Core product

Core products are a company's products or services which are most directly related to their core competencies. They refer to the use, benefit or problem-solving service that the consumer is really buying when purchasing the product.[1] They are at the first level in the model - Three Levels of a Product. These products are then integrated into a variety of end products, either by the company holding the core product or by a second company to which the core product is sold to, and the actual products are sold to users. In simple words, core products are derived by customers when they use the product.

Origin

The concept of Core Product is originated from Philip Kotler, in his book - "Marketing Management: Analysis, Planning and Control" in the 1967.[2] This is the first level of the concept of Three Levels of a Product.

Three Levels of a Product

Kotler suggested that the nature of a product can be divided into three levels, the core product, actual product and augmented product.[3] The core part of the product is mainly focused on the benefit that the product brings to the customer, while the actual product is a tangible product which focuses on the quality and the design of the product.[4] Augmented product consists of the measures taken to help the consumer put the actual product to sustained use.[1] The core product is viewed as one of the most important feature within the product. If it does not have good functions, no matter how good looking the actual product is, customers would not like it. By understanding your customer which is through doing research and development, business firms can therefore create a better product that they want and mould the product to position yourself in the market using a mixture of the three levels of product.[5]

New Product Development

The New Product Development (also known as NPD) process is often referred to as The Stage-Gate innovation process, developed by Dr. Robert G. Cooper as a result of comprehensive research on reasons why products succeed and why they fail.[6] This model is linked the Three Levels of Product Model, as NPD focuses on idea generation at Stage 1,[7] which is the function of the core product. Without the core product, firms would not be able to generate with an idea for their new product. Thus core product is essential when it comes to product and service innovation. If the core product is innovative and meets public wants and demand, the product will be successful. However, if the core product is abstract and not meeting public demands, the product will fail, leading to the failure in business.[8]

Marketing Strategy

Product issue

Core products are central to the company's performance and make the most money that sustain the business. One of the marketing strategies is to deal with product issues. In a competitive market, a successful product can't be determined by the actual look of the product. The use of the product is the most important that affect customers' interest to buy a product. Even though they are other augmented products that affect the successfulness of a product, but undoubtedly the core product is the most important factor.[9]

Product Marketing

With the product issue, product marketing can be done much easily. Product marketing consists of overall process of conveying a good or service to customers. It includes defining the scope of the product line, identifying potential markets for a product, determining optimal pricing for the market, and most importantly encouraging potential customers to purchase the product.[10] As mentioned, the core product directly affects customers' interest to buy a product, with an attractive core product, if the core product is successful, brand image or position of the firm in the market can be improved.[11] This proves that the core product is an important in terms of the product marketing aspect of the firm, and it is so essential that can affect the future of the firm directly.

Meeting customers' expectations

A company usually does research and development (R&D) before creating a new product. In order to meet customers' needs, the core product is an important element that attracts people to buy the firm's product. In an international marketing research conducted by University of Southern California, it has been founded that customers and professionals usually emphasize on service characteristics such as heterogeneous products (variation in standards among providers, frequently even among different locations of the same firm) and inseparability from consumption.[12] This can show how important of having a core product is to a firm, in order to meet customer expectation. And this has to be done only by injecting money to do R&D.

Competition

The competition between businesses focuses mainly on the distinctiveness of the Augmented Product and the Core Product according to Kotler. It is about the perception a consumer experiences when purchasing a product and it is not so much about value. He states: “Competition is determined not so much by what companies produce, but by what they add to their product in the form of packaging, services, advertising, advice, delivery (financing) arrangements and other things that can be of value to consumers”.[13] To be able to tower over the competition, production companies focus on factors which consumers attach extra value to such as extreme packaging, surprising advertisements, customer-oriented service and affordable payment terms. This is not just about satisfying the customers and exceeding their expectations but also about surprising them.[14]

Examples of Core Products

Information Technology

Core products are usually the first products that the company created and sustained itself from its founding like the Windows Operating system for Microsoft, The Macintosh computer for Apple, Inc., the Google Search platform for Google, etc. Therefore, there is emphasis placed on the profitability of core products while working on other products hoping that they will become a competency for the company. The products that make the most profit are usually the core products. Other products that are not considered core products are called side projects, side products and experimental products.

Examples of core products by notable IT firms include:

The above core products are then produced as an actual product. Examples of how the core product and actual product are used together include:

Airline Companies

Airline companies provides both in-flight and on ground services. These services are known as the actual product. However, airline companies' most crucial service provided is to transport people and their luggage i.e. goods to respective destinations. This service is known as the core product.[15]

Budget Airlines

Examples of budget airlines include EasyJet and Ryanair. The core product of these airlines is to provide cheap air travel services to different destinations. While the actual product is the actual airline journey. However, due to its low costs, food provided on flight has to be paid, and that is served as the augmented product.[16]

Car Companies

Car companies such as Lexus often have a core product that the company is most proud of, with Lexus's being the Lexus IS.

Fragrance

The actual product of a bottle of fragrance is its bottle, chemical ingredients and the color of the fragrance. However, customers do not get attracted by these actual products (except the bottle of the fragrance). Why they become attracted to fragrance is because they want to smell beautiful and refreshing, be more attractive and noticeable.[17] And so these factors are the core product of fragrance. Each fragrance brands putting on advertisements would not be selling its chemical ingredients because customers would have no idea what those ingredients are, but in fact they focus on the core product of fragrance and advertises it in a way that customers become appealed to it, such as giving out free samples.[17]

References

  1. 1 2 http://kfknowledgebank.kaplan.co.uk/KFKB/Wiki%20Pages/Marketing.aspx. Retrieved on 17 October 2014
  2. ↑ http://www.learnmarketing.net/threelevelsofaproduct.htm Retrieved on 25 October 2014
  3. ↑ "http://www.marketingteacher.com/three-levels-of-a-product" Retrieved on 18 October 2014
  4. ↑ http://www.marketing91.com/levels-product/ Retrieved on 17 October 2014
  5. ↑ http://www.becomeremarkable.co.uk/the-three-levels-of-product/ Retrieved on 29 october 2014
  6. ↑ http://www.innovationexcellence.com/blog/2013/05/27/8-step-process-perfects-new-product-development/#sthash.CcKSlgpC.dpuf Retrieved on 26 October 2014
  7. ↑ http://www.learnmarketing.net/npd.htm Retrieved on 26 October 2014
  8. ↑ https://www.boundless.com/marketing/textbooks/boundless-marketing-textbook/products-9/new-product-development-71/success-and-failure-strategies-to-improve-success-360-10625/ Retrieved on 26 October 2014
  9. ↑ http://www.smallbusiness.wa.gov.au/marketing-product-strategy/ Retrieved on 25 October 2014
  10. ↑ http://www.businessdictionary.com/definition/product-marketing.html/ Retrieved on 26 October 2014
  11. ↑ http://smallbusiness.chron.com/examples-marketing-strategies-used-sell-product-10850.html/ Retrieved 26 October 2014
  12. ↑ http://www.consumerpsychologist.com/intl_Product.html/ Retrieved on 26 October 2014
  13. ↑ http://www.toolshero.com/five-product-levels-kotler/ Retrieved on 29 October 2014
  14. ↑ Kotler, Philip (1967). Marketing Management: Analysis, Planning and Control. Englewood Cliffs, N.J., Prentice Hall. Retrieved on 29 October 2014
  15. ↑ http://www.slideshare.net/105Prutha/core-product/ Retrieved on 26 October 2014
  16. ↑ http://www.marketingteacher.com/answer-three-levels-of-a-product/ Retrieved on 29 October 2014
  17. 1 2 http://www.dymondinstitute.qld.edu.au/marketing/core-product-marketing-mix/ Retrieved on 16 October 2014
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