What are the types of situations (or examples) of when a small, resource strapped company should divert resources from other areas (product development, email newsletter) to Facebook? Some general examples that come to mind:
I can't think of examples of the above for my company but maybe someone else can provide examples.
Social Media marketing is all the rage. (I'm talking about building up your "friends"/followers organically, not paid advertising.) However, of all the small companies (<5 employees, < $500K in annual sales) I've talked to, none have had success with it.
Clarifying update :
Firstly, I would argue that an email newsletter is social media marketing. The two options you present shouldn't be mutually exclusive.
The reason that you have noticed that small companies have not had success with it is because they are assuming "success" means that having an online social networking presence will gain them customers and orders.
From what I have found in my line of work, simply outputting content (as you would in an email newsletter) via a social network has almost a negative effect on sales. Nobody wants to have newsletters served to them on Facebook.
But using social media is very effective when you engage your customers' social side, which is something that email newsletters cannot achieve.
How you are going to achieve this is not going to be easy to sum up in a single post - that's why there are companies who's sole business is offering this as a service. I can however recommend a really good book: