5 product levels with example of mobile phone

The concept of product levels refers to the different layers or aspects of a product that add value for the
customer. The five product levels, often described by Philip Kotler, are:
• Core Benefit Level:
This is the fundamental reason why a customer buys a product.
Example for a mobile phone: Communication. The core benefit of a mobile phone is to enable
communication with others.
• Basic Product Level:
This level involves turning the core benefit into a basic product.
Example for a mobile phone: The basic product includes features like calling, texting, and storing
contacts.
• Expected Product Level:
This level includes additional features and attributes that customers expect.
Example for a mobile phone: Customers expect a certain level of reliability, battery life, and user-friendly
interface.
• Augmented Product Level:
This involves providing additional features and benefits that exceed customer expectations.
Example for a mobile phone: Advanced camera features, high-quality display, and additional apps beyond
basic communication.
• Potential Product Level:
This level represents all the potential additional benefits and features that could be added in the future.
Example for a mobile phone: Future upgrades, compatibility with new technologies, and additional
functionalities through software updates.

Product: Mobile Phone

Core Benefit Level: Communication
Basic Product Level: Calling, texting, contact storage
Expected Product Level: Reliability, decent battery life, user-friendly interface
Augmented Product Level: Advanced camera features, high-quality display, additional apps
Potential Product Level: Future upgrades, compatibility with emerging technologies, additional
functionalities through software updates.
By considering these levels, companies can better understand customer needs and expectations, and also
identify areas for innovation and differentiation in their products.
Channel functions – Hospital Case
• Address spatial discrepancy
Doctor can possibly visit even a patients house and so on, but then that is a very
inconvenient way of using a doctor's time. So you are a patient, go to the hospital and all
these services would be made available to you there. So through that the question of special
discrepancy is being addressed.
Other aspect eg: antivenom should be available at snake dominant area

• Address temporal discrepancy

Providing ambulance service, telemedicine is addressing both 1 and 2

• Bulk Breaking
Starting dedicated clinic nearby

• Assortment
Different dpmnts position accordingly, different options

• Information and promotion

• Service
Post hospitalization
• Spares and Returned Goods logistics
Unused medicines, eqpmnt

• Managing Relationships
A comparison between e-commerce and brick-and-mortar shops in terms of how they fulfill various
channel functions:
Address Spatial Discrepancy:
Brick-and-Mortar Shops (VA): Presence everywhere, even in the smallest settlements of the country.
E-commerce (SD): Limited penetration, especially in remote areas.
Address Temporal Discrepancy:
Brick-and-Mortar Shops (VA): Immediate delivery of the product, better quality transportation with
shorter distances.
E-commerce (SD): Takes three to four days for delivery.
Bulk Breaking:
Brick-and-Mortar Shops (VA): Can break bulk and sell individual products.
E-commerce (SD): May not be as effective in bulk breaking.
Assortment:
Brick-and-Mortar Shops (VA): Limited assortment visible in physical stores.
E-commerce (SD): Offers a wide range of products with detailed specifications and customer feedback.
Information and Promotion:
Brick-and-Mortar Shops (VA): Provide personalized information, explain product details, and assist in
decision-making.
E-commerce (SD): Displays all brands with specifications and customer feedback.
Service:
Brick-and-Mortar Shops (VA): Immediate service, technicians available for basic service all the time.
E-commerce (SD): Relies on manufacturer's service centers; may not offer immediate service.
Spares and Returned Goods Logistics:
Brick-and-Mortar Shops (VA): Can handle spares and returned goods directly in the store.
E-commerce (SD): Dependent on the manufacturer's service centers for returns and spares.
Managing Relationships:
Brick-and-Mortar Shops (VA): Emphasizes personal relationships, helps customers make better choices,
provides service, and manages relationships over generations.
E-commerce (SD): Limited ability to build personal relationships; customers may be dependent on
manufacturer service centers.
In summary, both e-commerce and brick-and-mortar shops have their advantages and disadvantages in
fulfilling various channel functions. Brick-and-mortar shops excel in immediate service, personalized
interaction, and relationship management, while e-commerce offers a broader assortment and
convenience. The effectiveness of each channel depends on the specific needs and preferences of the
customers.

Q. Explain the following terms and illustrate them with suitable examples.
a. Optional Product Pricing
b. Product Bundle Pricing
c. Captive Pricing
d. By-product Pricing
e. Product Line pricing
a. Optional Product Pricing:
Definition: Optional product pricing involves offering optional or accessory products along with the main
product and pricing them separately. Customers can choose whether or not to purchase these additional
features.
Example: When purchasing a laptop, the manufacturer may offer optional upgrades such as additional
RAM, a larger hard drive, or premium software packages. Each of these options comes with an additional
cost, allowing customers to customize their purchase based on their needs and budget.

b. Product Bundle Pricing:

Definition: Product bundle pricing involves combining multiple products or services into a single package
and offering them at a reduced price compared to purchasing each item individually.
Example: A fast-food restaurant may offer a value meal that includes a burger, fries, and a drink at a lower
price than if each item were purchased separately. This encourages customers to buy more items at once
and provides them with a cost savings.

c. Captive Pricing:
Definition: Captive pricing involves setting a low price for the main product but charging a higher price
for the essential accessories, components, or services associated with that product.
Example: Printers are often sold at a relatively low price, but the replacement ink cartridges are priced
higher. The low printer price attracts customers, but the recurring need for ink cartridges generates
revenue for the company.

d. By-Product Pricing:
Definition: By-product pricing involves setting a price for by-products generated during the production of
a main product. It aims to recover some of the costs associated with producing the main product.
Example: In the meat industry, the main product might be the meat from animals, while by-products such
as bones, skin, and organs can be processed and sold separately for additional revenue.

e. Product Line Pricing:

Definition: Product line pricing involves setting prices for a group or range of products that are related or
similar. The pricing strategy takes into account the features, benefits, and perceived value of the entire
product line.
Example: A technology company may offer a product line of smartphones with different models (e.g.,
basic, mid-range, premium). Each model within the product line is priced differently based on its features
and specifications, allowing customers to choose a product that fits their needs and budget.
These pricing strategies demonstrate the various ways companies can strategically set prices to meet
customer needs, maximize revenue, and differentiate their offerings in the market.