When you’re thinking about building a brand based on your knowledge and expertise, you need to understand the economics of information. So, let’s dig in and answer the question: how do we value information?
How much is information worth? When you’re thinking about building a brand based on your knowledge and expertise, you need to understand the economics of information. So, let’s dig in and answer the question: how do we value information?
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Why Information Loses Its Worth
For traditional product businesses, there is a standard way to value what you’re selling. In addition, there is generally a significant advantage to selling to more and more people. That’s very different for information, which, from a theoretical perspective, loses its value.
As information becomes more widely available, it becomes less valuable. People aren’t willing to pay for something that is widely available for free. So the ability to sell information and put a price on it is tied to its scarcity.
If you have an online course that you’ve taught to lots of people, the content eventually becomes common knowledge. People will be willing to pay less and less, and that’s a reality. It’s a paradox that in some ways, putting your product out there devalues it, but it’s a reality that you need to recognize from an economic perspective.
Barriers To Entry
A barrier to entry is any factor that would stop a competitor from coming in and knocking off your product by providing a competing product at a lower price. In the online marketing space, there are few barriers to entry.
Today, you’ll find many plug-and-play systems that make it so easy for someone to come in and create a competing product. It’s simple, so you have to be cognizant of that fact when you think about how to position yourself to fend off those competitors.
Competition isn’t necessarily a bad thing. In fact, you should expect that you will have competition. This will help motivate you to build a business that can withstand competitors. Ironically, competition can make your business stronger in the long run because it will force you to improve your marketing expertise.
As you build your business, you need to think about ways to create barriers to entry. It’s like putting a moat around your business. For example, we did it with my legal template business when we created our legal template generators. As far as I know, I’m the only person in the online marketing space that has built this type of solution. So I have a built-in marketing advantage.
The Value Of A Service
I serve a lot of people who offer some kind of service based on skills they’ve developed. This leads to discussions about how much they should charge. While a service-based business is not purely based on knowledge, it is a related concept.
Setting aside the specific service you offer, part of the value relates to how important the solution is to people. The amount of discomfort they’re experiencing will determine how much they’re willing to pay you to solve the problem. How rare is the skill necessary to solve the problem? If the skill is widely held, it won’t be valued as much, and you won’t be able to charge as much for that skill.
On the other hand, if you’re the expert who can solve some of the most complex problems within that area and there are only a few people with that skill set, you can charge a lot more.
That’s the concept of skill. The rarer the skill, the fewer people who can do it, the more valuable that skillset is within reason.
Information is unlike physical products and most other products because it’s valuable when it’s not widely known. But as you sell more of it, more people will be less willing to buy and will want to buy it for a cheaper price.
It’s also important to understand that barriers to entry are low in the online information space. You need to plan for competition and think about ways to create barriers by setting yourself apart. Finally, the rarer the skills you have, the more you can charge for using those skills in a business.
If you want to learn more about how to build a knowledge business, you should join my free training program, BADA$$ Online Marketing University (BOMU). We have free resources that will help you grow your online business.