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Marginal analysis identifies the relationship between additional benefits and costs associated with an activity to determine overall satisfaction. Consumers use this process to compare similar products and choose the one with the greatest satisfaction. Variables such as changing tastes and prices can influence the decision-making process.
Marginal analysis is a process that seeks to identify the relationship between the additional or fringe benefits received from engaging in a specific activity and the additional costs associated with that activity. The objective of this type of analysis is to have an idea of the general satisfaction that can be derived from the effort, also considering the primary and accessory costs associated with that particular effort. This makes it much easier for consumers to make comparisons between different purchasing options and choose the one that offers the greatest satisfaction while still being considered valid.
Consumers tend to use marginal analysis as a matter of course when choosing between two or more similar products. This is done by identifying the primary benefit derived from each product, then determining whether there are other aspects of the individual products that could provide some additional benefit or incentive. For example, a consumer may compare two different laundry detergents that both effectively clean clothes and that the cost of each product is similar. While both products meet that primary need and are considered reasonable in cost, the consumer will often choose the product that provides the most desirable scent to laundered clothing, a secondary or fringe benefit that increases the desirability of that particular brand of detergent.
The same fringe analysis process is used when a consumer chooses between two restaurants. While the two restaurants offer similar entrees at similar prices, one restaurant has a reputation for serving larger portions. A consumer who doesn’t mind eating leftovers may view larger portions as an added or marginal benefit that can be achieved with little or no additional cost. As a result of this marginal analysis exercise, the consumer enjoys part of the appetizer at the restaurant and takes the rest home to be eaten in the evening or the next day.
The key to the marginal analysis process is the understanding and proper evaluation of changes in variables that could influence the outcome of the decision making process. For example, a previously preferred laundry detergent may be rejected next time, as the consumer has grown tired of the smell. Likewise, the restaurant may choose another restaurant when dining out again, due to the fact that the other restaurant offers a wider range of side dishes with the desired entree. Changes in consumer tastes or changes in prices are variables that can influence the primary and secondary benefits that a consumer identifies with a given purchase option and make a difference in the consumer’s final decision.
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