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 constant: $5,000
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 per lead
And your new cost per lead is: $17.66

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% (entirely possible).

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).