The Power of Pro-Suming

If you are unfamiliar with the concept of a pro-sumer, think of it as a combination of consumer and producer. In the age of e-commerce and online deep-discounts, many people have been fooled into believing that they are saving money by purchasing cheaper goods and services online. Ironically, we may actually be using up our money more quickly. Here's why.

If you are spending $50 to buy something online that retails in a brick & mortar store for $80, are you saving $30? Or are you spending $50? Consumption cannot help you build financial security because you spend your money to purchase liabilities that depreciate over time as opposed to assets that grow over time. The ones who benefit most from the e-commerce explosion are the producers of wealth, the companies that rack up record profits for themselves and their shareholders. The primary keys of wealth creation are to make money and build equity. You cannot do that if you are buying goods that lose value over time. The convenience of e-commerce has made it easier to spend our money more quickly.

The idea of being a pro-sumer is to consume the product and services that you want or need, while also positioning yourself to produce income by recommending those products and services to others. Referral-based business has been growing for a long-time, and some of the biggest companies in the world are profiting from it, including Google (through Google AdSense) and Amazon (through Amazon Associates), as well as some lesser known stores such as MoreStore.com. Facebook is a perfect example of a multi-billion dollar company whose value was built in this way.

Pro-suming with products that are consumables and commodities allows you to build a more long-lasting stream of income. If you are paid to refer another customer to a common product they will buy over and over again after they use it up, then you can create residual or passive wealth that does not shut off. In other words, you get paid for what you did instead of what you do. This is same mindset many business owners and entrepreneurs share.

Instead of looking at "price" as simply the money you pay at the store, "price" should reflect what you give up in return for what you get. Factors considered in the latter and more comprehensive definition include the time you spending acquiring the item, rebates paid back to you after you purchase the product/service, the shopping experience, and... perhaps most importantly what you could or would have been doing if you were not shopping for a product or service. For those who are familiar with Michael Pollan's arguments in The Omnivoire's Dilemma, he makes a similar point regarding the cost of food. The price tag does not represent the entirety of the price we pay for buying cheap industrial-produced food. In order to determine that, we also must take into account the health-effects of processed and treated food, the environmental impacts of how that food is produced and delivered, and the eventual burden that health-related problems will put on our health-care system.

Today, affiliate marketing offers companies and individuals the opportunity to earn money through a referral-based system. It wields arguably the most powerful forms of marketing, word-of-mouth. Despite the plethora of new online startups that attempt to break into affiliate marketing, the most successful companies are (and will continue to be) established brick & mortar stores that capitalize on the potential of affiliate marketing through the Internet. Physical companies such as Barnes & Nobles, Safeway, Office Depot, and Best Buy already have extensive distribution systems in place. New web-based businesses have to deal with the issue of building enough capital  not only for startup costs, but also for laying in their distribution infrastructure before they can take advantage of the power of affiliate marketing.

Price is not defined by the money you pay, it is defined by what you give up in return for what you get.