Product Management: Product Levels, Product Hierarchy, Product Mix and

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Product Management: Product Levels, Product Hierarchy, Product Mix!
We will discuss about how a company manages its products. Marketers must determine
the assortment of products they are going to offer consumers.
Some firms sell a single product; others sell a variety of products. A product item refers
to a unique version of a product that is distinct from the organisations other products.
Product Levels:
Theodore Levitt proposes that in planning its market offering, the marketer needs to
think through 5 levels of the product. Each level adds more customer value and taken
together forms Customer Value Hierarchy.
i. Core Benefit or Product:
This is the most fundamental level. This includes the fundamental service or benefit that
the customer is really buying. For example, a hotel customer is actually buying the
concept of “rest and sleep”
ii. Basic or Generic Product:
The marketer at this level has to turn the core benefit to a basic product. The basic
product for hotel may include bed, toilet, and towels.
iii. Expected Product:
At this level, the marketer prepares an expected product by incorporating a set of
attributes and conditions, which buyers normally expect they purchase this product. For
instance, hotel customers expect clean bed, fresh towel and a degree of quietness.
iv. Augmented product:
At this level, the marketer prepares an augmented product that exceeds customer
expectations. For example, the hotel can include remote-control TV, fresh, flower room
service and prompt check-in and checkout. Today’s competition essentially takes place
at the product-augmentation level. Product augmentation leads the marketer to look at
the user’s total consumption system i.e. the way the user performs the tasks of getting,
using fixing and disposing of the product.
Theodore Levitt pointed out that the real competition is not what the companies have
manufactured in the factories, but between what they add to their factory output in the
form of packaging, services, advertising, customer advice, financing, delivery
arrangements, warehousing and other things that people value.
Some things should be considered in case of product-augmentation strategy.
i Each augmentation adds cost. The extra benefits available in hotels add cost
ii. Augmented benefits soon become expected benefits. The unexpected additions like
flower, remote-controlled TV soon become very much expected by the customers from
the hotel.
iii. As companies raise the price of their augmented product, some companies may offer
a stripped- down” i.e. no-augmented product version at much lower price. There are
always a set of low- cost hotel are available among the 5-star hotels.
v. Potential Product:
This level takes into care of all the possible augmentations and transformations the
product might undergo in the future. This level prompts the companies to search for
new ways to satisfy the customers and distinguish their offer. Successful companies add
benefits to their offering that not only satisfy customers, but also surprise and delight
them. Delighting is a matter of exceeding expectations.
Product Hierarchy:
Each product is related to certain other products. The product hierarchy stretches from
basic needs to particular items that satisfy those needs. There are 7 levels of the
product hierarchy:
1. Need family:
The core need that underlines the existence of a product family. Let us consider
computation as one of needs.
2. Product family:
All the product classes that can satisfy a core need with reasonable effectiveness. For
example, all of the products like computer, calculator or abacus can do computation.
3. Product class:
A group of products within the product family recognised as having a certain functional
coherence. For instance, personal computer (PC) is one product class.
4. Product line:
A group of products within a product class that are closely related because they perform
a similar function, are sold to the same customer groups, are marketed through the
same channels or fall within given price range. For instance, portable wire-less PC is
one product line.
5. Product type:
A group of items within a product line that share one of several possible forms of the
product. For instance, palm top is one product type.
6. Brand:
The name associated with one or more items in the product line that is used to identity
the source or character of the items. For example, Palm Pilot is one brand of palmtop.
7. Item/stock-keeping unit/product variant:
A distinct unit within a brand or product line distinguishable by size, price, appearance
or some other attributes. For instance, LCD, CD- ROM drive and joystick are various
items under palm top product type.
Product Mix:
An organisations product line is a group of closely related products that are considered
a unit because of marketing, technical or end-use considerations. In order to analyse
each product line, product- line managers need to know two factors. These are.
i. Sales and profits
ii. Market profile
A product mix or assortment is the set of all products and items that a particular seller
offers for sale. A company’s product-mix has some attributes such as.
ADVERTISEMENTS:
1. Width:
This refers to how many different product lines the company carries.
2. Depth:
This refers to how many variants, shades, models, pack sizes etc. are offered of each
product in the line
3. Length:
This refers to the total number of items in the mix.
ADVERTISEMENTS:
4. Consistency:
This refers to how closely the various product lines are related in end use, production
requirements, distribution channels or some other way.
Let us take example of partial product assortment of HLL in its Home and Personal Care
(HPC) division:

So you see that there are three product lines of detergent, bathing soaps and shampoos
in our example. The list is illustrative and not exhaustive as HLL has many more
product lines. Hence, in the example the product width is 3. If Sunsilk has 3 different
formulations (oily, dry and normal hair) and 3 variations (sachet, 50 ml and 100 ml),
then the depth of Sunsilk is 3 X 3 = 9.
The average depth of HLL’s product mix can be calculated by averaging the depths of
all brands, which signifies the average depth of each product. For example if Surf,
Lifebuoy, Surf Excel, Lux, Clinic Plus, Sunsilk, Wheel, Liril, Rexona, Dove and Hamam
have depths of 3, 2, 1, 3, 6, 9, 2, 3, 2, 1 and 2 respectively (all are hypothetical figures),
then the average depth of HLL’s HPC division is (3+2+l+3+6+9+2+3+2+l+2)/11i. e.
34/11 i.e. 3.1. The length of HPC division is 11. The average length of line is determined
by dividing the total length by the width (i.e. the number of lines), which signifies the
average number of products in a product line. In this case, the average length is 11/3
i.e. 3.67.
Product-Line Length:
Product-line managers are concerned with length of product line. If adding items to the
product line can increase profits, then we can say that the product line is too short. On
the contrary, the line is too long if dropping items can increase profits. They have to
consider these two extremes of the product line and have to strike a balance between
them.
Company objectives influence product-line length. Companies seeking high market
share and market growth will carry longer lines. Companies that emphasise high
profitability will carry shorter lines consisting of carefully chosen items.
A company can lengthen its product line in 2 ways viz. a) line stretching and b) line
filling.
Line Stretching:
This occurs when a company lengthens its product line beyond its current range. This is
a frequent measure taken by companies to enter new price slots and to cater to new
market segments. The product may be stretched by the addition of new models, sizes,
variants etc. The company can stretch in 3 ways:
1. Down-market stretch:
A company positioned in the upper market may want to introduce a lower price line.
They offer the product in the same product line for the lower end markets. A company
can take this strategy for 3 reasons:
i. Strong growth opportunities in the down-market
ii. Tie-up lower-end competitors who might try to move up-market
iii. Stagnating or declining middle market
The company has 3 choices in naming its down-market products.
i. Same name Eg: Sony
ii. Sub-brand name: Eg: Maruti 800
iii. Different name: Eg: Panasonic and JVG from Matshushita
ii. Up-market stretch:
Companies may wish to enter the high end of the market for more growth, higher
margins or simply to position themselves as full-line manufacturers. So they offer the
products in the same product line and cover the upper end market. For example, most
of the car companies in India have cars in premium segments like GM (Chevrolet
Forester), Ford (Endeavour), Hyundai (Terracan), Mitusubishi (Pajero), Maruti (Grand
Vitara XL-7), Honda (CR-V) and Mercedes Benz (M-Class)
iii. Two-way stretch:
Companies serving the middle market may decide to stretch their line in both
directions. Tata Motors had Multi-purpose Utility Vehicles (MU V) like Sumo and Safari
targeted for middle segment of the market. It had launched Indica for lower segment of
the market as well as Indigo Marina and Indigo Estate for up-market consumers.
a) Line filling:
As the name applies, filling means adding a product to fill a gap in the existing line. The
company wants to portray itself as full line company and that customers do not go to
competitors for offers or models in particular price slots. There are several motives of
line filling as follows:
i) Reaching for incremental profits
ii) Trying to satisfy dealers who complain about lost sales because of missing items in
the line
iii) Trying to utilise the excess capacity
iv) Trying to be the leading full-line company
v) Trying to plug holes in the product-line to keep out the competitors
Line Modernisation:
Product lines need to be modernised continuously. Companies plan improvements to
encourage customer migration to higher-valued, higher-priced items. For instance, Intel
upgraded its Celeron microprocessor chips to Pentium 1, 2, 3 and now 4.
Line Featuring:
The product-line manager selects one or few items in the line to feature. Sometimes, a
company finds one end of its line selling well and the other end selling poorly. Then the
company may try to boost demand for the short sellers especially if they are produced in
a factory that is idled by lack of demand.
Line Pruning:
At times a company finds that over the years it has introduced many variants of a
product in the product line. This was required may be because of the changing market
situations. In this process the product lines become unduly complicated and long with
too many variants, shapes or sizes. In the present situation it mind find out that efforts
behind all these variants is leading to non-optimal utilisation of resources. In other
words it might be profitable for the company to leave behind some of the variants.
So when the products are not satisfactorily performing, the product managers need to
drop them form the product line. This may lead to increase in profitability. Thus line
pruning is consciously taken decision by the product manager to drop some product
variants from the line. For example Heads and Shoulders is a well-known brand of
shampoo from P&G, which had 31 versions. They went for line pruning and now they
have around 15 versions.
Five Product Levels – Kotler and Keller
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What is Product?
The term “product” refers to any tangible or intangible item or service that is created,
developed, and made available for sale or consumption in the market. It encompasses a
wide range of offerings, including physical objects like electronics, clothing, and furniture,
as well as digital goods like software, e-books, and online services. Products can be
designed to meet the needs and wants of individual consumers or businesses, and they
come in various forms, catering to diverse preferences and requirements. Ultimately,
products play a crucial role in commerce and are essential components of the economic
system by providing value and satisfaction to those who use or purchase them.
Definition of Product
A product is a versatile term encompassing tangible objects, intangible services, or even
innovative ideas that are created, developed, and offered for sale, use, or consumption
in the market. It encompasses a wide range of items, from physical consumer goods to
intangible digital content, like software and music. The essence of products lies in
meeting the needs, wants, and aspirations of individuals and businesses, contributing
significantly to commerce and the economy by generating revenue and creating value
for both producers and consumers.
Five Product Levels-Philip Kotler
Product levels, also known as the product hierarchy, offer a comprehensive perspective
on the various aspects of a product that customers interact with. These levels were
originally introduced by marketing expert Philip Kotler and include five essential
components:
1. Core Benefit
At the core benefit level, a business finds the fundamental value or primary purpose that
a customer seeks while purchasing a product. This aspect addresses the underlying need
or problem the product is designed to fulfil.
For example, when someone buys a smartphone, they are seeking the core benefit
of communication and access to information.
2. Generic Product
Moving on to the generic product level includes the basic version of the product that
fulfils the core benefit. This level includes all the essential features and attributes
necessary for the product to function as intended. Essentially, it is a bundle of tangible
and intangible attributes that make up the product.
For example, in the case of smartphones, these would encompass components like
display, processor, battery, and basic communication capabilities.
3. Expected Product
The expected product level represents the set of attributes and features that customers
anticipate to have in a product of a specific category. These are the minimum
requirements that customers expect when making a purchase. Failing to meet these
expected features may lead to customer dissatisfaction.
For example, in the case of smartphones, customers would expect features like a good-
quality camera, app compatibility, and internet connectivity.
4. Augmented Product
As we ascend to the augmented product level, we encounter additional features and
benefits that surpass customers’ expectations and distinguish the product from its
competitors. These extras add value and elevate the overall customer experience.
Augmented product offerings may include warranties, customer
support, packaging, after-sales services, or loyalty programs.
For example, In the case of smartphones, augmented features could be extended
warranty, fast charging technology, or exclusive access to certain apps.
5. Potential Product
Lastly, the potential product level entails envisioning future possibilities
and innovations that could be incorporated into the product. These are ideas and
improvements that may not be currently available but hold the potential to be introduced
in the future. Anticipating and adapting to changing customer needs and technological
advancements are crucial aspects of the potential product level.
For example, for smartphones, the potential product could be a gaming kit on one
occasion and earbuds on some other occasion. Through potential products, a business
can surprise its customers.
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Classification of Products
It should be apparent that the process of developing successful marketing programs for
individual products is extremely difficult. In response to this difficulty, a variety of
classification systems have evolved that, hopefully, suggest appropriate strategies. The
two most common classifications are: (a) consumer goods versus industrial goods, and
(b) goods products (i.e. durables and nondurables) versus service products.
The traditional classification of products is to dichotomize all products as being either
consumer goods or industrial goods. When we purchase products for our own
consumption or that of our family with no intention of selling these products to others,
we are referring to consumer goods. Conversely, industrial goods are purchased by an
individual or organization in order to modify the product or simply distribute it to the
ultimate buyer in order to make a profit or meet some other objective.
Classification of Consumer Goods
Products and services can be categorized in a number of ways. We will use these
categories throughout the book because they are the most commonly referred to
categories by marketers and because there are marketing implications for each.
Consumer offerings fall into four general categories:
1. Convenience offerings
2. Shopping offerings
3. Specialty offerings
4. Unsought offerings
In this section, we will discuss each of these categories. Keep in mind that the categories
are not a function of the characteristic of the offerings themselves. Rather, they are a
function of how consumers want to purchase them, which can vary from consumer to
consumer. What one consumer considers a shopping good might be a convenience good
to another consumer.
Convenience Offerings
Convenience offerings are products and services consumers generally don’t want to put
much effort into shopping for because they see little difference between competing
brands. For many consumers, bread is a convenience offering. A consumer might choose
the store in which to buy the bread but be willing to buy whatever brand of bread the
store has available. Marketing convenience items is often limited to simply trying to get
the product in as many places as possible where a purchase could occur.
The Life Savers Candy Company was formed in 1913. Its primary sales strategy was to
create an impulse to buy Life Savers by encouraging retailers and restaurants to place
them next to their cash registers and include a nickel—the purchase price of a roll of Life
Savers—in the customer’s change.
Jason – Life Savers – CC BY-NC 2.0.
Closely related to convenience offerings are impulse offerings, or items purchased
without any planning. The classic example is Life Savers, originally manufactured by the
Life Savers Candy Company, beginning in 1913. The company encouraged retailers and
restaurants to display the candy next to their cash registers and to always give
customers a nickel back as part of their change so as to encourage them to buy one
additional item—a roll of Life Savers, of course!
Shopping Offerings
A shopping offering is one for which the consumer will make an effort to compare and
select a brand. Consumers believe there are differences between similar shopping
offerings and want to find the right one or the best price. Buyers might visit multiple
retail locations or spend a considerable amount of time visiting Web sites and reading
reviews about the product, such as the reviews found in Consumer Reports.
Consumers often care about brand names when they’re deciding on shopping goods. If a
store is out of a particular brand, then another brand might not do. For example, if you
prefer Crest Whitening Expressions toothpaste and the store you’re shopping at is out of
it, you might put off buying the toothpaste until your next trip to the store. Or you might
go to a different store or buy a small tube of some other toothpaste until you can get
what you want. Note that even something as simple as toothpaste can become a
shopping good for someone very interested in her dental health—perhaps after she’s
read online product reviews or consulted with her dentist. That’s why companies like
Procter & Gamble, the maker of Crest, work hard to influence not only consumers but
also people like dentists who influence the sale of their products.
If your favorite toothpaste is Crest’s Whitening Fresh Mint, you might change stores if
you don’t find it on the shelves of your regular store.
Ben Lucier – Crest Toothpaste – CC BY 2.0.
Specialty Offerings
Specialty offerings are highly differentiated offerings, and the brands under which they
are marketed are very different across companies, too. For example, an Orange County
Chopper or Iron Horse motorcycle is likely to be far different feature-wise than a
Kawasaki or Suzuki motorcycle. Typically, specialty items are available only through
limited channels. For example, exotic perfumes available only in exclusive outlets are
considered specialty offerings. Specialty offerings are purchased less frequently than
convenience offerings. Therefore, the profit margin on them tends to be greater.
Note that while marketers try to distinguish between specialty offerings, shopping
offerings, and convenience offerings, it is the consumer who ultimately makes the
decision. Therefore, what might be a specialty offering to one consumer may be a
convenience offering to another. For example, one consumer may never go to Sport Clips
or Ultra-Cuts because hair styling is seen as a specialty offering. A consumer at Sport
Clips might consider it a shopping offering, while a consumer for Ultra-Cuts may view it
as a convenience offering. The choice is the consumer’s.

Specialty offerings, such as this custom-made motorcycle, are highly differentiated.

People will go to greater lengths to shop for these items and are willing to pay more for
them.
Wikimedia Commons – CC BY 2.0.
Marketing specialty goods requires building brand name recognition in the minds of
consumers and educating them about your product’s key differences. This is critical. For
fashion goods, the only point of difference may be the logo on the product (for example,
an Izod versus a Polo label). Even so, marketers spend a great deal of money and effort
to try to get consumers to perceive these products differently than their competitors’.
Unsought Offerings
Unsought offerings are those that buyers do not generally want to have to shop for until
they need them. Towing services and funeral services are generally considered unsought
offerings. Marketing unsought items is difficult. Some organizations try to presell the
offering, such as pre-need sales in the funeral industry or towing insurance in the auto
industry. Other companies, such as insurance companies, try to create a strong
awareness among consumers so that when the need arises for these products,
consumers think of their organizations first.
Classification of Industrial Goods
Consumer goods are characterized as products that are aimed at and purchased by the
ultimate consumer. Although consumer products are more familiar to most readers,
industrial goods represent a very important product category, and in the case of some
manufacturers, they are the only product sold. The methods of industrial marketing are
somewhat more specialized, but in general the concepts presented in this text are valid
for the industrial marketer as well as for the consumer goods marketer.
Industrial products can be classified differently depending on the source. We are dividing
the products into two categories. The first category are types of product used in
production of products:
Raw materials: products in their crude form that will be used in other products
Installations: major capital investment items of facilities and equipment
Component parts: manufactured products that are a part of another good
The second category are products used in the running of the business:
Accessory equipment: the equipment found in an office setting such as furniture or
communication devices
Business services: services performed by a third party such as security, accounting,
etc.
MRO supplies: (maintenance, repair, and operating): products that are used in daily
operations
The Product Mix
Most organization have thousands of individual products (product items) they offer to
potential buyers. All the offering of an organization is known as the product mix. Trying
to manage thousands of products and strategies is unrealistic and would be a waste of
resources. To help manage all the items in the mix, firms organize the items into lines
and categories. Product lines are groupings of similar product items. The grouping is
up to the organization but might be based on functionality, target market, or
geography. Product categories are sub-groupings within a product line.
Finally, product mix width (or breadth) describes the number of lines in a mix. If a
product mix has many lines, then it is wide. If it has limited lines, then it is narrow. The
product mix depth describes the number of items in a line. If there are many items, it is
deep. If it has limited items, it is shallow. As the graphic below illustrates, some product
lines may have a couple items, some may have many, and some may even have
different categories with differing numbers of items.