What does... "marginal utility" actually mean?
In his column "What does... actually mean?", Benno Maggi looks at terms from the marketing and communications sector. This time he deals with the term "marginal utility".
What on earth is that now, many creatives probably ask themselves when clients use this word. It's one of those terms that recipients should learn quickly. But beware, it's also one whose meaning you think you understand, only to be surprised that it means something completely different. The term "marginal utility" comes from the field of utility theories - yes, there really is such a thing. Utility theories are models that describe the choice or decision-making behavior of people.
Decisions that people make depend on the benefits that we attribute to our decisions. For example, customers decide in favor of an agency or one of the three proposals presented by this very agency. They always do this depending on the benefits that this decision will bring them. The focus is often not on annoyance with board members, bosses, colleagues or competitors. The benefit for the cause, on the other hand, usually takes a back seat. Except perhaps when it comes to winning an award. In this case, the benefit can serve as legitimation for both the client and the agency that they have done everything right - even if sales figures claim the opposite.
In theory, a decision rarely relates to one attribute (benefit of a feature) of a selected option, but as described above, usually to a variety of attributes that are considered important. In practice, these can be recommendations from the VR, the boss's buddy, the promise to colleagues or the award potential. Together, these result in the marginal benefit when the actual aim is to optimize the image of a brand, position a company better or sell a consumer good more effectively.
The end of "Nützt's nüt so schadt's nüt"
Diminishing marginal utility is often mentioned at present. This means that with every additional unit of a good consumed, the additional utility value (i.e. the marginal utility) generally decreases. Let's remember the first smartphone: the utility value of this magic thing was initially very high because it combined so many things that we no longer had to carry a laptop, agenda, camera or iPods around with us, just a smartphone. Nota bene, we still call it a phone, even though the screen time announcement at the start of the week shows that we hardly need the device for making calls any more. The marginal benefit is therefore becoming more important than the actual utility value.
The fact that this term from economics is now flooding the creative industry is of great benefit to many. This is because it is usually used to determine how many units of a product consumers will buy. Although these are marketing basics, in the creative industry they are usually an annoying element on the way to winning awards for creative and not necessarily useful work. On the other hand, clients of creative agencies use the marginal benefit to optimize their decisions - they consume the agencies' services up to the point where the marginal benefit corresponds to the marginal costs or the marginal benefit decreases. So listen carefully when a customer talks about decreasing marginal benefit. He or she could soon draw economic conclusions from this.
* Benno Maggi is co-founder and CEO of Partner & Partner. He has been eavesdropping on the industry for over 30 years, discovering words and terms for us that can either be used for small talk, pomposity, excitement, playing Scrabble, or just because.
This article originally appeared on markt-kom.com - https://www.markt-kom.com/de/markom/was-bedeutet-eigentlich-grenznutzen/
