Question

a. Explain the five (5) product levels in the Customer Value Hierarchy.          
b. As a Marketing Consultant employed by Wisconsin International University College, and using the Customer Value Hierarchy as your framework, advise the management of the school about five (5) strategies, with justification, they may need to employ at the different product levels in order to achieve their organizational objective.

Answer 1

a.

The Five Product Levels model in the Customer Value Hierarchy  was developed by economist Philip Kotler. According to him, a product is not just a physical product rather it can be anything that can meet a need or a want and this model gives a way to show the different levels of need customers have for a product, such as: Core benefit, Generic Product, Expected Product, Augmented Product and Potential Product. These can be explained as:

1.Core benefit: It is the basic want that a customer need to satisfies himself when they buy the product. For example, a restaurant provides food to satisfy his hunger.

2. Generic product: It is more than basic needs and includes only those features necessary for it to function. In this example, a restaurant would provide not only food, but a few additional items such as water, good furniture to sit, salad etc.

3. Expected Product: It includes additional features that customer might expect. In the restaurant example, water can be expected as mineral water, well furnished with positive vibes.

4. Augmented Product: It means any product with extra features that helps in differentiating the product from its competitors and make the brand a preferred choice amongst the competitiors. These could be additional facilities such as restaurant equiped with air conditioner, fast service, hygiene.

5. Potential Product: It includes all augmentations and improvements the product might experience in the future. It means to keep customers delighted, the product must be constantly improved. In the restaurannt example, this could mean royal serving pattern using premium crockery, giving discounts to regular customer, good sitting area having good interior and colors that will make customer delighted and choose the same product over others in the future.

b.

Five strategies with justification that can be employed at the different product levels in order to achieve their organizational objective can be explained as follows:

1. Cost Leadership Strategy: This strategy is for organizations that want to compete for a broad customer base based on price and this strategy can be used at core benefit product level because at this level customer wants to satisfy his basic

need and wants to pay minimum price only.

2. Differentiation Strategy: Firms with this strategy focus on involving unique features to win in the marketplace. They also usually charge a higher price to their customers to offset the cost of being unique.This strategy can be used at generic product level as at this level customer not only wants to satisfy his basic needs but wants something more than it.

3. Focused Cost Leadership Strategy: Under this, organizations not only competes on price but also wants to stand out because they focus on serving a niche market. This strategy can be used at expected product level as at this level customer wants more beyond the basic product and the firm is also providing better to stand at a diiferent position in market and customer is ready to pay for it.

4. Focused Differentiation Strategy: It focusses on a very narrow segment of the market and very similar to that of a differentiation strategy.  These firms compete by offering unique features to a small market segment. This strategy can be applied by a firm at Augmented product level because at this level customer wants that is differentiated from other and loaded with extra features which is possible in this strategy only.

5. Integrated Cost Leadership/Differentiation Strategy: It involves producing low-cost products with differentiated features. This strategy focusses on two drivers of competitive advantage: cost and differentiation. This type of strategy is often called a hybrid strategy. This can be used at potential product level because at this level customer wants everything like diiferent or premium product with affordable cost or at the existing cost. As this strategy also focuses on these two things. Therefore, this strategy is bsest suited at potential product level.