How do you handle free offers or lead magnets with variable costs?

Question

Freebies are always a great way to attract people to your paid offer and traditionally they are of marginal cost at most - a newsletter series/mini-course, downloadable PDF or video link.

However, lately I've seen free generative AI offers, either text or image generation, which all have a non-trivial cost associated.  A Dalle3 image generated through the API is about $0.04, for example.

If thousands of people use this, it could start to add up.  Assuming people sign up for the paid app, it's a good marketing expense.

On the other hand, a capped free tier in your app could at least be slightly more predictable in cost where the free tool basically has no predictive nature... you could have thousands per day using the free app, generate their images and cost you hundreds or even thousands per day.

So, how is this risk managed?  Has anyone had good success with using a higher cost free lead magnet vs. the typical downloadable?

Anthony Latona · Accepted Answer

@richard_powell1 Freebies and free tools definitely work.  It's low-cost and manageable as a downloadable but when there is a seemingly unlimited cost when people use it, I'm wondering how people handle that.

For instance, if someone made a free AI linkedin headline generator or an AI logo generator and anyone can come use it as much as they want - and it goes viral - that could have a high unexpected cost associated with the marketing tool.

A assume that they either have to put in a cap, either daily or with authentication OR have a great funnel to turn enough of those users into buyers to justify the marketing expense of the free tool.

Answer

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