Economic Utilities of Marketing Added Value: The function of Marketing is to add value to a product. The added value in economic terms is called utility.

Form Utility Involves changing raw materials or putting parts together to make them more useful. In other words it deals with making, or producing things. Ex. Tree, in its original state a tree has value as an object of beauty. A tree prevents soil erosion, provides homes for animals , and produces oxygen for us to breathe. When a tree is cut down it can be used to make products pencil, paper, furniture and buildings.

Place Utility Involves having a product where customers can buy it. Location, convenience.

Time Utility Is having a product available at a certain time of year or convenient time of day. Marketers increase value of products by having them available when customers want them. This requires planning ahead. Ex. Valentine’s cards are already available. Late shopping hours around Christmas. Convenience stores staying open 24 hrs. Wal-Mart .

Possession Utility The exchange of a product for some monetary value. Retailers may accept alternatives to cash, like personal checks, credit cards, in exchange for their merchandise. Ex. Lay-away, customer credit (business to business) Debit cards @ McD’s

Information Utility Involves communication with the customer. Salespeople provide information to customers by explaining features and benefits of products. Displays communicate information too. Packaging and labeling inform customers about quantities, and uses for products.

Lower Prices Marketing activities add value to products and increase demand. When demand is high, manufacturers can make products in larger quantities, which reduce the unit cost of each product.

How to Make a Profit Fixed Costs- rent etc. remain the same whether the company produces 10 units or 10,000. When a company produces larger quantity of a product , it spends less per unit on fixed costs Quantity Produced Fixed Costs per Unit 10,000 $2.00 200,000 .10