EM - Added Value [LESSON]

Added Value

Remember: being in business is not about you—it's about the customer. Successful business people don't ask themselves "What do I want to sell?" but rather "What does the customer want to buy?" Customers buy products to fill unmet needs and because they expect to derive some value or utility from them. People don't buy Alka-Seltzer because they like the taste or even because the price is right: they buy it because it makes their indigestion go away. They don't shop at Amazon.com because the website is entertaining: they shop there because they want their purchases delivered quickly. The realization that this kind of service would meet customer needs made Amazon.com a genuine business opportunity.

Products provide customers with four types of utility or benefit:

  1. Time utility. The value to a consumer of having a good or a service available at a convenient time. A concessionaire selling bottled water at a summer concert is making liquid refreshment available when it's needed.
  2. Place utility. The value to a consumer of having a product available in a convenient location. A street vendor selling hotdogs outside an office building is making fast food available where it's needed.
  3. Ownership utility. Value created by transferring a product's ownership. A real estate agent helping a young couple buy a home is transferring ownership from someone who doesn't need it to someone who does.
  4. Form utility. The value to consumers from changing the composition of a product. A company that makes apparel is turning raw material (fabric) into a form (clothing) that people need. A company that produces liquid detergent, rather than powdered detergent, is adding form utility for some consumers.

Economic Utilities Activity

Complete the Economic Utilities Activity to review the information above.

 

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