3.1. Kotler’s five ‘levels’ of product benefit Core and basic benefits

Kotler proposed at the most fundamental level the core benefit provided by the product. For a car, for example, this would be the ability to transport. Since all the products on the market will provide this benefit, this will rarely be the level on which companies compete. Added to the core benefit is the basic benefit, which would include everything that would be required to make the product practical in use. For the car, this might include the seats, appropriate controls, and legal safety equipment.

Expected, augmented and potential benefits

The next level is the expected benefit. Here we have all that the custo­mer has come to expect in a product. In our example of a car, this might include a radio, comprehensive guarantee and certain levels of performance. The augmented benefit goes beyond the customer’s expectations to provide something extra and desirable – for example, air conditioning and an on-board satellite navigation in a car. At the final level is the potential benefit – the product level that encompasses all that the product might ultimately become, but currently does not incorporate. The ownership of a certain car, for example, may confer on the owner a certain status in society, provide him or her with opportunities that would otherwise not present themselves or even assist in the attraction of a sexual partner.

Competition of augmented benefits

In mature markets, competition is normally at the augmented product level or above, and the basic product is taken for granted. What is in the expected product in one market may be in the augmented product in another. Air conditioning in a car might be a bonus in a temperate climate, but necessity in a tropical one. Thus, a car company that had gained a competitive advantage by superior reliability would lose that advantage once all cars had become reliable. It then has to be able to offer something else or face a lack of competitiveness. Over time, the augmented benefit becomes the expected benefit, so there has to be a continuous search for something extra to offer.

Augmentation adds to costs, and the company has to consider whether the customer will be willing to pay for the extra costs in the final price. Sometimes, after a period of rivalry in which compe­titors try to compete by adding more and more features and cost, a market segment emerges for a basic stripped-down low-cost version that just supplies the expected benefits.

Copeland’s product typology and strategy

There is a commonly held view that different types of products need to be managed and brought to market in different ways. Services, for example, cannot be stored, must be consumed at the point of produc­tion, are intangible and it is difficult to judge their quality in advance. As a result of these factors, we might anticipate off-peak pricing offers, the need for supplier credibility and difficulties in advertising not experienced by physical products. Industrial products are less likely to be sold direct to the end user than consumer products, with adver­tising being relatively more important for consumer products and high-quality personal contact being relatively more important for industrial products (hence the use of sales representatives to speak directly to industrial buyers).

There have been a number of attempts to build on product characteristics to produce classification systems for products that will serve as a comprehensive guide. A system based on dividing consu­mer products into convenience, shopping and speciality goods (Copeland, 1923) has endured and is one of the most popular product classifica­tion systems used at the present time.

Convenience goods. Convenience goods are products whose purchase is relatively fre­quent, at low prices, and the customer sees little interest or risk in the purchase. Examples would include low-price confectionery, bat­teries, carbonated drinks. As a consequence, the customer will typi­cally buy the product available in the most convenient outlet, and the supplier will have to make the product available in as many outlets as possible. Point-of-sale display and simple reminder advertising with little information content are likely to be important.

Shopping goods. In contrast, shopping goods are those that are typically more expen­sive of more interest to the purchaser, and some risk is seen in the purchase. Examples would include cars, personal computers and cameras. The customer will typically ‘shop around’ to make comparisons and gather information. These goods do not, therefore, have to be available in all possible outlets, and promotional material will usually have a high information content. In some categories of shopping goods such as personal computers, customers can demonstrate a very high level of technical knowledge that assists them in their pur­chase and producers must usually satisfy customers on a technical level before a sale is made.

Speciality goods. Speciality goods are seen as products that are so differentiated from others, often carrying considerable prestige, that customers may insist on only one brand. High prices, high levels of service and restricted distribution would be appropriate. An example would be that of Hasselblad cameras, which dominate certain parts of the professional photography market. There is no need or benefit for the products to be available in every camera shop, but they would tend to appear in shops where customers would expect a high level of service and expertise.

Limitations of Copeland’s framework

The use of classification systems is widely accepted by both managers and academic researchers. It is easy to show how they work in prac­tice, and a multitude of examples can be produced to show how appropriate they are. A strong argument against their slavish adop­tion is that they can exhibit circular logic. In other words, we examine how a product is marketed, and on this basis assign it to a particular classification. We then use that to say how it should be marketed. This is a recipe for staying with the status quo, and companies adopting this practice, even if implicitly, will never lead with new product stra­tegies. Over time, many products will gradually change from shopping goods to convenience goods. Thus, some watches will be speciality goods, some will be shopping goods and now the lowest priced watches on the market will effectively be convenience goods.

Changes in technology and customer taste or fashion may also create opportunities for things to be done differently, and there may always be part of a market that will respond to an approach that is different from the norm. Some organizations recognized that technology, in reducing transaction cost, could make telephone bank­ing viable. Avon cosmetics was built on the basis that some customers would be prepared to buy cosmetics from people selling it on their doorsteps as opposed to buying in conventional retail outlets.

Product type may be a useful starting point to guide management thinking, but it is not a substitute for creativity and analysis.