Chapter 6

Product Concept and Decisions

Product is a key element in the market offering. Marketing-mix planning begins
with formulating an offering to meet target customer’s needs or wants. The
customer will judge the offering by three basic elements: product features and
quality, services mix and quality, and price appropriateness (Figure 6.1.) All three
elements must be meshed into a competitively attractive offering.
The Product and the Product Mix l a product is anything that can be offered to a
market to satisfy a want or need.
Products that are marketed include physical goods, services, experiences, events,
persons, places, properties, organizations, information and ideas.
Product Levels
In planning its market offering, the marketer needs to think through five levels of
the product (Figure 6.2.). 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, dresser, and closet.

Figure 6.1: Components of the Figure 6.2: Five Product Levels Market Offering

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 Product Concept and Decisions 207 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 service.
Elmer Wheeler once observed, “Don’t sell the steak—sell the sizzle.”
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, using, fixing
and disposing of the product. 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 things should be noted about product-augmentation strategy. First, each
augmentation adds cost. The marketer has to ask whether customers will pay
enough to cover the extra cost. Second, augmented benefits soon become expected
benefits. Today’s hotel guests expect a remote-control television set and other
amenities. This means that competitors will have to search for still other features
and benefits. Third, as companies raise the price of their augmented product, some
competitors can offer a “stripped-down” version at a much lower price. Thus
alongside the growth of fine hotels like Four Seasons and Ritz Carlton we see the
emergence of lower-cost hotels and motels (Motel Six, Comfort Inn) catering to
clients who simply want the basic product.
At the fifth levels stands the potential product, which encompasses all the possible
agmentations and transformations the product might undergo in the future. Here is
where companies search for new ways to satisfy customers and distinguish their
offer. All-suite hotels where the guest occupies a set of rooms represent an
innovative transformation of the traditional hotel product.
Successful companies add benefits to their offering that not only satisfy customers
but also surprise and delight them. Delighting is a matter of exceeding
expectations. Thus the hotel guest finds candy on the pillow or a bowl of fruit or a
video recorder with optional videotapes. Ritz-Carlton hotels, for example,
remember individual guests’ preferences and prepare rooms with these preferences
in mind.
Product Offer Can Range from the Generic to the Potential
At the beginning of this chapter, we made a simple definition of product as a ‘need
satisfying entity’. Now, after analysing the various components that actually build
up the product, we have a better idea of what a product means. A product has a
personality consisting of several components—the basic material, its associated
features, the brand name, the package and the labelling, the price range, the
positioning, speciality of the sale outlets, the quality of promotion and the
corporate image and prestige. A product that is finally offered in the market is a
combination of all these elements.
In fact, the crucial task in product management lies in working out the best
possible alignment among the myriad factors mentioned above. The marketing
man is constantly
208 Marketing Management
at it, always engaged in enriching his product offer. In his attempt to satisfy the
customer and score over competition, he brings out refinement upon refinement on
his basic product offer, and takes the product to higher levels of evolution.
Theodore Levitt explains this idea beautifully in his HBR article : ‘Marketing
Success Through Differentiation of Anything’. According to Levitt, a product
offer can be conceived at four levels : the generic product, the expected product,
the augmented product and the potential product. To make this evolution easier to
understand, we go by a six-level approach, as shown in Chart 6.1

Chart 6.1: Product Offer can Range from the Generic to the Potential

l The generic product

l The branded product

l The differentiated product

 l The customised product

l The augmented product

l The potential product

The Generic Product

The generic product is the unbranded and undifferentiated commodity like rice,
bread, flour, or cloth. Here, the product does not have an identity through a name
and is not linked to any one maker or owner.
The Branded Product
The branded product gets an identity through a ‘name’, Lalkila basmati rice,
Modern bread, and Annapurna atta are branded products.
The Differentiated Product
The differentiated product enjoys further distinction from other similar
products/brands in the market. The marketer endows his brand with some special
attributes/qualities and claims uniqueness for his offer. The differentiation claimed
may be ‘tangible’, with a distinction on ingredient, quality, utility or service. It
may also be intangible or ‘psychological’, highlighted by subtle sales appeals.
Maggi noodles, and Dettol soap are examples of differentiated products with
tangible differentiation. Maggi claims a tangible distinction over other brands of
noodles. It is ready in two minutes and involves very little cooking. It is available
with different ‘taste makers’ for the vegetarian and the non-vegetarian users. The
differentiation is tangible and rests on the planks of convenience and variety.
Among bath soaps, Dettol is differentiated on the basis of its ability to provide total
protection from germs.
The scope for differentiation is immense; and to win over customers, firms seek
higher levels of differentiation through customizing and augmenting of the
product.
The Customized Product
A product that is adapted to the requirements of the individual customer is a
customized product. Today, many products coming from the IT and telecom
industries have large degree of customization built into them. For example, the
telephone ‘knows’ which language a given user would like to use while calling a
long-distance operator. It will Product Concept and Decisions 209 also allow him
to create a distinctive ring so that his best friend knows that he is calling. And, it
can also recognize his most frequently called numbers, not just by number, but by
name as well.
The Augmented Product
The augmented product is the result of voluntary improvements brought about by
the manufacturer in order to enhance the value of the product. The firm goes
beyond all expectations of the consumers. It finds out through market research
how the value of its product can be enhanced. Using the insights so gathered, the
firm augments the product by adding extra features and functions to it.
Examples of augmented products: Titan, added protective packing to its alarm clocks
and claimed, ‘Here is a travel clock with a protective shutter. Available in 3 dial
options and 4 elegant colors.’ Aristocrat introduced suitcases with wheels. The
wheel was an extra facility, an augmentation to the luggage. Instead of lifting and
carrying the suitcase, the users could now pull it on its wheels. Hindustan Motors
augmented its Ambassador car and offered the Ambassador 1800 ISZ,
incorporating into the car, the 1817 cc, 74 HP, Isuzu engine, 5 synchro meshed
gears with an overdrive, power-assisted brakes, progressive suspension, diaphragm
clutch, a new dashboard and bucket seats. The augmentations translated into faster
pick-up, greater speed, sure stopping and greater comfort.
Companies resorting to the product development route in their marketing strategy
are basically in the game of continuous augmentation of products.
The Potential Product
The potential product is ‘tomorrow’s product’, carrying all the improvement and
finesse that is possible under the given technological, economic and competitive
conditions. For example, today, a robot available for domestic help can be
considered a potential product. In actual practice, development of potential
products is the forte of big companies, since heavy resources are required for this
task.
PRODUCT HIERARCHY

Each product is related to certain other products. The product hierarchy stretches
from basic needs to particular items that satisfy those needs. We can identify
seven levels of the product hierarchy (here for life insurance) :
 Need family: The core need that underlies the existence of a product family.
Example: security.
 Product family: All the product classes that can satisfy a core need with
reasonable effectiveness. Example: savings and income.
 Product class: A group of products within the product family recognized as
having a certain functional coherence. Example: financial instruments.
 Product line : A group of products within a product class that are closely
related because they perform a similar function, are sold to the same
customer groups, are marketed through the same channels, or fall within
given price ranges. Example: life insurance.