This framework, often called the Three Levels of a Product, is a cornerstone of marketing and is widely attributed to Philip Kotler.
Product Levels means that a manager must view the product in three layers:
- The Core Customer Value (what the buyer is really buying—e.g., rest).
- The Actual Product (features, design, quality, brand name—e.g., Hotel Room),
- The Augmented Product (additional services and benefits—e.g., Free breakfast, concierge service). Differentiation often occurs at the Augmented level.
It effectively illustrates that a product is more than just a physical object; it is a layered bundle of benefits and experiences.
Here is a quick breakdown and how they build upon each other:
| Product Level | Focus/Definition | Example (Hotel) | Where Differentiation Often Happens |
| 1. Core Customer Value | The fundamental benefit or service the customer is really buying. (The problem the product solves). | Rest, Security, Comfort | The most basic level, rarely a differentiator alone. |
| 2. Actual Product | The tangible aspects and features that deliver the core benefit. | Hotel Room (features, design, quality, brand name) | Differentiation can happen here (e.g., luxury design, superior quality). |
| 3. Augmented Product | Additional services and benefits built around the core and actual product. | Free Breakfast, Concierge Service, Free Wi-Fi, Loyalty Program | Often the key source of differentiation and exceeding customer expectations. |
Differentiation often occurs at the Augmented level, as many core and actual product features become standardized or easy for competitors to copy.
| Level | Focus | Example (Hotel) | Purpose |
| 1. Core Customer Value | What is the buyer really buying? (The fundamental need being met.) | Rest, Security, Escape | To define the basic problem being solved. |
| 2. Actual Product | The tangible package of features. (Must deliver the core value.) | Hotel Room: (Brand Name, Quality, Design, Features like a bed/TV) | To make the core benefit a reality with a specific offering. |
| 3. Augmented Product | Additional services and benefits that add value. | Free Breakfast, Wi-Fi, Loyalty Program, Concierge Service, Express Check-out | To differentiate the offering and exceed customer expectations. |
In today’s competitive markets, the core and actual products for many goods become standardized (e.g., all smartphones make calls and access the internet), making the extra services and value-adds the primary battleground for market share.