Increasing Marginal Utiility

Bill Gurley writes in the latest issue of his “Above the Crowd” newsletter (no online link available):

One might wonder, “What metric would highlight the ultimate in terms of sustainable competitive advantage?”. It would need to be something that encompassed (1) a clear advantage relative to competition, and (2) something that increased the lead over time. In other words, the competitive advantage would constantly be improving. What if a company could generate a higher level of satisfaction with each incremental usage? What if a customer were more endeared to a vendor with each and every engagement? What if a company were always more likely to grab a customer’s marginal consumption as the value continued to increase with each incremental purchase?

This may be the nirvana of capitalism – increased marginal customer utility. Imagine the customer finding more value with each incremental use….The customer who abandons increasing marginal customer utility would experience “switching loss.”

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Rajesh Jain

An Entrepreneur based in Mumbai, India.