An augmented product is a product with additional features and services that set it aside from similar competitors. Companies augment their products to increase revenues, and may create additional streams of revenue in the process, depending on the types of products and services they offer. Consumers may preferentially select an augmented product when they have an option, which puts demand on manufacturers to continue adding innovations to their products to capture and hold consumer attention.
The core product may be something like a computer. The manufacturer can add features like a warranty, customer support, membership with a club, or accessories that come with the computer, such as a laptop case or a keyboard. A computer manufacturer has a number of manufacturers who create products of similar quality that operate in a similar way, and consumers may differentiate between various offerings on the basis of the augmented product package.
Consumers weighing a choice between two similar options may pick the one with more apparent benefits, like the laptop that comes with a case and a year's support plan. It is also possible to get consumers to pay more through the use of an augmented product, because the consumer could feel like the extra features make it a better deal. Consumers view these options as value adders, and can interact with the product and the marketing much differently depending on the level of features available.
Costs to create an augmented product can vary. Often, small, cost-effective measures can add significantly to the retail price, which makes it a good deal for the producer, though not necessarily so good for the consumer. Some augmented product packages rely on the fact that few consumers will take advantage of the extra feature. An insurance company might add a free tow package to premium policies, for instance, on the grounds that it won't be used by every single customer, and thus towing costs should stay low.
Marketing departments work with product development teams to decide on how to develop new products, and what kinds of features to offer. The team may have suggestions for additions they feel could add to the value, and the marketers can use focus groups and other consumer studies to gather data. They may also create product tiers, where consumers can choose from low, medium, and high priced versions with more features at each step. This can underscore the benefits of the augmented product at the high scale, by showing consumers what they get at the cheap end of the spectrum, such as a computer with very low RAM, or a car with only minimal features.