1.4 PRODUCT LEVELS
In planning its market offering, the marketer needs to think through five levels of product. Each level adds more customer value, and the five constitute a customer value hierarchy.
The most fundamental level is the core benefit: the fundamental service or benefit that the customer is really buying. A hotel guest is buying “rest and sleep.” The purchaser of a drill is buying “holes”. Marketers must see themselves as benefit providers.
At the second level, the marketer has to turn the core benefit into a basic product. Thus a hotel room includes a bed, bathroom, towels, desk, etc.
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, working lamps, and a relative degree of quiet. Because most hotels can meet this minimum expectation, the traveler normally will settle for whichever hotel is most convenient or least expensive.
At the fourth level, the marketer prepares an augmented product that exceeds customer expectations. A hotel can include a remote-control television set, fresh flowers, rapid check-in, express checkout, and fine dining and room services.
Today’s competition essentially takes place at the product-augmentation level. (In less developed countries, competition takes place mostly at the expected product level). Product augmentation leads the marketer to look at the user’s total consumption system: the way the user performs the tasks of getting and using products and related services. According to Levitt, the new competition is not between what companies produce in their factories, but between what they add to their factory output in the “form of packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing, and other things that people value.”
Some important points should be noted about the product-augmentation strategy. First, each augmentation adds cost. Second, augmented benefits soon become expected benefits. Today’s hotel guests expect a remote-control television set. This means competitors will have to search for still other features and benefits. Third, as companies raise the price of their augmented product, some competitors offer a “stripped-down” version at a much lower price.
At the fifth level stands the potential product, which encompasses all the possible augmentations and transformations the product or offering might undergo in the future. Here is where companies search for new ways to satisfy customers and distinguish their offers. Richard Branson of Virgin Atlantic is thinking of adding a casino and a shopping mall in the 600-passenger planes that his company will acquire in the next few years and consider the customization platforms new e-commerce sites are offering, from which companies can learn by seeing what different customers prefer.
Successful companies add benefits to their offering that not only satisfy customers but also surprise and delight them. Delighting customers is a matter of exceeding expectations.
The idea of the product life cycle (PLC) is the hub of the product strategy. It is based upon the premise that a new product enters a ‘life cycle’ once it is launched in the market. The product has a ‘birth’ and ‘death’- its introduction and decline. The intervening period is characterized by growth and maturity. By considering a product’s course through the market in this way, it is possible to design marketing strategies appropriate to the relevant stage in the product’s life. In addition to the stages outlined, an additional stage is often discussed- that of saturation, a leveling off in sales once maturity is reached, and prior to the decline. A company’s positioning and differentiation strategy must change as the product, market, and competitors change over time. To say a product has a life cycle is to assert four things:
(i) Products have a limited life.
(ii) Product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller.
(iii) Profits rise and fall at different stages of the product life cycle.
(iv) Products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life-cycle stage.
2.2 PRODUCT LIFE CYCLE
Most product life-cycle curves are portrayed as bell-shaped. These curves are typically divided into four stages: introduction, growth, maturity, and decline.
- Introduction: A period of slow sales growth as the product is introduced in the market. Profits- are nonexistent because of the heavy expenses incurred with product introduction. GENERALLY: LOW SALES, HIGHER COST PER CUSTOMER, NEGATIVE PROFIT, FEW COMPETITORS AND OFFER BASIC PRODUCT, INNOVATORS CUSTOMERS
- Growth: A period of rapid market acceptance and substantial profit improvement. RISING SALES AND PROFIT, AVERAGE COST PER CUSTOMER, GROWING NUMBER OF COMPETITORS, EARLY ADOPTERS CUSTOMERS,
- Maturity: A period of a slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits stabilize or decline because of increased competition. PEAK SALES, LOW COST PER CUSTOMER, HIGH PROFITS, MIDDLE MAJORITY, STABLE NUMBER OF COMPETITORS BEGIN TO DECLINE
- Decline: The period when sales show a downward drift and profits erode. The PLC is influenced by the following factors.
- a) The intrinsic nature of the product itself.
- b) Changes in the macro-environment.
- c) Changes in consumer preferences, which are affected by macro and microenvironment.
- d) Competitive action.
DECLINING SALES AND PROFIT, LOW COST PER CUSTOMER, DECLINING NUMBER OF COMPETITORS AND LAGGARDS CUSTOMERS