Knowledge Base

Opportunity Costs of E-commerce Marketing

Opportunity cost is defined as: the true cost of something is what you give up to get it. This goes past just monetary value but also includes economic benefits (better known as utility) because you spend money and time on one specific thing, you are no longer able to spend either that money or time on something else.

An example would be during my lunch break, I have to decide what I am going to spend my money and time in order to get something to eat rather than go out for some exercise. Once that decision has been made and followed through, I am unable to go back and reverse my decision for that day even though I regret feeling full and bloated after that super burrito. Another one is deciding to go to the beach rather than work, for that day I decided to give up the value of getting paid in order to enjoy the sunny weather with my friends. These are opportunity costs because they have an effect on not only my wallet but also my time that I could have spent doing something else (utility).

With the world of eCommerce expanding each day, business owners and marketing professionals are faced with opportunity costs in order to yield higher revenue and profits. The time you spend marketing through one aspect of eCommerce is going to take away time and resources from another field that could have been explored. An example would be putting 100% of your time and resources into Google AdWords and ensuring your company is the top result for specific key words. With your entire utility put into one thing, you are unable to branch out to other fields that could help benefit your company. It might have been better broadening those keywords and being number two or three with hundreds more possibilities. Breaking up your utility based off trends and results, allows your company to be more efficient and eventually bring in more revenue.

We wish that our business could be number one at everything however competition in a free market ensures opportunity cost is taken into account. Everything we do has an opportunity cost associated with it and business owners need to make sure these resources are used efficiently. This allows new and current businesses to grow as they find new venues to spend their resources on. These decisions enable companies to increase their field in order to get their product out to consumers. A real-internet-world-case would be business A decides to decrease their bid in AdWords so they can better use that time and money on SEO, in the meantime this allows business B to adjust their bid and become more prevalent in paid search for that specific keyword which increases business and competition in that field. These adjustments in a competitive market allow businesses to grow and reinvent themselves in the world of eCommerce.

These decisions can haunt business owners since it may be difficult to decide whether to redesign their website or spend that same utility on adopting a new marketing agency to overlook different channels. With scarce resources, even in the world of eCommerce, we must examine the decisions we make in order to reach our targeted audience. These choices can make or break a company but also enable them to differentiate from their competition – and if done correctly can significantly increase revenue.

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