Marketing Essentials
Economic Utilities
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SECTION 1.2
Economic Utilities
What You'll Learn
The benefits of marketing
The meaning of economic utility
The five economic utilities and how to
distinguish the four that are related
to marketing
Chapter 1 n Marketing Is All Around Us
The Marketing Concept
•Businesses must satisfy customers’ needs
and wants in order to make a profit.
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SECTION 1.2
Economic Utilities
Why It's Important
By understanding the benefits of marketing,
you will see how the functions of marketing
add value to products. You will also see how
marketing activities lead to lower prices and
new and improved products.
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SECTION 1.2
Economic Utilities
Key Terms
 utility
 form utility
 place utility
 time utility
 possession utility
 information utility
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SECTION 1.2
Economic Utilities
Economic Benefits of Marketing
 Bridges the gap between you and the
maker or seller of an item.
 Makes buying easy for customers.
 Creates new and improved products at
lower prices.
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SECTION 1.2
Economic Utilities
Economic Benefits of Marketing
•Economic utility
• the amount of satisfaction a person receives
from the consumption of a particular product
or service
•Economic utilities
• reflect the value that producers and
marketers add to raw materials when they
make them into products and offer them for
sale to the public.
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SECTION 1.2
Economic Utilities
Economic Utilities
Form utility (production)
Place utility (marketing)
Time utility (marketing)
Possession utility (marketing)
Information utility (marketing)
Attributes of a product or service that make it capable
of satisfying consumers’ wants and needs.
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SECTION 1.2
Economic Utilities
Form Utility
Changing raw materials or putting parts
together to make them more useful.
 Example: The parts of a lounge chair—
the wood frame, the fabric, the glue and
nails, and the reclining mechanism—are
less useful by themselves. Putting them
together adds form utility.
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Form Utility
Changing raw materials into goods– making
and producing things.
• Sand into glass
• Wood into paper
• Silk into fabric
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When Henry Ford first created the Model T, he
was the only one mass producing cars. He
didn’t have to think about “The Marketing
Concept.” But, as more and more producers
started making cars, they had to think about
what customers need and want in order to
stay in business.
Click on the Model T
Ford to see Henry
Ford’s thoughts about
car color in the early
1900’s.
Chapter 1 n Marketing Is All Around Us
Imagine if, in today’s world, you
could only buy black. Many
customers would not be very
happy!
Chapter 1 n Marketing Is All Around Us
Today’s buyer wants a choice!
Chapter 1 n Marketing Is All Around Us
The Marketing Concept
• If automobile manufactures do not give
their consumers a choice (what they
want), they will not stay in business.
• That concept is true for all businesses.
• Companies sell what Customers want.
Chapter 1 n Marketing Is All Around Us
SECTION 1.2
Economic Utilities
Place Utility
Having a product where customers can buy it.
 Example: Selling directly to the customer
through catalogs.
 It Includes:
Location –at a retailer (actual store) – or,
Internet
Transporting the product to the location.
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SECTION 1.2
Economic Utilities
Place Utility
If you are selling products in a
huge warehouse style store,
like Home Depot of Costco, the
utility of "place utility" can be
as simple as having the product
in boxes on pallets ready to be
picked up and the customer
can simply walk directly to the
cashier to make payment.
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SECTION 1.2
Economic Utilities
Place Utility
• When so many products are sold online, or in a marketing
situation which may be partly online, and partly in a store, it is
more and more important to make sure the "place utility" is as
competitive as possible because sometimes the final decision
about whether to buy, or not buy, is made by the customer
based on how they can physically get their hands on the
product as soon as possible.
• For example, it is no good having a detailed YouTube video of
how your low priced air-conditioner works, if the customer has
to drive many miles to find a store with one actually in stock
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SECTION 1.2
Economic Utilities
Time Utility
Having a product available at a time
convenient for customers.
 Example: Retailers offer large supplies
of backpacks in the late summer, near
the beginning of the school year.
•Planning and ordering
•Time of day and week
•Time of year: holidays and seasons
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SECTION 1.2
Economic Utilities
Time Utility
Challenge: The "social-cultural environment" of
customers in the current marketing climate is one in
which people often are quite impatient to take possession
of the product once they have made the final decision to
buy. It is important, in a competitive environment, to use
every opportunity to streamline your supply chain and
distribution channels to allow a customer to physically
obtain the chosen product as quickly as possible.
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SECTION 1.2
Economic Utilities
Time Utility
In the case of food service
items, you can't have the burger
ready and have the customers
wait many minutes for the fries,
they just won't come to your
drive-through next time.
This is one of the reasons why (say some fast food experts) that
McDonald's fries are skinnier and smaller and are designed to cook
faster so McDonald's can serve customers faster because the
McDonald's focus is on the "Fast" in fastfood.
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SECTION 1.2
Economic Utilities
Possession Utility
Exchange of a product for some
monetary value.
 Example: Taking credit cards
and checks rather than just cash
enables customers to buy
•
products.
•
Cash
Personal checks
•
Credit cards
•
Installments (layaway)
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SECTION 1.2
Economic Utilities
Possession Utility
• The utility of Place and Possession are very
much inter-related and depend on each other.
When someone buys something from a vendor,
essentially, it is a "transfer of ownership".
• Part of being successful in the competitive
world of "selling stuff" is to make it easy for
the customer to pay, and take possession.
• Having a variety of easy payment methods, is
part of facilitating possession as is the physical
location of the product and how it is delivered to
the customer.
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SECTION 1.2
Economic Utilities
Information Utility
Providing information so the customer is
comfortable buying.
 Example: Salespeople
explain features of products.
 Example: Packaging explains
qualities and uses.
 Example: Advertising informs
consumers about products.
• Ads
• Packaging
• Signs
• Displays
• Owner’s Manuals
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SECTION 1.2
Economic Utilities
Lower Prices
When demand is high, manufacturers can make
products in larger quantities, which reduces the
unit cost of each product.
 Example: When fixed costs are $20,000:
Quantity Produced Fixed Cost Per Unit
10,000
$2.00
200,000
10¢
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SECTION 1.2
Economic Utilities
New and Improved Products
As businesses continue to look for
opportunities to better satisfy customers'
wants and needs, the result is a larger
variety of goods and services.
 Example: Personal computers have become
smaller, more powerful, and less expensive
through competition between makers.
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Which types of utility are related
to marketing?
Form utility is a
function of
production,
NOT marketing
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These utilities ARE directly related
to marketing:
• Place
• Time
• Possession
• Information
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1.2
ASSESSMENT
Reviewing Key Terms and Concepts
1. What is meant by the economic concept
of utility?
2. Which economic utility is not classified as
a marketing utility? Why?
3. Besides added value, what are two other
benefits of marketing?
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1.2
ASSESSMENT
Thinking Critically
How would you explain the following
statement?
Marketing is more than just promotion.
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Marketing Essentials
End of Section 1.2
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