Three Levels of Product

What are the three levels of product? 

The three levels of product framework explains how a product is more than just its physical form, and that it’s made up of different layers of value that influences customer perception. 

These three levels are the core product (the fundamental benefit or need it fulfills), the actual product (the tangible item with its features and design), and the augmented product (the additional services or benefits that enhance its value).

Think of a product like an onion – layered, complex, but (hopefully) not something that makes customers cry. To truly understand what you’re offering, you need to break it down into the three product levels:

• Core Product – The fundamental reason a customer wants it.
• Actual Product – The tangible thing they’re buying.
• Augmented Product – The extras that sweeten the deal.

These three layers come together to form the total product concept: a handy framework that helps Product Marketing Managers (and the rest of the team) clearly communicate the full value of what they’re offering. 

By considering all three levels, you can better meet customer needs, exceed expectations, and build products that don’t just compete but stand out in the market.

Let’s take a look at these in more detail:

Core product definition

This is the fundamental benefit of your product or service. The why behind your product – the core benefit that solves a problem or fulfills a need. It’s not the physical thing itself, but the value it delivers. 

Take a car, for example. The core product isn’t the vehicle; it’s the ability to travel quickly and conveniently.

Actual product definition

This is the product in its tangible form, describing the design, product features, brand, and quality. It’s what the customer physically receives when buying your product.

Sticking with our car example, this includes the sleek exterior, the horsepower, the leather seats, and the logo on the front. 

Augmented product definition

This is where you go beyond the basics.  Warranties, customer support, free maintenance – the extra details and additional features that set your product apart from competitors. 

In the car world, it’s that bumper-to-bumper warranty, roadside assistance, 24/7 customer service, or the free coffee at the dealership.

By understanding and optimizing these three levels, you’re not just selling a product, you’re delivering an experience that customers actually want (and will pay for).

Who created the three levels of product?

The Three Levels of a Product framework was first introduced by the father of modern marketing, Philip Kotler, with the concept of a core product making its debut in his work all the way back in 1967. 

Decades later, this model is still a go-to tool for teams looking to clearly define and communicate the value of their product.

Kotler actually developed a deeper and more detailed framework called the Five Levels of a Product framework. Think of this three-level version as a more streamlined version of its chunkier sibling. 

While the five-level model dives deeper, the three-level version keeps things simple, making it easier to understand how a product goes beyond just its core benefit.

For context, Kotler’s five levels are:

• Core Benefit – The fundamental reason a customer needs the product.
• Generic Product – The basic, no-frills version of the product.
• Expected Product – The product features customers expect as standard.
• Augmented Product – The extras that enhance the product and add value.
• Potential Product – The future possibilities and innovations that could be added.

To create the three levels of product, Kotler trimmed things down, removing Potential Product and Generic Product, while renaming Expected Product to Actual Product. The result? A practical, easy-to-use framework that helps teams better understand what they’re really offering.

Kotler’s influence on Product Marketing doesn’t stop here. He’s also the mastermind behind the Kotler Pricing Strategy Matrix, a must-know framework for pricing decisions. 

Check out our article on Product Pricing Strategies to dive deeper.

What’s the purpose of the three levels of product?

The three product level model helps businesses build products that truly meet customer needs while standing out in the market. It’s more than just a way to categorize features, it’s a tool for crafting a stronger value proposition and refining strategy. Here’s why it matters:

🎯 Customer-centric thinking: It shifts the focus beyond the physical product, ensuring teams consider the real benefit customers are seeking.

✨ Value creation: Looking at all three levels helps businesses add extra value, especially through the augmented product, where differentiation happens.

📢 Smarter marketing strategies: Highlighting different product levels makes it easier to craft targeted messaging that attracts and retains customers.

🛠️ Clearer product development: It provides a structured way to develop products, ensuring every level – from core benefit to added services – is thoughtfully designed.

🏆 Competitive advantage: Understanding these layers helps businesses identify where they can outperform rivals, whether through better features or standout services.

💰 Stronger price justification: By clearly defining the value at each level, you can can better justify pricing models and communicate why your product is worth the price tag.

🔄 Better expectation management: A well-defined product structure ensures customers know what to expect, reducing dissatisfaction and boosting customer satisfaction.

🚀 Brand positioning: The framework helps teams sharpen their unique selling points, ensuring their brand messaging aligns with customer expectations.

How can a Product Manager use the three levels of product?

At its core, the three levels of Product is a marketing concept, but it’s also a powerful tool for customer research and product analysis. As Product Managers, we need to deeply understand our users – their pain points, motivations, and unmet needs. This framework helps break down a product’s value from multiple angles, making it easier to analyze how well it aligns with user expectations.

By mapping your product across core, actual, and augmented levels, you can:

• Identify customer needs more effectively: Understanding the core benefit helps ensure your product truly addresses a real problem.
• Develop a clearer value proposition: By articulating what makes your product essential (core), functional (actual), and competitive (augmented), you refine your messaging.
• Prioritize features with impact: Features that directly support the core benefit should take precedence in your roadmap.
• Improve competitive product analysis: Evaluating your augmented product can reveal areas where you can differentiate through services, integrations, or premium offerings.
• Guide continuous improvement: Regularly assessing the augmented level ensures your product evolves with customer expectations and market trends.
• Create more engaging release notes: By highlighting improvements at each level, you can better communicate release note updates in a way that resonates with different user needs.

While this isn’t a rigid Product Management framework, it’s a useful lens to assess product-market fit, customer alignment, and strategic growth opportunities.

Three levels of product example

Still not really getting it? That’s okay, the concept of the 3 level product is a bit abstract. Because everyone seems obsessed with Duolingo and that green bird, let’s break down the three levels of product using it as an example 🦉.

Level 1️⃣ Core Product – The fundamental need

At its core, Duolingo isn’t just an app, it’s a tool to help people learn a new language. The real benefit? Language acquisition and communication skills. 

Users don’t sign up just to tap on a screen, they want to speak Spanish on vacation, ace their French class, or stop embarrassing themselves in Italian restaurants. That’s the core product – the deep, underlying value Duolingo provides.

Level 2️⃣ Actual Product – The tangible experience

This is what you see, use, and interact with:

• The Duolingo app itself
• Features like bite-sized lessons, gamified streaks, and XP points
• A friendly (and slightly menacing) green owl mascot who guilt-trips you into practicing
• Freemium subscription tiers
• Speech recognition technology for pronunciation practice
• A brand identity built around fun, accessibility, and consistency

All these elements make up the actual finished product, shaping the experience users have with Duolingo.

Level 3️⃣ Augmented Product – The extras that add value

This is where Duolingo goes beyond just being an app and differentiates itself from competitors.

• Duolingo Plus (now called Super Duolingo): Removes ads, offers offline access, and lets you repair streaks.
• Duolingo for Schools: A free tool for teachers to track student progress.
• Duolingo Events: Virtual meetups for practicing languages in real conversations.
• AI-driven personalized learning: Adapts lessons based on user progress.
• Brand trust and community: Millions of learners, social media engagement, and meme-worthy presence.

The augmented product is what makes Duolingo more than just a language-learning app – it’s a sticky, engaging, and evolving ecosystem that keeps users coming back.

So, next time you open the app and that green owl stares into your soul, remember: Duolingo isn’t just a bird with an agenda. It’s a three-level product strategy in action.

The different layers of your product

Understanding the three levels of product offers you a powerful framework for product discovery, customer research, and competitive product analysis. By breaking your product down into the core, actual, and augmented layers, you can better align your offerings with customer needs, sharpen your value proposition, and create a stronger connection with your potential customer.

While the concept itself is simple, the impact it can have on your product strategy is huge. It can help you prioritize features, identify gaps in the market, and even craft better marketing campaigns by focusing on the different ways your product provides value at each level.

We think following the three levels of Product can help you prioritize features by assessing them based on their value. But there are plenty of other ways to prioritize your ideas. Check out our eBook on Product Prioritization Frameworks to learn all about the best frameworks to help you make informed product decisions.