When trying to build a business on the concept of opportunity cost is interesting and vital to your success. At least it should be of importance to you if you are trying to make money on the Internet.
As is the case when I want to learn something I go to Google and type in a keyword phrase. Often one of the first results is a Wikipedia page that provides a definition and then a complete explanation of what I am looking for.
Wikipedia defines the concept of opportunity cost as “a key concept in economics, and has been described as expressing “the basic relationship between scarcity and choice.”. The notion of opportunity cost plays a crucial part in attempts to ensure that scarce resources are used efficiently.
They go on to say it is also referred to as an alternative cost. In terms of prospects for our business opportunity cost or alternative cost is seen as a value and not a benefit.
Why is that important?
Value and Not Benefits
In sales, there is a method known as FAB selling.
1. Feature
2. Advantage
3. Benefit
You describe a product feature, the advantage of that feature, and how it will benefit your prospect. With opportunity cost, you add one number to this with value.
Uses as a noun, value is worth or importance. As a verb, value is a monetary number or worth.
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Is What You Sell Valuable
With Internet Marketing, not everything people buy is for the benefit or value it brings. Sometimes people will buy something they want or desire. I think we have all bought something for these reasons and not for the value of it.
Having the right support or community can add great value to understanding and learning about Internet Marketing. Wealthy Affiliate is in a class by themselves when giving value to their members in their step-by-step training, and weekly webinars.
Opportunity Cost
When promoting a business opportunity we eventually get around to selling it for a certain cost. This opportunity cost had better provide value to our customer or new business partner, or we will not get them to join it with us.
I admit I have never really considered and opportunity cost for the value it brings to my prospect. For example, I promote Wealthy Affiliate as my primary business opportunity and product.
You can join for free and then upgrade for $47 a month. People join for free, look around, and then upgrade for the benefits they perceive they are getting. In my case, $47 seemed more than reasonable and as I got more into my Wealthy Affiliate back office the more impressed I was with it.
I know that no one makes any money giving away free products. This is nothing more than a way to draw people in until you get a chance to explain why spending money makes sense.
Now I am starting to look at the $47 in terms of value and not just in terms of benefits to my prospect. Wealthy Affiliate provides tremendous value at $47 a month.
This is especially true when you can take the knowledge you receive and build a 6 or even 7 figure affiliate business from it. That is a great value!
Explicit vs. Implicit Costs
When looking at the concept of opportunity cost you need to look beyond just the cost of the opportunity. You must consider explicit and implicit costs.
Explicit costs are what you directly spend on the opportunity. If you upgrade to Wealthy Affiliate the explicit cost is $47 a month.
You will never get that $47 back. It is gone the minute you pay it and you will never be able to use that $47 for anything else.
Implicit costs are implied costs and not direct costs. An implicit cost with Wealthy Affiliate would be things such as blog writing, pay-per-click advertising and other types of marketing.
When you spend $47 a month on the program you understand that without marketing of some type you will never make any money. It is implied that effort and possibly additional expenses will be required.
One of the many advantages of Internet marketing is the ability to make up in one way what you lack in another. For example, what you lack in time to market a product can be made up of spending money on outsourcing.
What you lack in money you can make up in time. For example, you may not be able to afford a blog writer, so you write your own content.
When you join Wealthy Affiliate you need to understand the explicit and implicit parts of the opportunity cost. Hopefully, I have broken this down in an easy-to-understand explanation.
Evaluate Your Opportunity Cost 
In my opinion, one of the primary reasons so many people fail at Internet marketing is because getting started is so cheap. Many affiliate programs do not cost anything to join.
Even business opportunities such as network marketing or eCommerce can be started for less than $100. I call this not having much skin in the game.
This leads to very little evaluation of the real opportunity costs associated with getting started. This type of evaluation is also known as due diligence and if you do it correctly can save you a lot of time and money down the road.
In affiliate marketing and network marketing, there is a tremendous amount of migration from one opportunity to the next. This happens because of a real lack of evaluation on the part of the affiliate or network marketing before they join.
After what is the worst that can happen. It is only $100 I am losing.
Why Join This Community?
What Opportunity Is There and Is Working?
People have a business and do not know how to market it online. there are some who want to earn an income online and do not know where to go or who to trust. Affiliate Marketing is a billion-dollar business and this year record numbers are going to be set.
The good thing about being an Affiliate Marketer is that you can choose a passion of yours and build a business on that concept. This is where you would some fun in your business while you make money online. this is why many people at Wealthy Affiliate are having great success when they apply what they have learned.
Final Thoughts
Let me summarize the concept of opportunity cost this way. Have you heard of WIIFM radio?
What’s in it for me is how most of us approach making money online. We never really look at opportunity cost in terms of value and explicit and implicit costs.
You have to see the big picture to really understand the concept of opportunity cost. It does not have to be difficult, but it does take a little bit of time to evaluate an opportunity before deciding to join it.
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Hello,
Everyone makes purchases based on impulse instead of value once in a while. It’s normal consumer behavior. Value is very important, especially when it comes to taking courses and setting up your own business. I can see that Wealthy Affiliate offers good value.
Although the monthly membership fee could be considered as “gone” I also see it as an investment, because you’re getting so much value from WA training, support, tools, and the community. I recommend WA to anyone who is serious about starting a business.
Understanding opportunity cost is always a major factor when deciding to choose a business. It is good that you see the value of Wealthy Affiliate and its monthly commitment which is a no-brainer.
I have introduced this service to many and so far is all good feedback I am receiving and I am happy that average people are seeing the results. Thank you for your feedback and I wish you all the best with your business.
Hi, there is a ton of awesome and applicable information here that will be very helpful to many people. I agree that WA is a valuable opportunity cost. I get to have fun learning about my passion and can network with many professional people. Not just that but I can make money while creating a long term sustainable business.
Jake, thank you for stopping by and leaving a comment. Wealthy Affiliate is changing lives and the cost of being a member is very affordable compared to the great value one is receiving. The ongoing training is what I look forward to the most cause the Internet keeps changing so often. And having a service that gives you updates on a regular basis, for a low monthly cost is quite impressive.
Thanks!
Thanks a lot for sharing a great perspective in this post!
Definitely a trial period is vital not necessarily to define the features and capabilities of any product rather define how valuable it is for me. Value ends up becoming a subjective concept.
Within the implicit cost, we could also add the price of our own time and services we may pay to get some rewriting and copywriting done for us by freelancers.
I’ve suffered a lot of not having much skin (so I personally understand what you’re talking about here). I wish I were read this 6 months ago!
Producing content when building a business is a major part of your growth and can play a major factor in whether you succeed or fail. There are so many parts of your business you can outsource to free up some of your time while you focus on other things.
I have seen a lot of people fail for just this one thing while it has so many freelance writers that are making it happen for people who even cannot write, or have a language problem. This is what drove me to write about opportunity cost and why it is so important in your business.
Hey, Thank you for writing on the Concept Of Opportunity Cost. I learn a lot while reading your article. I learn that no one makes any money giving away free products. This is nothing more than a way to draw people in until you get a chance to explain why spending money makes sense. One of the many advantages of Internet marketing is the ability to make up in one way what you lack in another. In my views affiliate marketing is the best way to earn money online.
Affiliate Marketing is definitely the place to get started if anyone wants to make money online. And having the right service and continued support is a major factor when choosing a business. I like what Wealthy affiliate offers by giving everyone the opportunity for free, in that way they can try it out first to see if it is what they were searching for before making a purchase.
It shows the integrity of the company and the concern for the ones that are joining with no risk involved. I must admit, that is what brought me to Wealthy affiliate back in 2013, and gave not look back since.
Hi Bishop,
Thank you for sharing this post. This is such a different perspective of looking at the concept of value sales.
I had never thought about evaluating the opportunity cost of a service/product or about the cost of starting a business weighing on the success/failure of if.
Do you think motivations would be high to put in efforts in our business if there was more money required to start it?
I have seen that a lot of people fail because of a lack of taking account of opportunity costs. Any programs I join right away I like to purchase the yearly membership. Not only for the cheaper package, but it would set me apart from the problems that most entrepreneurs go through during those 12 months.
The motivation level I think would not change based on the cost, but some people think it will because of the amount that they tend to lose. I believe if anyone gets trained on running a successful business and use those tools. if he gets motivated, then he will be successful.
The same, if another one who has the tools and do not use them, then people class that person as an idiot. So if he gets motivated, all you have is a motivated idiot that would not succeed. Education is key, and that is where the difference lies.
Thanks for this promotional post about working in internet marketing. I started doing this business myself. I put in some money in the business as you said. It’s just that I don’t want to quit my job because I like the job. I also work with people. To be creative. You work longer in this business and have greater experience than I do.
Although I started out just wanted extra cash to help supplement some of my bills, I get caught up helping others what I have learned or getting the information to them if I don’t know. and before long, I was earning a full-time income from home and not even realizing it.
I got caught up helping others and was fascinated by the progress they were having while I still work on my full-time job. Why? I love my job here in New York and is what motivates me with the different companies I get to rub shoulders with in NYC. So I can definitely relate to you. I am just enjoying the best of two worlds.
The concept of opportunity cost is something new to me. Your posting is extremely interesting. Thank you for sharing this with us. Indeed, the monthly cost in WA is very low compared to what it offers you: training, practical examples, an excellent community eager to help you succeed. The technical support is not to be neglected: it answers you very promptly and professionally.
Thank you for your comment and happy that you are a member of Wealthy Affiliate and experiencing the value that they provide. it still left up to the individual to take advantage of the tools and use them to their advantage. If ever you need help with anything please contact me within WA and I will be more than happy to lend a hand.¸ Talk to you soon.