The Real Cost Of Free Stuff

Social Media Give-Away Cost Dynamics

Social Media give-awayFree stuff is free—right?

Not if you’re the marketer.

At Social Media Week NYC’s Tackling the Great Consumer Attention Deficit panel, an example of a social media give away campaign was shared. Respondents were offered a “Free sample.”

They ran the social media campaign based on the assumption that a sample cost $1.00. After campaign concluded, they discovered that the true cost of the sample was about $7.00 per prospect.

YIKES! That’s a BIG difference in expense. Now multiply that $6.00 increase by the total number of samples sent.

Why did the sample cost so much more than they expected?

Most likely, they overlooked many of social media’s hidden costs. Also, like many marketers, they ONLY considered the sample cost. They didn’t understand social media give-away cost dynamics.

As a result, they neglected to factor in the cost of the fulfillment (that is getting the sample to the prospects), related marketing expense (such as the enclosed message), and the cost of postage.

As the veteran of many promotions for a variety of different types of products and services, here’s how to determine the real cost of your social media give-away (aka: free stuff).

For most businesses, the aim of giving prospects and customers free stuff is to encourage future sales. Therefore, you don’t want to give them so much of your product that they don’t need to buy from you for a while.

Note, I’m not talking about sweepstakes. They’re a special free give-away that involve a lot of complex rules.

Social media give-away cost dynamics

To ensure that you don’t blow your budget, follow these 7 steps to understand your social media give-away cost dynamics,

1. Determine what you want your social media give-away to achieve.

  • Get people to test your product. This is important with expensive and high risk products.
  • Expand sales from existing customers. The objective is to get your current customers to buy other products from your organization. This can be easy and less expensive since you can do a “free product inside” offer.
  • Increase average order size. Entice customers to stock up by offering a free gift with purchase for sales above a set amount. This is very popular for beauty products.

2. Decide what product to give away.

Put yourself in your customers’ shoes. Offer them a product that has value to them, not you! It must be related and enticing. Once I was asked to entice buyers of mystery books with small kitchen items, not exactly what they were looking for!

3. Target your audience for your give-away properly.

  • Know the people you want to reach and motivate to take future actions. This means create a marketing persona so that you understand them.
  • Estimate how many people you plan to reach. This is a critical element. You need to be able to offer enough give-aways to reach the people who want it. BUT you don’t want to over deliver.

4. Understand your social media give-away cost dynamics.

While the word cost is enough to send many marketers under the nearest desk for cover, the reality is that it’s just basic arithmetic that you learned in grade school. (Here’s a fuller description of marketing costs.)

What you need to know:

  • Unit cost of the give away
  • Unit cost of fulfillment (getting it out of your company’s warehouse)
  • Unit cost of postage (or other form of delivery)
  • Unit cost of related marketing (your messaging and branding)
  • Total units given away

The costs can be given per unit or for the total amount of give-aways.

If the costs are per unit, then for each type of cost, you must multiply the cost by the number of give-aways. The total cost is calculated by getting the total cost for each type of cost. Then you add all of the costs together to get the fully loaded total cost.

5. Make it easy for give-away recipients to order more stuff from you.

Don’t assume that what’s obvious to you in terms of purchasing makes sense to your customers.

  • Incorporate your branding and a call-to-action.
  • Include an order form, 800 number and URL.
  • Sweeten the deal by adding a coupon for future purchase. The benefit is that most people don’t redeem them.

6. Create a conversion plan for the people you send free stuff.

  • Have a lead nurturing or sales plan ready to follow up with prospects before you start your social media give-away campaign. This should correspond with your objectives for the campaign.
  • Test the different variables in your offer.

7. Measure your results.

  • Think beyond increasing social media cred in terms of likes and tweets.
  • Track these new members of your housefile to determine results over their lifetime of purchasing from you. Include the number of people added to your housefile, the amount of sales and the increase in average order size.

While “Free” is a great word for enticing prospects and customers, it’s rarely free for marketers. Make sure that you do your math before you make an offer your prospects may refuse.

What has your experience been with free give-aways?

Happy Marketing,
Heidi Cohen



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