Marketers used to succeed by providing superior products and other distinctive functional benefits. Today this is no longer enough, for such benefits can readily be imitated; in the automobile industry, for instance, quality and performance increasingly meet—and are perceived by consumers to meet—uniformly high standards (Exhibit 1). Today’s marketers must therefore find new ways of differentiating their products and services.

The solution is to emphasize process benefits (which make transactions between buyers and sellers easier, quicker, cheaper, and more pleasant) and relationship benefits (which reward the willingness of consumers to identify themselves and to reveal their purchasing behavior). In other words, the basis for creating successful marketing strategies has expanded to three dimensions, from one.

McKinsey research on marketing in four industries—automobiles, cosmetics, credit cards, and long-distance telephone services—shows that many people have come to value these new types of benefit as highly as their functional predecessors, if not more highly (Exhibit 2). The implication: if your company doesn’t satisfy the demand for all three kinds of benefit in its value propositions, it will be vulnerable to competitors that do.

Our research also shows that consumers can be segmented by all three dimensions of benefit to create more complex...