Are you as tired as I am of hearing that social media is a great, free way to promote a business?  It’s great, but social media isn’t free.

For a social media marketing campaign you need people, time, and technology – all limited, non-renewable resources that require a hard dollar investment.

Of course, there’s a 100% overlap between the marketing budget and the resources that generate nearly all of a company’s revenue.  Think about the things you need to drive sales:  people, digital/online marketing, advertising, call center(s), IT (software, hardware, bandwidth, support), marketing (collateral, email, creative), sales, PR, events (webinars, trade shows, conferences) , accounting/compliance/legal.

Aren’t the major marketing cost silos for your company the same as the tools and processes you use to generate new business and revenue? The only things missing are your inventory and product costs, right?

Once we get past the hurdle of explaining to management why social media isn’t free, the next question is, “Where do I get the money to fund my social media plan for 2012?” (It’s almost a given that it isn’t going to magically appear — to fund new initiatives, chances are you’ll have to spend less somewhere else.)

The answer to that question differs from company to company, but it seems to me that it comes from two primary areas: cost reduction and revenue generation.

Where can social media help to cut costs? For many companies, it’s in customer service and business intelligence or market research. (Solving customer service issues through online interaction, especially by local managers and agents, brokers or channel partners, is the #1 area where companies are finding savings, although a good multi-channel distributed marketing automation system may be the best place to cut costs in large marketing organizations.)

On the revenue side, top managers want to know whether new spending will result in more transactions, more new customers, increased customer loyalty, and higher revenue. Unfortunately, that’s where many social media experts run into a brick wall. They understand how to measure the non-financial impact of social media (website visitors, click-through, impressions, delivered emails, Facebook friends, Twitter followers, social mentions, etc.) but seem clueless when it comes to defining the financial impact of social media.

It’s not likely that you’ll get a social media marketing budget approved unless you build a business case for spending using the metrics that matter to top management. The truth is that business executives don’t care about website visitors, Google Analytics, Twitter followers, and the number of Facebook or Google+ friends a campaign generates.

Instead, go back to Business 101, and look at changes in company revenue that can be attributed directly to social media.  The mathematics geniuses behind marketing metrics call it transactional precursors – what happened, when did it happen, and exactly how did it affect revenue.

The key is to isolate the factors that are affecting revenue, and demonstrate the patterns clearly.  There are dozens of free and paid calculators online that can help — some of them are simple Excel spreadsheets, and others are more sophisticated.  What they have in common is a way of organizing and presenting the data in ways that make sense to top management.

If you’re putting together your first social media budget plan for 2012, check out several calculators to find the one that works best for you.

Cartoon credit: The amazing Geek & Poke blog is filled with cartoons sure to have anyone interested in technology laughing out loud. The cartoon above is used under a Creative Commons license.