Utility in marketing

Customer value = economic utility

If you have previously studied economics, then the chances are you have seen the word “utility”. Utility is the economic term for the range of value and benefits received by consumer from the acquisition and consumption of a product.

Therefore, in marketing we can use the terms customer value and utility on a interchangeable basis. But the word “value” has now become more common in usage because it is much clearer to what it means.

A firm goes through the process of both creating and distributing a product to create utility (value) for the end consumer. There are five types of different utilities that can be generated for a consumer by a firm.

These are: form utility, task utility, time utility, place utility, and possession utility.

Form utility

This means that the firm adds value by designing a product in a particular way. This is most common with physical goods, where the design, look, features of the product are enjoyed and/or appreciated by the consumer.

Task utility

Task utility is usually associated with a service firm, where the organization provides value through performing a task (delivering a service) for a consumer. For example, a laundry service, childcare service, legal advice, and so on – all provide some form of service or undertake a task for the consumer.

Time utility

Time utility refers to adding value to the consumer by having the product available when the consumer needs it. A good example here would be a convenience store that is open 24/7 – which provides a time advantage over a regular supermarket.

Place utility

Similar to time utility above, place utility refers to having the product available at a location that is suitable for the consumer. For example, home delivered food, mobile services, stores with lots of locations, and so on – all provide the consumer value through the ease of availability.

Possession utility

Possession utility means that the product is relatively easy to acquire. For example, an expensive piece of furniture might be made more easily available through a low interest financing deal. Or a bank may simplify the steps needed to obtain a loan. In both cases, the firm is looking to make it easier for the consumer to possess (own) the product.

Overall customer value

As you can see, these forms of economic utilities in marketing are designed to increase the level of value and convenience to consumers.

What you should note is value extends beyond just the product (form utility). In the above list of utilities, value also extends to task (service), the convenience of time, the convenience of location and access, and the convenience of and easy purchase and an easy process.