Direct Marketing - How to Tell When a Consumer Is Maximizing His or Her Utility
Saturday, November 23, 2013
The idea of "utility" in the context of customers in a store is abstract. "Utility" represents any benefit or satisfaction a customer gets by using a product or a service. The more of the product or service a customer uses, the larger his utility is. Economics operates on the idea that customers naturally seek to satisfy their wants by maximizing utility. Here is and explanation of "utility" terms and concepts and how to help someone find what he wants and need in order to maximize his utility, or satisfaction, with a good or service.
Understanding and applying the concept of "utility"
1
Utility represents the power of a good to satisfy the consumers' "wants". The more of a good or service the consumer uses, the greater his utility. Consumers do this naturally. There is also another factor: "marginal utility". Total utility adds up continually as the consumer uses the product or service. Nevertheless, "marginal utility" starts high and decreases as the product or service is used. Maximizing utility is the consumers balance of these two ideas.
2
"Marginal utility" is the extra utility a consumer gains from using more of the product or service. Imagine eating an ice cream cone. The first bite is amazing. The consumer gets a lot of utility out of that bite. The second bite is also amazing. The consumer gets slightly less additional utility form that bite, having already started to satisfy his want for ice cream. By the last bite, the consumer is usually almost completely satisfied his want for ice cream and he gets the least amount of additional utility by taking the last bite.
3
The consumer needs to know what goods and services are available to him in order to maximize his utility, especially if the consumer is undecided on what he needs. Help the customer by showing him all the different products or services currently offered.
4
If the customer indicates interest in a specific one, jump to it, even if the conversation was in the middle of explaining a different product. Once the consumer knows what type of product or service he is interested in, lead him to that product or service. Follow the consumer toward what he is interested in because this is the consumer illustrating what good or service will best maximize his utility.
5
Finally, if there are alternative products, explain to the customer the benefits and disadvantages of different products. This will aid in his decision regarding a product of service and allow the consumer to get the most out of the product or service he chooses to go with. By following the customers interests and expressed needs or wants, it will be clear through the course of the conversation that the customer is indeed satisfying wants and thus maximizing utility.
Tags:
Direct Marketing, Marketing
Understanding and applying the concept of "utility"
1
Utility represents the power of a good to satisfy the consumers' "wants". The more of a good or service the consumer uses, the greater his utility. Consumers do this naturally. There is also another factor: "marginal utility". Total utility adds up continually as the consumer uses the product or service. Nevertheless, "marginal utility" starts high and decreases as the product or service is used. Maximizing utility is the consumers balance of these two ideas.
2
"Marginal utility" is the extra utility a consumer gains from using more of the product or service. Imagine eating an ice cream cone. The first bite is amazing. The consumer gets a lot of utility out of that bite. The second bite is also amazing. The consumer gets slightly less additional utility form that bite, having already started to satisfy his want for ice cream. By the last bite, the consumer is usually almost completely satisfied his want for ice cream and he gets the least amount of additional utility by taking the last bite.
3
The consumer needs to know what goods and services are available to him in order to maximize his utility, especially if the consumer is undecided on what he needs. Help the customer by showing him all the different products or services currently offered.
4
If the customer indicates interest in a specific one, jump to it, even if the conversation was in the middle of explaining a different product. Once the consumer knows what type of product or service he is interested in, lead him to that product or service. Follow the consumer toward what he is interested in because this is the consumer illustrating what good or service will best maximize his utility.
5
Finally, if there are alternative products, explain to the customer the benefits and disadvantages of different products. This will aid in his decision regarding a product of service and allow the consumer to get the most out of the product or service he chooses to go with. By following the customers interests and expressed needs or wants, it will be clear through the course of the conversation that the customer is indeed satisfying wants and thus maximizing utility.
