In a perfect internet market, the marginal cost of a digital product is zero. But no market is perfect, so, what we have in reality is that the marginal cost tends towards near-zero. What that means is that the transaction and distribution costs stay low even as output increases. Whenever you attain that positioning, your unit economics improves since you are essentially having accelerating returns which keep compounding.
Before you launch that digital product, understand this plot. If you do not, you will struggle to scale that product. The mastery of marginal cost is the mastery of digital business growth. Your scalable advantage is built on the “physics” bounded by distribution cost and transaction cost.
Unit Economics. Marginal Cost. Understand both, and the path to the mountaintop becomes clearer. How do you keep growing without increasing marginal cost?
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