strategy tools
/ Kotler and Keller's Five Product Levels
In short
Categorize products based on perceived value to customers for strategy.
Can be used for: Value Proposition and Customer Focus
Kotler and Keller's Five Product Levels is a strategic tool that categorizes products based on their perceived value to customers. The five levels include the core benefit (the fundamental need or want satisfied by the product), the basic product (the core product with added features and attributes), the expected product (meeting customer expectations), the augmented product (additional features that exceed customer expectations), and the potential product (future innovations and enhancements). This framework helps businesses understand and improve their product offerings by focusing on customer needs and expectations at different levels of value delivery.
Type of tool: Market Positioning
Expected outcomes:
Enhanced understanding of customer needs and wants at different levels of value delivery.
Clear differentiation of products based on perceived value to customers.
Improved product development strategies by focusing on meeting and exceeding customer expectations.
Strengthened competitive advantage through strategic positioning of products in the market.
Facilitated innovation and future enhancements by identifying opportunities for product evolution.
In detail
Kotler and Keller's Five Product Levels is a strategic tool that provides a comprehensive framework for categorizing products based on their perceived value to customers. Developed by marketing gurus Philip Kotler and Kevin Keller, this model is designed to help businesses understand and enhance their product offerings by focusing on customer needs and expectations at different levels of value delivery.
At the core of this tool are five distinct levels that represent the progressive stages of product development and differentiation. The first level is the core benefit, which addresses the fundamental need or want that the product aims to satisfy. This level delves into the intrinsic value that the product provides to customers, focusing on the underlying problem or desire it solves.
Moving up the hierarchy, we encounter the basic product level, which involves the core product with added features and attributes. This level represents the tangible aspects of the product that differentiate it from competitors and enhance its value proposition. By enhancing the basic product, businesses can create a more compelling offering that resonates with their target audience.
Next, we have the expected product level, which revolves around meeting customer expectations. This level emphasizes the importance of fulfilling basic requirements and delivering on promises made to customers. By consistently meeting these expectations, businesses can build trust and loyalty among their customer base, fostering long-term relationships and repeat business.
The augmented product level takes things a step further by incorporating additional features that exceed customer expectations. This level focuses on providing added value and enhancing the overall customer experience. By going above and beyond what is expected, businesses can differentiate themselves from competitors and create a unique selling proposition that sets them apart in the market.
Finally, we reach the potential product level, which encompasses future innovations and enhancements. This level encourages businesses to think ahead and anticipate evolving customer needs and market trends. By continuously innovating and exploring new possibilities, businesses can stay ahead of the curve and maintain a competitive edge in the ever-changing business landscape.
Overall, Kotler and Keller's Five Product Levels framework aims to help businesses strategically differentiate their products and gain a competitive advantage in the market. By understanding and optimizing each level of product value delivery, businesses can create offerings that resonate with customers, drive loyalty, and ultimately achieve sustainable success in their respective industries.
How to use it
Identify the core benefit of your product - Determine the fundamental need or want that your product satisfies for customers.
Develop the basic product - Enhance the core product by adding features and attributes that provide additional value to customers.
Ensure the expected product meets customer expectations - Make sure your product delivers on the basic requirements that customers anticipate.
Create the augmented product with added value - Exceed customer expectations by incorporating extra features that enhance the overall product experience.
Explore the potential product for future innovations - Identify opportunities for future enhancements and innovations that can further differentiate your product in the market.
By following these steps, you can effectively utilize Kotler and Keller's Five Product Levels to categorize your products based on perceived value to customers, enhance your understanding of customer needs, differentiate your products in the market, improve product development strategies, strengthen competitive advantage, and drive innovation for future growth.
Pros and Cons
Pros
Cons
Helps businesses understand and categorize products based on their perceived value to customers
Enables businesses to identify the fundamental need or want satisfied by the product (core benefit)
Guides businesses in enhancing their products by adding features and attributes to the core product (basic product)
Ensures that products meet customer expectations (expected product)
Encourages businesses to exceed customer expectations by providing additional features and benefits (augmented product)
Inspires businesses to innovate and enhance products for future competitiveness (potential product)
Facilitates strategic differentiation by focusing on customer needs and expectations at different levels of value delivery
Supports businesses in developing a competitive advantage by aligning product offerings with customer preferences
Helps businesses stand out in the market by offering products that cater to various levels of customer value perception
Guides businesses in creating a product portfolio that addresses diverse customer needs and preferences
Overemphasis on product features: Focusing too much on adding features to move up the product levels may lead to feature creep and unnecessary complexity, potentially alienating customers who prefer simplicity.
Limited focus on customer experience: The framework primarily looks at product attributes and may overlook the overall customer experience, including factors such as service quality, brand perception, and emotional connections.
Difficulty in defining product boundaries: It can be challenging to clearly delineate between the different product levels, leading to confusion in product positioning and messaging.
Ignoring market dynamics: The tool may not account for rapidly changing market trends, disruptive innovations, or evolving customer preferences, potentially making products obsolete or out of touch.
Risk of commoditization: By solely focusing on product features and value delivery, businesses may neglect building sustainable competitive advantages beyond the product itself, making it easier for competitors to replicate offerings.
Resource-intensive product development: Constantly striving to enhance products to reach higher levels may require significant investments in research, development, and innovation, which may not always translate into increased customer value or market success.
Inflexibility in adapting to market feedback: Rigidly following the product levels framework may hinder a company's ability to quickly pivot or adjust its offerings based on customer feedback or changing market conditions.
Potential customer confusion: Customers may struggle to understand the differences between products positioned at various levels, leading to decision paralysis or dissatisfaction with perceived value discrepancies.
Lack of focus on sustainability and ethical considerations: The tool's emphasis on product features and customer value may overshadow important considerations such as environmental impact, social responsibility, and ethical sourcing, which are increasingly critical for competitive differentiation and long-term success.
When to Use
Businesses evolve from a simple idea into complex entities that undergo various stages of growth, learning, and adaptation before ultimately reinventing themselves to remain competitive. Throughout these stages, leveraging the right tools can significantly enhance success and efficiency. Below are the typical stages highlighting the stages where this tool will be useful. Click on any business stage to see other tools to include in that stage.
