Co-creation And The Impact On The Three Levels Of Product

Philip Kotler in Principles of Marketing devised an interesting concept of benefit building with a product. There are three levels of product, and each have a different impact by co-creation. The three levels are the Core Product, the Actual Product and the Augmented Product. Understanding the three levels and where co-creation can add value or will transform the process will increase adaptiveness, competitiveness and differentiation.

Co-creation impacts this model because the exchange between the organisation and the customer forms the model’s heart.

 The scope of the product as viewed by Kotler:

A product is more than physical. A product is anything that can be offered to a market for attention, acquisition, or use, or something that can satisfy a need or want. Therefore, a product can be a physical good, a service, a retail store, a person, an organisation, a place or even an idea. Products are the means to an end wherein the end is the satisfaction of customer needs or wants.

Three product levels

Core Product level

Co-creation redefines the What at the core product. Those organisations that extract, understand unmet needs and wants can apply a kind of Blue Ocean strategy by differentiating and lowering cost by not having to compete on red oceans elements (commonalities with competitors). Because an organisation has its own uniquenesses that in combination with (unmet) needs create new products and experiences. This is what I elaborated in a previous article, on how co-creation differentiates customer experiences. Transforming customer understanding (at the core) into a more viable and efficient value proposition.

Actual Product level

When understanding the customers’ needs, the wants –specific requirements to match the needs-  can be co-created. By opening up the product development process, integrating iterative feedback loops and involving external stakeholders will achieve increased effectiveness and lowered costs.

customisation kicks in when a ‘standard’/basic product is being delivered where customers can personalise the output to its own refined wants. This furthers the perception of the experience in a positive way.

Augmented Product level

Also on this level, customisation (output) personalizes additional features and benefits all adapted to the requirements of the customer. Prior to the output, as within the Actual Product, defining and co-creating the additional features and benefits increases effectiveness and value.

Social Media as a door

The effectiveness described can be achieved and/or enhanced through the means of social media, their data and technologies. When deployed relevantly it achieves more cost-effective operations and increases the value chain output.

Social media are not not simple channels to deliver through. It’s a door to the outside world, to listen, ask, connect and create with people outside the org – partners, customers and experts. The door achieves competitive advantage in marketing, service and product innovation.

Understand –through co-creation- how you need to open up the organisation to achieve those competitive advantages in the different levels of product.

Outside-in

The apex of an Open Business (through means of social media) is opening up the organisation from its core (product level). By doing so, it achieves the highest rewarding and truely is customer-centric in its total value proposition.

NOW WATCH: Tech Insider videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.