Opportunity Cost


Opportunity cost is the loss of potential gain from other alternatives when one alternative is chosen.

As applied to marketing, opportunity cost is the comparison of the actual or expected monetary return of a chosen marketing strategy, tactic, or plan to that of the best alternative for the same use of resources.  It is a means of quantifying the net impact of one marketing investment over another.

The formula for calculating opportunity cost is:

Opportunity Cost = Return of Best Foregone Option – Return of Chosen Option

The opportunity cost is often calculated when trying to decide between potential marketing options. In this case the two best options are usually used, and the resulting opportunity cost represents what would be given up if the second-best option was implemented in lieu of the best choice. However, it is possible for the chosen option to be one other than the best. For example, a currently used option could be compared to a new, better option to quantify what would be missed if a change was not made.

Note: When calculating the opportunity cost, differences in time horizon for the return should be controlled. This can be done by using the same interval for both the chosen and foregone options with this time being long enough to appropriately capture the returns from both options. Alternatively, a technique like net present value could be employed to ensure comparability.


  1. Universal Marketing Dictionary Project, 2023.

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