Marginal analysis identifies the relationship between additional benefits and costs of an activity to determine overall satisfaction. Consumers use this process to compare similar products and choose the one with the most desirable marginal benefit. Understanding changes in variables is key to the decision-making process.
Marginal analysis is a process that seeks to identify the relationship between the additional or marginal benefits received by engaging in a specific activity and the additional costs associated with that activity. The purpose of this type of analysis is to get an idea of the overall satisfaction that can be derived from the effort, while also considering the primary and ancillary costs associated with that specific effort. This makes it much easier for consumers to compare different purchasing options and go with the one that provides the most satisfaction while still being considered valuable for the cost.
Consumers tend to use marginal analysis as an option when choosing between two or more similar products. This is done by identifying the primary benefit derived from each product and then determining whether there are other aspects of the individual products that would provide some additional benefit or incentive. For example, a consumer might compare two different laundry detergents that can clean clothes efficiently and find that the cost of each product is similar. While both products meet this primary need and are considered reasonable in terms of cost, the consumer will generally go with the product that provides the most desirable scent for laundry, a secondary or marginal benefit that adds to the desirability of that particular brand. of detergent.
This same marginal analysis process is used when a consumer is choosing 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 consider larger portions an additional or marginal benefit that can be obtained at little or no extra cost. As a result of this marginal analysis exercise, the consumer enjoys part of the entrée at the restaurant and takes the rest home to be eaten that night or the next day.
The key to the marginal analysis process is to understand and properly assess changes in variables that can influence the outcome of the decision-making process. For example, the laundry detergent that was previously preferred may be rejected the next time because the consumer is tired of the scent. Likewise, the restaurant may choose a different restaurant when eating out again, due to the fact that the other restaurant offers a greater variety of side dishes with the desired entrée. 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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