What is Utility Marketing?

Utility is the economic term for the usefulness, enjoyment, or total satisfaction a consumer received from a service or good. Economic theories based on rational choice usually assume that consumers will strive to maximize their utility. So how does this economic term relate to your marketing efforts and why is it so important for subscription eCommerce brands?

A simple way to define utility for marketers is value. Consumers purchase your product with certain expectations on the benefits they’ll receive from its use. The problem for eCommerce brands in 2022 is the number of options consumers now have to purchase the same (or similar) product you are selling. This is where the use of effective Utility Marketing can become a game-changer for brands. Creating utility that goes beyond the physical product you are selling allows your brand to connect with customers based on value and not volume. This value-based connection creates stronger bonds between brands and consumers leading to increased brand loyalty and ultimately more revenue.

There are five types of utility as laid out in the Utility Marketing Model:

1) Place Utility - the ability for consumers to get what they want, where they want it. Amazon leveraged place utility to become the eCommerce Goliath by creating a logistics chain that brought easily obtainable products to customers within 24 hours.

2) Time Utility - the ability for consumers to get a product when they want it. If a customer orders snow boots in December, they don’t want to wait until March to receive their product. Marketing around available inventory helps meet customer expectations.

3) Form Utility - the value of the physical state of a finished product. Consumers would never pay the same price for an IKEA sofa compared to a sofa from CB2. Part of the value of a CB2 couch is that it’s delivered into your living ready for use.

4) Possession Utility - the ability for consumers to utilize a product in multiple ways so simply owning, or having possession, of the product provides value. Our Places markets their Perfect Pot as “combining every single pot and then some.” For a consumer, the value is having one pot in the kitchen instead of seven pots.

5) Information Utility - the ability for consumers to make an educated decision. With all of the options available, brands that utilize information effectively will be better able to convince the consumer to purchase.

Utility marketing is important for subscription businesses given the recurring nature of the relationship between the consumer and store. In order to retain a customer, brands must continuously provide value. Here are some examples of how subscription brands can create utility:

Vitamin Orders: a user purchases a 60 bottle of daily multi-vitamins from your store. If we know that it takes seven days from purchase to delivery, this store can create time utility by reaching out to the customer between 14 and 7 days before the 60 vitamins have all been used. This means the customer will never miss a day of their vitamins and allows the brand to stay part of the customer’s daily routine.

Plant-Based Food Delivery: a user is interested in eating healthier and wants to give plant-based eating a try. Changing diets and routines are challenging so this brand emails the user every week with tips from a licensed dietician on how to prepare different meals and creates a Facebook community of other users who are looking to change their eating habits. This has created significant information utility increasing the likelihood that the customer continues on with this lifestyle.

Children’s Clothing Box: a user subscribes to a children’s clothing box after giving birth. Every three months, a box arrives with clothing that fits the child for the exact stage of development. This is a great example of place utility as the consumer gets exactly what they want and need without having to go shopping.

There are also several sub-categories that fall under Utility Marketing that subscription businesses can utilize. One additional form of utility that I believe will become more prominent over the next year is Principle Utility or the ability for consumers to align their beliefs and behaviors to a brand. Examples of this are brands that send the consumer shipping labels to return all of the packagings to be responsibly recycled as to not put the burden of waste on the customer.

Utility marketing is designed to increase the level of value and convenience for your customers by integrating your product into the consumer’s lifestyle. If deployed effectively, you’ll be able to build stronger customer relationships leading to lower churn rates and a growing eCommerce business.