Rome Business School
Q1 What are the three levels at which a product can be seen? In response, use a concrete example of product.
The product is defined as a "thing produced by labor or effort or the "result of an act or a process"and stems from the verb produce from the Latin 'produce' which means to lead or bring forth'. The first economic use of the word was by Adam Smith, known as the father of modern economics.
-Kotler et al (1989)
For marketers, it is useful to divide the product into three main categories, being the Core Product ( Also known as Core Benefit), the Actual product and the Augmented Product. You can see them in the diagram below with some examples of what they encompass.
-Kotler et al(2006)
I shall use the example of the Adidas Sports apparel, a product line which they have used heavy societal marketing to promote. Adidas is the largest sportswear manufacturer in Europe, and the second largest in the world. The 11% increase in sales in 2011 thanks to their new marketing efforts has meant an income of around 634 million euros. Out of this, they invested about 136 million euros in Marketing. About 1/6th of their income.
-Adidas annual report (2011)
The strategy behind selling their sports apparel, has been to differentiate the offering from their competitors like Nike by providing more customization for the customers. They say their key strategic pillars are:
Gaining sales and market share with key growth categories such as running and basketball within Adidas Sport Performance
Leading the industry in the fields of customization and interactivity across categories
Expanding Adidas Sport Style in the fast-fashion business with the Adidas NEO label
It is obvious here, that Adidas has invested heavily in developing all three layers of their product.
The Core Product: this is the part of the product which satisfies the basic need of a consumer by providing a basic benefit. For Adidas apparel, it provides a comfortable clothing in which to do physical exercise. Adidas, how started producing the standard type apparel shirts we see today in the 1980s when they had their largest boom in sales. The core benefit, does not however distinguish the product from competitor's offerings, but it is useful to know in order to give the company a clear idea of exactly what need they are fulfilling.
The Actual Product: This is the physical product into which the core benefit is translated into, but at this stage, the marketer has to make it physically and cognitively different from the competitor's offerings in order for it to sell and retain a unique position in the customer's mind. Kotler (2006) states that this can involve deciding on the quality level, product and service features, styling, branding and packaging. It is not the same as the 4Ps of marketing, because those include place and promotion, which are not direct product attributes.
I shall describe each of these so as to give a full idea of what Adidas has done to define and perfect the actual product.
a) Product Lines: In the 1990s, Adidas subdivided their apparel to appeal to three types of customer segments:
the sportsmen ( for which they opened Forever Sport), this was based on the original concept of the brand by founder Adi Dassler . He made Adidas to help athletes perform at the peak of their ability, and this goal continues to drive the brand’s activities today. Adidas performance is focused on meeting the performance needs of all athletes. Forever Sport products are “engineered to perform”, bringing high-level, performance-oriented products and innovative technologies to the market. Forever Sport is structured into five main sports categories: running, basketball, football, tennis and training for sport.
The brand-followers in the lifestyle market- or which they opened the style-focused Adidas Originals . The originals line...
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