Marketing consultant Philip Kotler developed the Five Product Levels model. He asserted that a product was not just a physical object but also something that satisfied a wide range of consumer needs. According to that Kotler identified five types of products: core product, generic product, expected product, augmented product, and potential product.

Understanding the Five Product Levels model

Kotler defined a product as anything that could meet consumer needs or wants. It’s important to note that a lot of needs and wants are not related to product functionality. That is, the needs and wants of the consumer are more abstract in nature.

Offering products with abstract value is the goal of any business. Since the consumer receives this value on top of the functional value of the product, their buyer satisfaction is higher. Satisfaction is also increased when the perceived value of a product matches the actual value of owning it. 

Once a product has high perceived value, the brand behind the product forms an emotional bond with the consumer. This increases brand equity and ensures that a business is top-of-mind the next time a consumer needs to make a purchase.

In the next section, we’ll look at each of the five levels in more detail.

The five basic levels of all products

1. Core level products

Core products address fundamental consumer needs such as food, water, or shelter. A consumer who rents a hotel room has a core need for sleep. Others buy cars because of their core need to get from one place to another in a satisfactory amount of time.

2. Generic level products

Generic products do offer some benefit over and above their functionality, but they lack differentiation. Therefore, businesses offering generic level products are often competing on price instead of building brand equity. 

Generic products are often thought of as commodities and have the bare minimum of features required to make them functional. Examples include bottled water, insurance, mirrors, and beds.

3. Expected level products

Expected level products have value-adding features that seek to differentiate them both in the marketplace and from core and generic products. The danger with expected level products is that they become normalized over time and potentially revert to the core level. 

When WIFI was first offered in hotels, it created a high amount of value that was priced accordingly. Nowadays, WIFI is so ubiquitous as to be free of charge in most establishments – therefore relegating it to a core or generic product at best.

4. Augmented level products

Augmented products are truly differentiated in their respective markets. A consumer may not directly seek out the extra features that make a product augmented, but these features do contribute to competitive advantage, nonetheless. 

For example, a new laptop bundled with Microsoft Office and a five-year warranty for no extra cost adds abstract value in the form of consumer peace of mind and value for money.

5. Potential level products

Potential level products are simply the transformations an augmented product might undergo in the future. Businesses must aim to surprise and delight consumers to sustain brand equity through innovation. This also ensures that augmented products are continually updated so that they avoid falling to lower levels of the model. 

Adobe’s photo editing software is one such example, with engineers constantly adding new features and ensuring that the software is compatible with new camera releases.

Key takeaways

• The Five Product Levels model shows that consumers have as many five different levels of need for a single product. These needs are based on psychological, emotional, and perceptual factors.
• The Five Product Levels model argues that consumers must derive value from a product that is not directly related to its functionality.
• The Five Product Levels model explains how a product may move through five levels of development, according to the degree of market differentiation and subsequent consumer benefits.

Connected resources:

• Ansoff Matrix
• Business Strategy Frameworks
• Blue Ocean Strategy
• BCG Matrix
• Competitive Moat
• Porter’s Five Forces
• Profit Margins

Additional resources:

• Business Models
• Business Strategy
• Digital Business Models
• Distribution Channels
• Go-To-Market Strategy
• Marketing Strategy
• Network Effects
• Platform Business Models
• Revenue Models

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