A while back whilst I was staying at the YMCA in Cape Town, South Africa, I had an acquaintance of mine ask me how I market my business. My response at the time, was that I had no money to pay for Facebook advertising, and was therefore not marketing the business as I had hoped. His response to that however took me aback.
He said there is no reason why I should be paying for advertising. He made it sound like that activity was beneath him. He went on to mention that one only needs to reach out to their network on social media and things start to happen.
He claimed that he had a lot of followers on Facebook, I don’t recall how many exactly, but it was an impressive figure. My friend then proceeded to offer to share my business’s Facebook page with his sizable network.
His conviction that simply sharing my business’s Facebook page to his network would find lot of clients for me got me very excited. As it turned out, after he shared the page with his network the response was, at best, disappointing.
For some reason, people seem to have this inherent shame when it comes to paying for advertising. It is very strange because it does not make sense at all. But then again, a lot of human idiosyncrasies do not make sense.
I think I have a clue however, where this shame comes from. It all boils down to the ego. The ego can get so big, that it gets in the way of growth. When someone understands the need to market their product or service, but are not prepared to pay for marketing, and only trusting that their popularity will see them through, then they are missing the point.
People think that if they spend money on advertising, then it somehow reflects badly on who they are. They want to promote their product or service, with the knowledge that they did it on their own. That is, they want to bask in the knowledge that, it is their personal gravitas that drives the engine of their success.
Whether you promote your business through your charismatic persona with the popularity you may have, or you pay for your advertising, what really matters is that you get the desired result. People tend to waste so much time concentrating on the means, when they should be paying particular attention to the ends.
Your business will not care whether you found your customers by paying someone to acquire them or you did it through your personal popularity. The only thing that matters, is that you are getting the customers needed to feed your business’ growth.
Going back to the conversation I had with my friend at the YMCA: he was probably right that his social network was impressive, but he missed two points that should be considered when making use of your social network to promote your business.
The first point is that social networks are very personal by nature. These are connections that are built around shared interests, and may not particularly be interests related to your business or someone else’s business for that matter. Naturally therefore, it means that people in your social network, are unlikely to respond favourably to business promotions they don’t feel connected to.
Social networks built around a business idea on the other hand, such as the network around a Facebook page for a business, are very different. By default, the people in those networks are already open to receiving your business oriented information.
The second point to note is the numbers issue. In order for you to leverage your personal social network to promote your business, you have to have a really large following. What people tend to miss is that, often, our friends are unlikely to be our customers, even if they are our strong supporters.
For marketing and promotion to work, it must be highly targeted. So, even if you have 5,000 friends on Facebook, you are unlikely to make an impact in your marketing efforts, because only a small proportion of those, will actually buy from you, and also because your reach on social media platforms is significantly smaller than your number of friends.
If you pay for advertising on a social media platform on the other hand, you are paying for the reach you get, and the outcome is different.
Even if I am advocating for paying for your advertising, this should not be done willy-nilly. Like I always say, it is important and in fact crucial to always measure. By putting a yardstick to your activities, you are in position to gauge your progress.
Metrics is the term that describes a system or standard of measurement. If you have a standard by which to measure your efforts and the progress arising from them, you are in a better position to strategise and make plans. How else can you make plans if you have no clue as to how far you have come?
One important metric used when paying for advertising is the Customer Acquisition Cost (CAC). The Customer Acquisition Cost, is the cost associated with convincing a customer to buy a product or service. This is the costing for all the money spent to acquire a single customer.
For example, if you spend 100 Pula on Facebook advertising, and end up having 2 qualified customers, then your CAC for your budget is 50 Pula. Simply put, a qualified customer is a customer that is a solid lead that ends up buying.
A second and also important metric is the Customer Lifetime Value (CLV). This is a prediction of the net profit attributed to the entire future relationship with a customer.
What this means is that, if you are in the business of selling airtime credit for mobile phones, and someone regularly buys airtime for 30 Pula in profits a week, and they remain your customer for a year, their CLV is 30 Pula multiplied by 52 days which comes to 1,560 Pula. This is the amount of money you are going to make for the duration of your relationship with the customer.
Going with the earlier example of spending 100 Pula on Facebook advertising to acquire a customer, with a resulting 50 Pula Customer Acquisition Cost, and saying that money was spent to to acquire the customer discussed above who goes on to bring in a profit of 30 Pula a week, that translates to 1,560 Pula a year: then clearly the 100 Pula was money well spent.
This is the secret of buying ads or spending on advertising of any kind. You should first weigh things in, to see how the Customer Acquisition Cost compares with the Customer lifetime value.
If the CAC is fairly lower than the CLV, that is a green light to spend on advertising for that particular CAC. If the CLV is higher than the CAC, then do not even try to advertise for that CAC. The idea is that, you should always be spending less in acquiring customers, than the value that customer is worth to you for the duration of your relationship with that customer.
So, putting shame and pride aside, you should look at buying and paying for advertising as a necessary part of growing your business. Growing a business is not a popularity contest that feeds your ego. Ultimately, what matters is the end result. Definitely, there should be no shame at all in paying for and buying ads.
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