Although it may seem
counterintuitive, giving something away at no charge can
lower your cost per lead. That’s because offering a
freebie usually increases your response rate.
Here’s an example of what I mean.
Your cost per lead is the money you must spend to acquire
one lead. When you mail 10,000 strangers at a cost of
$0.50 each ($5,000), and get a response rate of 1% (100
leads), then your cost per lead is $50 ($5,000 in cost
divided by 100 leads).
Now let’s say you offer a free information booklet. The
booklet costs $1 but offering it increases your response
rate from 1% to 3%. Here is what happens:
- Your cost of mailing remains
- Your response rate increases: 3%
- So your number of leads
increases: 300 leads
- Your cost per lead drops: $16.66
($5,000 divided by 300)
- Add the cost of your freebie: $1
- And your new cost per lead is:
So you see that, by offering a
freebie that costs you $1 extra for each lead you
generate, you almost cut your cost per lead in half, even
though your total costs increase. That’s because your $1
freebie tripled your response rate, from 1% to 3%
By the way, if you want to reduce the number of “freebie
collectors” that you attract, link your freebie with
what you are selling (a free lawn analysis, for example)
rather than offering something that just about everyone
would want for free (an AM/FM radio, for example).