economics lap 13 describe the types of utility. explain the relationship between utility and...

Economics LAP 13Economics LAP 13

Describe the types of utility.

Explain the relationship between utility and marketing.

Objectives:

Describe the types of utility.

Marketers use utility to measure consumer

satisfaction.

Faulty products aren’t helpful to you.

Crackedcoffee

mug

Bad hair

cut

Utility As UsefulnessUtility As Usefulness

“A little off the sides is all I asked for!”

A helpful product is a useful one.

Useful products make your life

better.

Utility As SatisfactionUtility As Satisfaction

To satisfy consumers’ wants and needs, marketers look at how consumers view the

product.

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Utility and Self-InterestUtility and Self-Interest

Consumers buy products to benefit themselves.

A camera phone that shoots both stills and video

Businesses provide useful products to stay in business.

Example:

Measuring UtilityMeasuring Utility

Marketers measure satisfaction in terms of low or high utility.

• Low utility

The higher the utility, the more satisfying the product.

Example:

• High utilityHigh utility

Creating Utility

Marketers attempt to increase:

• TheThe probability of purchases

• The level of consumer satisfaction

Creating Utility

• By making changes to existing products• By developing new products

Updates

New New designsdesigns

Making changes is called creating utility.

Now open 24 hours!

Betterhours

Shop at

target.com

Online options

Types of Utility

When marketers create utility, they usually adjust one or more of the four types of

utility:Form/Task utility

Time utility

Place utility

Possession utility

Form utility =

the usefulness created

by changing the form of a good

Businesses can change product styles, scents,

flavors, or colors.

Task utility =

the usefulness created by changing the characteristics

of a service

Businesses can do things in a new or improved way.

Types of Utility

Towel-dry serviceTowel-dry service

Fastest delivery in town!

Time utility =

Types of Utility

the usefulness created when products are made available at the time they are needed.

Businesses can make sure the product is available when you want to buy it.

How useful is holiday candy available after the holiday?

How helpful is a tax service if offered after the deadline?

Place utility =

Types of Utility

the usefulness created by making sure products are available where they are

needed

Businesses can make sure the product is available where you want to buy it.

A bus service could expand into your neighborhood.

Your bank could set up online account management.

New!New!

Possession utility =

the usefulness created when ownership is transferred to the user

Businesses can make it easy for you to become the product’s owner.

Types of Utility

As the owner, you can do what you want with your jeans.

Explain the relationship between

utility and marketing.

Utility reveals what consumers prefer.

Marketers cater to consumers’ preferences by making changes.

These changes influence the degree of utility a product offers.

How satisfied a consumer is with a product

How useful a particular product is to a particular consumer at a particular time

Each gallon of milk is ranked individually—

according to its usefulness.

Spoiled milk—Low utility

Fresh milk—High utility

Utility tells marketers:

Utility varies.

One product vs. another product

One consumer’s view vs. another consumer’s view

Utility now vs. utility later

For the system to work well, both marketing and production are needed.

In fact, both are necessary for all four types of utility to be present.

Form/Task utility

Time utility

Place utility

Possession utility

For a consumer to be satisfied, the four types of utility must be present.

Marketing influences utility by:

Providing information—which can make the product’s purchase (and usefulness) more likely

Being involved in the four types of utility—which must be present for consumer satisfaction

Marketers affect form utility indirectly when they:

Study which features bring the most satisfaction

Recommend the changes producers should makeRecommend the changes producers should make

Marketers are directly involved in time utility when they:

Find out when consumers need the product

Plan how to get the product there on time

Make the necessary changes to get it done

A snowsuit in Hawaii would have little place utility.

A snowsuit in Hawaii would have little place utility.

Marketers are directly involved in place utility when they:

Figure out where the right location isFigure out where the right location is

Plan how to get the product there

Actually deliver the product to the right placeActually deliver the product to the right place

Address whatever holds consumers back from making a purchase

Make the purchase as effortless as possible

Marketers directly create possession utility when they:

If affordability stands in the way of a purchase,

marketers can provide options:

This allows a willing buyer to take ownership of a product as soon as possible.

Utility supports implementing the marketing concept.

• All about what the consumer thinks

Utility also plays a role in the implementation.

• A measurement tool to research what consumers want

• Think of something you bought recently.

• Consider how the four utilities were provided.

• What improvements—or increased utility—would you like to see?

John and Marcia

Collect information from a local business

Select the television they prefer

Purchase it online

AcknowledgmentsAcknowledgments

Original Developers:Original Developers:

Lelia Ventling and Mary C. Hollaway, Lelia Ventling and Mary C. Hollaway, MarkED MarkED

Version 1.0Version 1.0

Copyright Copyright 2006 2006

MarkED Resource CenterMarkED Resource Center

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