“Law of Diminishing Marginal Utility”. Business & Marketing Term Paper

Analysis and Reflection – Law of Diminishing Marginal Utility
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June 14, 2020
Understanding consumer psychology is perhaps one of the essential skills for any organization. It allows a critical understanding of the factors underlying the purchasing processes and how these can be used in order to maximize profitability in the long run. Accordingly, one of the concepts that were discussed in this course is the law of diminishing marginal utility. This law states that as a consumer continuously consumes the same product, it is benefits of utility decreases through time. In line with this article, the author would try to understand the relationship between the law of diminishing marginal utility and the variables that affect success in the restaurant industry using the article written by Line, Hanks, and Kim (2016). This includes the relationship between ambiance, satiation, cleanliness, and good quality with the customer’s perception of utility. All in all, the author believes that similar to other commodities in the market, service quality in the restaurant service is generally subject to the law of diminishing marginal utility.
Service Quality and Diminishing Utility
Aside from the meal, another factor that influences the restaurant-goers’ act of visiting the restaurant is the establishment’s service. This includes factors such as sanitation, courtesy of the employees, and ambiance, among others. For example, in one study conducted by Line, Hanks, and Kim (2016), they stated that despite the importance of these factors in the restaurant business, an excess of such could also lead to a decrease in utility over the long run. A phenomenon that is known as negative utility. They hinged their theories based on the idea of the diminishing marginal utility and hedonic adaptation, in which repeated use of one thing makes it less appealing for the average user.
To understand how this happens, the authors utilized an empirical study where they questioned several restaurant-goers and asked them to rate whether much cleaner restaurants are more appealing rather than those who focus less on these factors. It shows that since one of the main reasons for restaurant-goers to go to a restaurant is to experience something new (i.e., hedonic adaptation), then improving ambiance, increasing sanitation, and diversifying other services is not as effective in keeping customers from going back again.
In line with the lessons discussed in the course, it could be seen that this is a clear example of diminishing marginal ...