Utility Eats Value for Breakfast: About Diminishing Marginal Utility
Let’s look at the distinctions between a utility and a novelty, and why the utility always wins the race for value in the minds of consumers.
I would like to thank Tremis Skeete, Executive Editor of Product Coalition for his valuable contributions in the development and writing of this article. I also thank Product Coalition founder Jay Stansell, who has provided a collaborative product management education environment.
In the past I’ve written about the economist William Stanley Jevons, and his thesis which is “Value depends entirely upon utility.” In other words, if you’re thirsty, a tall glass of drinking water has great utility and therefore great value.
“Value,” said Jevons, “depends entirely upon utility.”
Source: https://www.econlib.org
However, with each additional glass of water, you will get full — because there’s no longer the same utility proposition. This dynamic is known as “diminishing marginal utility” because when product utility diminishes, the product value can diminish. More of my thoughts on the subject can be found in a previous article I wrote.
What’s more important for a product — great value or great utility?
Over the course of my product development career, I’ve developed the following hypothesis:
“If I focus more on utility/usefulness, and less on value, then I will solve more meaningful problems for customers, bridge more gaps and unlock more revenue for my company.”
One of the reasons I’ve developed this hypothesis is because it’s difficult for me to think of someone using the term utility in an abusive, manipulative or gimmicky way. After all, the basic idea behind a “utility” is that it’s something that’s useful and it brings a sense of satisfaction to the person who uses it. Think of a “utility” as a great glass of drinking water.
However, I can certainly think of product or marketing professionals who use the term value when referring to cheap widgety dashboards and features aimed at novelty seekers, or following an industry trend with no real vision.
For example, in the cycling industry, value is normally associated with cheap or low end (budget) gear. Generally speaking the same goes for grocery stores and their products also.
Water versus Milkshakes, and “Jobs to be Done”
To make the distinction between a utility and a novelty, let’s use the example of a glass of drinking water and a milkshake.
Why is a glass of drinking water useful? Well, according to the CDC, drinking water helps to keep a normal body temperature and maintain good health. Let’s not forget that it’s also used to make other kinds of beverages — like a milkshake.
Now let’s look at a milkshake. A milkshake is delicious and milkshakes are great when you’re craving something sweet.
So at first read, we can see how water and milkshakes can be useful. But which one is more valuable to, for example — consumers who are commuting long distances to their places of work in the morning? Which has more utility?
To answer this question, we’ll use the “Jobs to be Done” (JTBD) framework.” created by Harvard Business School (HBS) professor, Clayton Christensen, “JTBD” is designed to help professionals discover why consumers use products or services, or what utility they derive from them.
With JTBD, according to HBS sources, Christensen engaged by McDonald’s to discover the “job” their milkshake product was “hired” to do. After conducting customer interviews and other ethnographic activities, Christensen learned that customers “hired” milkshakes for breakfast that will help them stay engaged during long commutes to work, and to stay full as long as possible, before they become hungry and need to eat again.
Customers expressed that milkshakes do the “job” better than other products they’ve tried or “hired”. In the context of commuting to work in the morning — the McDonald’s milkshake provided the most satisfying pathway for customers to get what they needed to accomplish.
The utility had nothing to do with milkshake flavor or thickness.
Customers wanted something easy to consume, and they wanted to be able to hold the product in one hand while using the other hand to hold the steering wheel while commuting in their cars. Customers expressed that with the milkshake, they could sip it easily through a straw, as opposed to having a eat a banana or donut with possibly two hands, which is not easy to do while driving. These factors and others influenced their decision to “hire” a McDonald’s milkshake.
This is why I say, inspired by the words of management consultant, Peter Drucker — utility eats value for breakfast.
While customers admitted that products like bagels, bananas, donuts or drinking water also have value and were “hired” on occasion, which makes these products a novelty in this case — McDonald’s milkshakes provided the best utility.
Of course, a customer could a eat a banana while driving to work, but then they’d end up getting hungry again in a lesser amount of time, which could mean they’d either eat another banana, or maybe a donut, or drink water, or do all three. However, this is not the “job” they wanted to get done. This scenario is an example of diminishing marginal utility — because while these novelties are good, they’re not getting the job done, the utility begins to fade and they need something more valuable.
Microsoft Excel: The Favorite Tool of Nerds Everywhere
Ibrahim Bashir explains in his article entitled “Product Delight: Brain Rewiring” that all SaaS products are competing with Microsoft Excel. Why is that? Excel is not a pretty product. I’d also argue that it’s not easy to become proficient in Excel unless you take several courses.
Ibrahim writes:
“Every SaaS product is ultimately competing with Excel, with getting users to stop thinking of their workflows in terms of spreadsheets. Why is change management in enterprise software so hard? Why are people so unwilling to give up their beloved spreadsheets? It’s because that application has delighted users for decades and completely rewired their brains.”
“The most commonly pressed buttons in any SaaS app are ‘OK’, ‘Cancel’, and ‘Export to Excel’”
So in regard to the question of utility, what are the “jobs” Excel is hired to do? Users “hire” it predominantly to do the following:
- Users have most of their data in giant tables and Excel has proven to be capable of handling these tables.
- Users want to format data in preferably simple ways, and Excel provides different ways to do that.
- Users want to use software that will make it easy to collect data. Excel has proven consistently that it can do standard data collection.
Microsoft Sharepoint: Go Ahead And Laugh
Software developers usually don’t want to work in Microsoft Sharepoint. Everyone pokes fun at the user interface (UI), but it’s useful for document and content management, and it’s very easy to learn, especially for non technical users.
I once had a product role where a large part of the roadmap was centered on rebuilding a massive (and slow) SharePoint based document management system into a more modern and performative tool. It was obvious the new solution with Box on the backend was a value proposition explosion for the business and the external users. However, there was one big problem.
I interviewed up to ten internal super users who would each review one hundred and twenty SharePoint documents a day. They all loved SharePoint. They loved how simple and useful the frontend was, along with the clearly placed timestamps for every action they made, and they could refute any question about their work. They knew how every piece of it worked and for the most part they could rely on its steadiness.
They didn’t care about all the backend performance stuff, and how much more document governance and archival abilities we were gaining from moving to this new system. They had just been led to believe that this new silver bullet was coming down the pipeline and they should love it.
The original version one prototype of our tool didn’t have some of the things the users loved most. Some of the features seemed so basic, we didn’t think about them for our new futuristic lightweight tool. As a result, we underestimated their utility and excluded the features from the release. Consequently, the super users didn’t like what we presented, for it wasn’t intuitive enough. Based on what we learned from discovery, we reworked the frontend accordingly.
Jira/Confluence
How many startup companies have launched their product almost entirely with a value proposition of, “Our UI is so much cooler looking than Jira!”
Jira and Confluence are not sexy looking, I have been using them extensively for ten years, and I can’t recall a drastic change in the user interface or the way it looks and feels — but it’s the standard. Product-wise, it’s gained a lot of market share, and personally it offers a lot of utility.
As a duo, Jira/Confluence are so useful and they’re integrated with many tools such as Microsoft Teams, Slack and Google Analytics. I taught myself how to use Jira and Confluence in a week. I’ve used flashier tools, but I get lost in the cheap widgety dashboards and I return to Atlassian tools. Also, Jira and Confluence can scale in remarkable ways. My company has many teams using Jira and is able to successfully handle entreprise level traffic.
Avid Pro Tools: If You’re a Music Producer, Then You Know It’s an Industry Standard
Avid Pro Tools is the industry standard for digital music production. I asked my friend who has been professionally producing music in studios for ten plus years about Pro Tools. They communicated that if you want a job in a top recording and production studio, no matter where you are on the globe — you have to know Pro Tools.
He also said it takes a person six months to get proficient at Pro Tools, if they practice three times a week. In other cases, it typically takes twelve months for someone to get officially certified.
My question was that if it’s so difficult to learn Pro Tools, why is it still the top choice? I can go in the Apple app store and get something for $9.99 that will have me editing music and sending to grandma by the end of the hour.
The answer is — Pro Tools offers the most utility. It’s not gimmicky or cheap. It’s not chasing industry trends. Pro Tools is perceived as the best product in it’s category for recording multiple takes of channels quickly, especially for live music, such as bands or orchestras.
The point I am making is that it’s not easy to learn, it’s not the quickest thing to pick-up. But — it sticks, because it has immense utility for producers.
Professional engineers have also shared that with Pro Tools, it’s easy to mix and master live music recordings. Pro Tools has everything music producers such as Dr. Dre and Pharrell need to record and create entire album projects.
The power of its utility comes down to its widespread use within the music industry, which is probably why many competitor products now more than ever, contain features that appear to be similar to those in Pro Tools.
Pro Tools, like Microsoft Excel, successfully capitalized on the popularity of personal desktop computer, and as a result, maximized it’s potential as a tool for music producers. Basically, Pro Tools is the first product in the digital audio workstation (or “DAW”) category at that time to win the hearts and minds of producers, because it performed the “job” so well, users got the job done in ways that met real customer needs.
Great Utility Always Wins
Utilities like the before mentioned are always best for people or businesses, and it’s not because they are the most polished products or services. And of course, there will always be competition, and there will always be people who feel there are products out there, which are better.
Go to your local hardware store and look at how many offerings exist for one type of problem (like plumbing). In some instances there are innovations that have changed the game completely when it comes to having water issues, and then there are tools that have been the standard for 50+ years.
Has the usefulness of a hammer or screwdriver diminished much over time?
Does using a great utility mean you’re using the best of the best? Not necessarily. Does the widely popular use of ChatGPT mean that it’s the best of the best in the market? No, absolutely not. If anything, as useful as it seems to be so far, ChatGPT is still a novelty that’s attracting curious users who are discovering what it can do. And that’s okay.
Regardless of the product or service, if using it makes your life easier, then I say go for it. I still feel that great utility always wins.
Perhaps that’s why I’m currently more interested in Home Depot than I am in ChatGPT.
