Classic · Model
Core, actual and augmented product.
Philip Kotler divided a product into three layers. The core product is the benefit the customer is actually after, the actual product is the concrete thing you deliver, and the augmented product is everything around it, meaning the guarantee, the service, the availability and what it feels like to deal with you. The useful part is the observation that two suppliers can have an identical core and actual product and still be experienced as completely different, because the difference sits in the outermost layer.
The model
Three layers, one outside the other.
The core product is the problem the customer wants solved, so not the service but the benefit. Nobody buys an audit, they buy confidence that the figures hold up.
The actual product is what you concretely deliver: the scope, the execution, the quality and what’s written in the contract.
The augmented product is everything surrounding it. How easy you are to reach, what happens when something goes wrong, how you invoice, what you do once the assignment is finished, and what feeling you leave behind.
Kotler described the three levels in Marketing Management in 1967. There’s also a later five-level version with a generic and a potential product, developed together with Kevin Lane Keller.
How it’s used
Write out the three layers for your most important service, and be careful to phrase the core in the customer’s words rather than your own.
Then ask where your competitors actually differ from you. Almost always the answer sits in the outermost layer, and almost always nobody at your company is responsible for that particular thing, since it belongs to neither sales nor delivery.
The most useful question comes last: what in the augmented layer would the customer miss most if you took it away. If you get no answer, you probably don’t have an augmented layer yet, and then you’re competing on price without having chosen to.
Where it’s usually misused
As a reason to add services. The augmented layer is about how what you already do is experienced and not about selling more, and an add-on nobody asked for is a cost rather than a layer.
It’s also misused when the core is phrased too broadly. That the customer is really buying confidence is almost always true and almost never helpful, because a phrase that fits everyone doesn’t set you apart from anyone.
Something to try
Take the three most recent deals you won and the three most recent you lost, and write down what the customer was actually comparing. Did the difference sit in the core, in the actual product, or in the outermost layer?
Then go through your own augmented layer, meaning how easy you are to reach, what happens when something goes wrong, how you invoice, and what you do once the assignment is finished. At each point, ask what would be missed most if you took it away.
If you don’t get an answer, you’re probably competing on price without having chosen to.