The Hidden Cost of “Free” Marketing

People love a good deal and spending as little as possible in exchange for goods and services. It’s why consumers flock to sales promotions and bonuses. But when it comes to promoting your products, what is actually going to provide your business with the best outcomes? Is the pursuit of ‘free’ marketing actually resulting in us spending more in the long term? Let’s dive in and look at the hidden costs of ‘free’ marketing techniques.

How free is free?

Let’s start by defining free.
Many people consider ‘free’ marketing to be when you’re not paying directly for a marketing service, be that someone managing your social media accounts, paying for online advertising, or printing flyers.

‘Free’ marketing techniques are incredibly diverse. They range from penning articles and curating Instagram to offering free upgrades on products and services.

It is, however, important to consider the hidden costs of these ‘free’ techniques. There are often many hidden costs that occur either indirectly or are absorbed by the business. It’s rare that these are taken into consideration when comparing the upfront cost of engaging ‘paid’ marketing techniques.

Example:
You’re an ice cream shop. You’re trying to get more people in the door so you decide to offer a free single scoop kids scoop with every adult double scoop purchase. You put the offer up on your social media accounts and wait for the customers to come in to claim. You get a solid response and have increased takings at the end of the day, all for no marketing spend, score! But when you look over your inventory, you find that because of the inventory cost of your promotion, the upswing in sales has actually only provided a marginal boost to your profits, but some improvement is better than nothing, right?

Right. But let’s continue with our ice cream shop example. Let’s say you forfeited $400 worth of product in exchange for a $600 boost to sales, that leaves you with a $200 profit. When analysing the effectiveness of your marketing, looking at return on investment (ROI) is key. Are you confident that you couldn’t have gotten better results from your marketing activities if you’d engaged in a different form of paid advertising, as opposed to the ‘free’ marketing that cost you $400?

In addition to inventory costs, it’s worth taking into account the value of your time and how much of it was spent in arranging the promotion, if you value your time at $40 per hour and you spent four hours designing up a graphic and posting it online, have you taken that $160 spend into account? All up, a ‘free’ technique has cost your business $560 to execute in exchange for a $200 boost to profits. By engaging in a different mix of marketing, could this result have been improved? Are you getting the most value for your money? Or are you being seduced by a seemingly reduced price tag?

The purpose of this example is to illustrate the importance of considering the different ways costs can be accrued in a marketing activity. That isn’t to say there is no such thing as free marketing. Authentic free marketing is typically what is known as ‘earned media’. Earned media occurs when the activities of a business (promotional or otherwise) result in other businesses or consumers sharing a business. This can take the form of a news article about the launch of a new business or a review by an online influencer who visited. The condition is that there was no direct payment in exchange for the media.

At Bento Box Design Studio, we understand the importance of ensuring that their marketing activities form a part of an integrated mix. When different marketing techniques are used in conjunction in the right way, paid and organic, it is possible to turbocharge the individual effects of each technique, providing an ROI of which none would have been singularly capable.