Facebook freebies can build a strong customer base

(Editor’s note: Brendan McManus is co-founder of Startup Digest. He submitted this story to VentureBeat.)
By now, you’ve probably heard from so many social media evangelists that you roll your eyes when the topic comes up. Can’t blame you.
The thing is: Social media can beneficial for startups – but the different between being a slight help and a real game changer comes down to a few things.
Here are 5 steps I’ve learned over the years that your sales and marketing team needs to follow to see a real boost from Facebook and Twitter.
Step 1) Start with what you’ve got - Social media is not your channel to reach new customers; it’s their channel to find you through their friends who already know you. It doesn’t matter if you’re Starbucks or Buck’s Star Cleaners, your business has a core group of family, friends, and fans that make up your current customer base. You wouldn’t be in business if you didn’t.
Don’t try to simultaneously convince new people to like you and make a purchase. That’s insanely hard to do, as evidenced by the microscopic conversion rates of new users to buyers from even the most-well-targeted advertising sources. Instead, incentivize your current customers to introduce your business to new ones.
Step 2) Free stuff = incentives - Social media makes it faster, cheaper, and easier than any other marketing channel to leverage the Rule of Reciprocity.
When you do a small, unsolicited favor for a potential customer, they feel an obligation to repay you. It’s the Rule of Reciprocity, and effectively leveraging it is a proven sales method. Before Facebook and Twitter, it was impossible for you to scalably give to your customers. Giving things away for free helped sell more, but it cost too much and there was no way for current customers to get their friends involved.  Not anymore.
Step 3) Group freebies > individual freebies - If you give something away that benefits only one person, no one has any reason to tell anyone else about it. If they did, they would lower their own chances of winning. Instead, think about offering something that benefits a winner and a few of their friends.
A great example would be to give away tickets for 4 to the next Lady Gaga concert. It’s a group prize, one that rewards a winner and the 3 friends he or she coverts to join the promotion. Additionally, it incentivizes entering the giveaway, sending invitations to friends – and friends actually accepting them.
I’ve found that requiring an entrant to convert one to three friends works best because it forces participants to choose among their friends instead of blindly inviting all of them. When you make people choose, you make them care. This means that your current fans will actually care about whether or not their best friends discover your business.
Step 4) Follow-up properly after the giveaway - Everyone who participated in your giveaway just received an unsolicited favor from you. This fact makes them much more likely to do something for you (i.e. convert to a sale) than anyone else on your mailing list – so don’t just dump them into that list. Rather, send them each a personal message with a single call to action. (Too many companies insist leads do multiple things in their follow-up emails.)
Here’s a real case study: 99designs ran a $1,000 design package sweepstakes with my company, Startup Digest, back in December.
291 people participated in the contest. Non-winners were invited to create new accounts at 99designs.com and offered $20 off of their first project. Over 100 of those people created new accounts and 10 purchased new projects, which covered the cost of the promotion.
Remember, 99 designs is a small business and a design project is a product which people need rarely and only at very specific times. What if you were selling coffee, hotel rooms, or fast food? How would a roughly 3 percent sales conversion rate compare to your current display advertising numbers?
Step 5) Be consistently generous to current customers - Social media is a reflection of the real world; those who give the most value will get the most in return.
One of the best big splash examples is Edible Arrangements, which gave away a free six-pack of chocolate covered strawberries to anyone who became a fan.  It was the perfect approach because it was simple and uniquely interesting to both their current customers and target potential customers.
The Edible Arrangements Facebook Fan count jumped from 8,000 to 55,000+ in 36 hours and now stands at over 181,000.
Understandably, most startups can’t afford to give something special away to everyone, but running a regular, simple sweepstakes instead can be just as effective. Giving to your current customers on a regular basis will create more incentive for them to give back to you – in the form of sales and referrals.
Consistency builds trust, and trust builds loyalty.
(Image by erin m via Flickr)
Tags: Facebook, marketing