Page 349 - Marketing Management

326 PART 5 SHAPING THE MARKET OFFERINGS

Value-based prices
Product Levels: The Customer-Value Hierarchy
In planning its market offering,the marketer needs to address five product levels (see Figure 12.2). 2
Each level adds more customer value, and the five constitute a customer-value hierarchy.
Attractiveness
of the market • The fundamental level is the core benefit: the service or benefit the customer is really buying.
offering A hotel guest is buying rest and sleep. The purchaser of a drill is buying holes. Marketers must
see themselves as benefit providers.
Product Services
features mix and • At the second level, the marketer must turn the core benefit into a basic product. Thus a hotel
and quality quality room includes a bed, bathroom, towels, desk, dresser, and closet.
• At the third level, the marketer prepares an expected product, a set of attributes and condi-
|Fig. 12.1| tions buyers normally expect when they purchase this product. Hotel guests minimally expect

Components of the a clean bed, fresh towels, working lamps, and a relative degree of quiet.
• At the fourth level, the marketer prepares an augmented product that exceeds customer ex-
Market Offering pectations. In developed countries, brand positioning and competition take place at this level.
In developing and emerging markets such as India and Brazil, however, competition takes
place mostly at the expected product level.
• At the fifth level stands the potential product, which encompasses all the possible aug-
mentations 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 offering.
Differentiation arises and competition increasingly occurs on the basis of product augmenta-
tion, which also leads the marketer to look at the user’s total consumption system: the way the user
3
performs the tasks of getting and using products and related services. Each augmentation adds
cost, however, and augmented benefits soon become expected benefits and necessary points-of-
parity in the category. If today’s hotel guests expect satellite television, high-speed Internet access,
and a fully equipped fitness center, competitors must search for still other features and benefits to
differentiate themselves.
As some companies raise the price of their augmented product, others offer a stripped-down
version for less. Thus, alongside the growth of fine hotels such as Four Seasons and Ritz-Carlton,
we see lower-cost hotels and motels emerge such as Motel 6 and Comfort Inn, catering to clients
who want simply the basic product. Striving to create an augmented product can be a key for
success, as Jamestown Container has experienced.

Jamestown Container Companies What could be harder
to differentiate than corrugated containers? Yet Jamestown Container Companies, a leading
supplier of corrugated products for companies such as 3M, has formed strategic partnerships
with area manufacturers to provide every part of the shipping system. It offers not only boxes

|Fig. 12.2|
Potential product
Five Product Levels
Augmented product
Expected product
Basic product
Core
benefit