Interesting article by Patricio Robles over at econsultancy suggesting that using social media as a channel for running price promotions is lazy marketing that often makes little business sense, and that can ultimately undermine brands and destroy customer loyalty.

For example, it’s easy to sell or give away free products on Facebook, just as Jet Blue and Virgin, the darling brands of the air industry, have done with $10 and 50% promotional flights advertised on Facebook and Twitter.  And it’s all to easy to justify selling at a loss in social media by appealing to the PR/media value that the campaign generates.  Patricio’s big gripe is that using price promotions in social media as a customer acquisition tactic undermines the potential of price promotions in customer retention as part of a customer loyalty strategy.

And pitching into the debate is Yvonne Gando of PowerReviews highlighting an alternative to brand-eroding price promotions; Design-A-Bikini contest by Roxy/Schick, where visitors get to submit and vote on user-generated bikini designs – with the winning design going into production, and a $5000 prize for the winner.  The contest stimulates brand interaction, creating brand involvement, a driver of loyalty.  No price promotions in sight.

Of course, at one level Patricio and Yvonne are right, it makes little sense to reward non-customer promotional junkies with price promotions.  Smart promotions should focus on building loyalty and lifetime value of existing profitable customers who are your most valuable asset.

But here’s the thing. Patricio’s criticism is a comment on price promotions in general not social media promotions in particular.  Look at at mobile phone industry – new customers regularly get the best deals, rewarding professional switchers over existing profitable customers.  Likewise in the ailing magazine industry, new subscribers get introductory deals and pay less than profitable subscribers who already pay their dues. Sure it’s marketing madness, but it’s an industry-wide reality of marketing that is pre-occupied with customer acquisition rather than customer retention. Just compare how much brands spend on advertising campaigns to woo new customers, compared to how much they invest in CRM and loyalty programs.

Of course, just because everybody is doing it, doesn’t make it right.  But here’s the justification for price promotions in social media.

First, price promotions in social media make sense because price promotions are what people want in social media – not involvement, engagement or friendship  – they want exclusive discounts and deals.  Customers are not always right, but if you don’t give them what they want they’ll probably stop listening to you.

Secondly, price promotions make sense for social media marketers because they facilitate ROI calculations precisely because the campaign is engineered to result in purchase.  So called ‘engagement’ campaigns that use contests, quizzes etc, but with no link to a cash register – are virtually impossible to measure in terms of ROI (remember ROI is a financial measure).  If social media ROI is what you’re looking for – price promotions are your solution.

Finally, and for us this is the killer, price promotions make sense in social media because social media is ultimately a word of mouth platform – and we know that word of mouth is overwhelmingly a consequence of product experience (specifically 70% of word of mouth is triggered by a product experience that either beats or misses expectations). Therefore social media marketing that makes sense is social media marketing that boosts product experience, and encourages people to share them. Price promotions do just that. They get products into the hands of people, and getting into peoples’ hands is the prerequisite to getting on their lips.

Nonetheless we do agree with the underlying vision of Patricio; the profitable home of social media in marketing, in addition to improving the online shopping experience, may lie in customer retention – CRM and loyalty programs rather than customer acquisition through advertising and promotion (see Patricio’s 5W’s of Loyalty Marketing).  Why? Because it costs far less to grow a customer that win a new one, and activating the referral potential of existing customers is the most effective customer acquisition strategy you’ll ever have.

Just don’t throw social media price promotions out as an acquisition tool – social media price promotions are effectively smart sampling campaigns – where the customer pays for the sample.  And that can’t be bad.