features, etc.). You also get the augmented product, which turns the product into a complete solution to your connectivity problems as defined by the core customer value. This complete solution might take the form of a warranty, after-sale service, product support, instructions on how to use the device and so further.
As we have learned, a product is more than what you actually see when you buy it. Three levels of product are involved in any purchase. The levels of product include the core customer value, the actual product and the augmented product. What you buy is a complex bundle of benefits that aim to satisfy your needs. This also means that when marketers develop products, they first must identify the core customer value. What is the problem the product will solve? Then, they must design the actual product and in addition find ways to augment it in order to create customer value and the most satisfying experience.