Jyasmine Aura V.

Agustin Grade 12 ABM

Describe product and the three levels of product.

PRODUCT:

Definition: A product is the item offered for sale. A product can be a service or an item. It can
be physical or in virtual or cyber form. Every product is made at a cost and each is sold at a
price. The price that can be charged depends on the market, the quality, the marketing and the
segment that is targeted. Each product has a useful life after which it needs replacement, and a
life cycle after which it has to be re-invented. In FMCG parlance, a brand can be revamped, re-
launched or extended to make it more relevant to the segment and times, often keeping the
product almost the same.

Source: https://economictimes.indiatimes.com/definition/product

The three levels of product

The three levels of product: Core Value, Actual Product, Augmented Product

Three levels of product can be identified. Each level adds more customer value. The first and
most basic level is called the core customer value. The first one of the levels of product, the
core customer value, answers the question: What is the buyer really buying? When a marketer
designs a product, he should first think of the core problem. What does the consumer really seek?
If you buy a car, the most basic core value you seek is transportation. For others, it might be
status or glamour. If you buy a smartphone, the core customer value might be communication.
Likewise, if you buy an iPad, you buy more than a mobile computer or a personal organiser. The
core customer value you buy is freedom and on-the-go connectivity. A woman buying a lipstick
seeks more than just a colourful cosmetic. In fact, she might seek hope. You see that already the
first one of the three levels of product is much more than the product itself. Always ask yourself
first when developing a product: What benefit does the customer really seek? What is the
problem that needs to be solved?

The second one of the three levels of product is the actual product. Marketers should turn the
core benefit, the core customer value they identified into an actual product. This involves
developing product features, design, a quality level, a brand name and even a packaging. The
smartphone you finally buy as well as the car are actual products. You buy the phone, the
packaging, the functionality and so on.  All these factors at the second one of the levels of
product relate to the core customer value. This reveals that the levels of product build up on each
other. The smartphone’s name, parts, styling, features, packaging and other attributes all have
been carefully combined to deliver the core customer value of staying connected.

Finally, the levels of product are completed with the augmented product. The augmented
product rounds of the three levels of product, being built around the core value and the actual
product. It simply offers additional consumer services and benefits. If you buy an iPad, you get
more than the core customer value (e.g. communication), and also more than the actual product.
These are only two levels of product. The augmented product you get is the complete solution to
your connectivity problems as defined by the core customer value. This complete solution might
take the form of a warranty, after-sale service, product support, instructions on how to use the
device and so further.

As we have learned, a product is more than what you actually see when you buy it. Three levels
of product are involved in any purchase. The levels of product include the core customer value,
the actual product and the augmented product. What you buy is a complex bundle of benefits that
aim to satisfy your needs. This also means that when marketers develop products, they first must
identify the core customer value. What does the customer really need and want, what problem
does he have? Then, they must design the actual product and in addition find ways to augment it
in order to create customer value and the most satisfying experience.

Source: https://marketing-insider.eu/three-levels-of-product/amp/
Compare and contrast industrial products and consumer products.

Industrial Products Consumer Products

Industrial Goods  Consumer Goods 

Industrial goods are based on the demand for Consumer goods are tangible
the consumer goods they help to produce. commodities produced and purchased to satisfy
Industrial goods are classified as either the wants of a buyer. That's why these goods are
production goods or support goods. Production also referred to as final goods or end products.
goods are used in the production of a final They are purchased by consumers to use at
consumer good or product, while support goods home or school, or for recreational or personal
help in the production process of consumer use. Consumer goods are divided into three
goods such as machinery and equipment. different types: durable goods, non-durable
goods, or consumer services.
Unlike consumer goods, which are purchased
by the general public, there are very specific Durable goods have a significant lifespan of
buyers of industrial goods. They include three or more years. The consumption of a
component part buyers such as car durable good is spread out over the entire life of
manufacturers, those who purchase and install the good which causes demand for maintenance
machinery, and distributors or anyone else who and upkeep. Bicycles, furniture, and cars are
buys for resale. examples of durable goods.

Characteristics of industrial goods include: Non-durable goods are goods purchased for
immediate consumption or use and have a
 Rational Buying Power: The decision lifespan of less than three years. Food,
and drive to buy industrial goods is beverages, and clothing are examples of non-
rational compared to consumer goods, durable goods.
which are primarily purchased because
of an emotional need. Consumer services are intangible products or
 Complex Product Lines: Industrial services produced and consumed at the same
goods are usually complex in nature time. Haircuts and car washes are typical
because they can be highly technical. examples of consumer services.
Those who use them must be highly
skilled. [Important: Fast-moving consumer goods
 Higher Purchase Value: Industrial make up one of the largest consumer goods
goods typically come with a higher price groups and include items such as food and
tag because of their complex nature and drinks.]
limited target market.
 High Level of Investment: Those who Because of consumer buying patterns, consumer
 need to will often invest a lot of money goods are typically classified into four different
to purchase industrial goods. categories including convenience, shopping,
specialty, and unsought goods.
Companies that are involved in the industrial
goods sector represent a variety of industries  Convenience Goods: These products
including (but not limited to) machinery, are ready to be purchased. Milk is one
construction, defense, aerospace, and housing. example of a convenience good.
 Shopping Goods: These goods require
more planning and thought during the
purchasing process by consumers. This
category includes products like
electronics and furniture.
 Specialty Goods: This category, which
includes jewelry, is composed of goods
that are deemed to be luxuries.
 Unsought Goods: Unsought goods
require a niche market and are typically
purchased by only a few members in the
market, such as life insurance.

Source: https://www.investopedia.com/ask/answers/050415/how-are-industrial-goods-different-
consumer-goods.asp

Explain how discounts and allowances differ from promotional

pricing.

Discount and allowance meaning:

Discount and allowance pricing is reducing prices to reward customer responses such
as paying early or promoting the product.Promotional pricing is temporarily reducing prices
to increase short-run sales.

Differences:
Allowance is a reduction to the selling price of a home used as an incentive to a buyer to
purchase a specific house. A sales allowance can also help the buyer secure financing for a home
if the buyer does not meet the requirements of a financial institution. In this case, the seller
provides cash to the buyer for the expressed purpose of meeting a lender’s underwriting
requirements. You should always verify the legality of any sales allowance offered. For example,
many sales allowances that assist with down payment requirements violate state law or lender
guidelines. While A cash discount, on the other hand, is a discount to the sales price made to a
buyer for using cash to purchase the property. Cash purchases are not common in real estate and
not all sellers will choose to offer cash discounts. This type of discount is popular with bank-
owned properties and in cases where the seller needs to close the transaction quickly.

Source: https://smallbusiness.chron.com/difference-between-sales-allowance-cash-discount-
23140.html