It’s been said that the best things in life are free. It logically follows then that in the world of marketing, social media must be the very best thing. After all, it’s free. Isn’t it?
Your company can start a Facebook page, set up a LinkedIn profile, give your followers a place to tack up cool stuff on Pinterest, and do even more without spending even one penny. Why wouldn’t anyone take advantage of that, especially when all those other marketing channels demand so darned much money? In fact, why would you even need a marketing budget when you can use all the social media you want for nothing?
Those are pretty powerful arguments. But they neglect an important consideration that comes right out of the Economics class you took in college. The price tag on media represents only part of its economic cost. And when you consider the true cost of participating on Facebook and LinkedIn and what have you, they’re actually pretty pricey.
Confused how something that’s free could be costly? Then you need to consider how economists define “cost.” In essence, “cost” is what you give up when you decide to take a particular course of action or execute some sort of activity. One obvious cost factor is any money you spend. A cost factor that’s less obvious, but usually far more important, is what economists refer to as “opportunity cost.” That term reflects the simple fact that when you use a limited resource to do one thing, you can’t use the same resource to do something else.
For example, time is a limited resource. We get just 24 hours in each day. If we spend an hour sleeping, we can’t also spend that hour working, or jogging, or taking the kids to the playground. The things we choose not to do become the opportunity costs of the choices we make.
Suppose your time is worth $120 an hour when you perform work that you can bill to your clients. After you arrived at work this morning, you remembered that you were supposed to stop and fill up the gas tank. So you head out and drive past three stations to reach the one that’s selling Regular Unleaded for a nickel less than everyone else. It took you 15 minutes to get there and 15 minutes to get back, and you bought 15 gallons. Your smart shopping saved you 75 cents.
Or did it? Assuming that you’re an honest person, you couldn’t bill any clients for that half-hour drive. So you missed out on $60 in potential revenue. That means the opportunity cost of your decision to choose the cheaper gas station was $59.25.
Let’s apply the same concept to social media. Suppose you earn $75,000 at a full-time job or from a full-time business. That means you’re making roughly $37.50 for every hour you work (based on the 2,000 hours and 300 workdays that are normal for a full-time job). If you’re in some kind of sales role, that means you need to generate enough revenue on average each hour to cover that $37.50 an hour plus any overhead costs.
And let’s say that you spend just one hour of each workday posting to or checking on your company’s Facebook and LinkedIn pages. That adds up to 300 hours per year. At your $37.50 an hour rate, you’ve effectively “invested” $11,250 a year in those “free” social media sites. If we’re being honest and you really spend closer to two hours seeing who liked your posts and watching funny videos about hamsters eating burritos, that investment becomes $22,500.
Now, that doesn’t mean your investment is inherently a bad one. If you can prove that your social media activity has allowed you to generate an additional $22,500 of revenue this year, congratulations! You’ve managed to break even. But I’ll wager that you have no idea how much business you can attribute to all those hours.
How much revenue would you have generated if you spent those 600 hours by pursuing activities that would have actually generated revenue — things like sales calls, or romancing current customers? The difference between that number and your $22,500 “outlay” is your opportunity cost.
How much time and attention do your employees devote to that “free” social media? How much business does it really generate for you? If they weren’t spending all those hours online, how would they be using their time?
Still convinced that social media is the bargain of the century?