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.
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.
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.
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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