User:Ruud Koot/Buyer utility map

In business planning, a buyer utility map is a tool developed by professors at the elite business school INSEAD,which helps to identify which business ideas have real commercial potential. Next to pricing and the business model, utility proposition is one of the pillars of this commercial potential (Kim & Mauborgne, 2000). The buyer utility map can be used to create exceptional utility with new products and services or by innovating existing products and services. This means that it helps to identify how a product or service can create utility for its customers and differentiate from competitive products. The buyer utility map can therefore be seen as a tool which can be used for segmenting and positioning. The matrix is based on six Buyer Utility Levers and the Buyer Experience Cycle (Kim & Mauborgne, 2000). It is visualized in figure 1.

Buyer experience cycle

The buyer experience cycle covers the total customer’s product experience. It is based on the customer resource life cycle from Ives and Learmonth (1984) and consists of six stages:

purchase
delivery
use
supplements
maintenance
disposal

These stages represent the stages in which the customer is involved in the product. The purchase stage for example, is the first stage of the total customer’s experience where the customer experiences the buying of the product and the disposal stage is last the stage in which the customers experiences disposal of the product.

Utility levers

The six utility levers are the ways in which utility can be offered to the customer. There are six utility levers:

Customer productivity: This type of utility lever can increase customers’ productivity by helping them to do things faster, better, or in different ways. An example of increasing customer productivity is the financial information company Bloomberg. They made traders more efficient by offering instant on-line analytics.
Simplicity: This type of utility lever makes life easier for the user of the product or service. Phillips and Douwe Egberts for example launched the Senseo coffee machine. With the Senseo machine coffee is brewed by consumers by simply putting coffee pads and water in the machine and pushing a button.
Convenience: The convenience utility lever is a luxury, which lets a customer save time or frustration. Online banking is an example of the convenience lever. It saves customer’s time and frustration, because he/she does not have to go to the bank anymore to handle his/her transactions.
Risk: Another lever which is addressed by online banking is the risk lever. Online banking reduces risk of losing paper financial statements. A customers can print his/her own statements when the old statement was lost.
Fun and image: The fun and image lever provides fun and image to the customer. Apple’s iPod is a good example of using this lever. Customers obtain a fun and a trendy image by buying one of the mp3-players from Apple.
Environmental friendliness: This utility lever is providing friendliness towards the environment. For example, the initiative of fast-food chain McDonalds to recycle materials and reduce material content can be seen as usage of the environmental friendliness utility lever.

The buyer utility map process

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Figure 2: The meta-process model

The method for using the Buyer Utility Map consists of four main activities: locating the new product, locating existing products, market research and positioning the new product. This is visualized in the meta-process model in figure 2.

Locating the new product

The new product should first be located on the buyer utility map. Two perspectives can be used for systematically locating the product: the utility perspective and the buyer experience perspective. When chosen for the first perspective, one examines all six buyer experience stages for every utility lever. When the buyer experience perspective is chosen, one examines all six utilities for every experience stage. By using one of these two perspectives every space on the map will be thought about.

Analyzing the market

Before existing products can be located on the buyer utility map, some market research needs to be done to gather information about these existing products and to determine whether there is room for improving the company’s current utility proposition.

Locating the existing products

When enough information about competing, existing products is available, these products can be located on the map. Again two perspectives can be used to systematically walk through the map: the utility perspective and the buyer experience perspective.

Positioning the new product

When existing products are located on the map, one can compare the position of the new product and the positions of the existing products. After this comparison the new product can be positioned on the buyer utility map by spotting unused spaces on the map and think about using these spaces and how to use them to produce (market-shaping) innovation. This will result in one of the following innovations: using a new utility lever at the same stage, using the same utility lever in a new stage, or using a new utility lever in a new stage. Also using the same utility lever at the same stage is an option.

Using the same utility lever at the same stage: When market research has shown that there is enough room for improving a company’s current position one can decide to improve this position, thus the same utility for the same experience stage.
Using a new utility lever at the same stage: An example for using new utility at the same stage is McDonald’s Mc Drive. Customers can not only buy their food inside the store, but they can also buy their food by driving through the McDrive with their car. This is an explanation of exploiting the convenience lever for the purchase experience.
Using the same utility lever in a new stage: Microsoft’s operating system windows already offered simplicity by making it easy to work with computers through their graphical user interface. Windows nowadays also offers the functionality of automatically downloading and installing updates from the internet, which makes it also easy to maintain the operating system.
Using a new utility lever in a new stage: McDonalds first offered convenience and increased productivity with their McDrive in the purchasing stage of the buyer experience cycle. Customers could stay in their car and drive to a window, where they could buy their meals. McDonalds’ initiative to recycle their packaging materials can be placed in a new utility lever within a new stage: the environmental friendliness lever within the disposal stage.

Example: online banking

The figure visualizes the positioning of an online banking service on the buyer utility map. It is clear to see which utility levers and buyer experience stages are being addressed by this service and which are open for exploitation.

Finding transactions faster provides customer productivity in time saving within the stage of using the service. Other utility levers addressed within this stage are the convenience and the risk lever. Online payments are convenient for the customer, because he/she does not have to go to the bank or a mailbox anymore, but can handle his/her payments from behind their computer. Because bank statements can be generated and viewed with the online banking service no paper statements have to be collected anymore by the customer. This lowers the risk of losing bank statements by the customer and it is environmental friendly.

References

Chan Kim, W & Mauborgne, R (2000). Knowing a Winning Business Idea When You See One. Harvard Business Review, September-October, pp. 129-137
Ives, B. and Learmonth, G. (1984). The information system as a competitive weapon. Commun. ACM 27, 12 (1984), 1193–1201.

Category:Business planning

Buyer experience cycle

Utility levers

The buyer utility map process

Example: online banking

See also

References