For so many entrepreneurs, the idea of giving away something for free sounds antithetical to good business.

But it can actually prove a smart strategy, especially for companies looking to strengthen their online presence.

There are a couple different reasons why giveaways make good sense. The key is making sure that, one, the initiative is cost effective and, two, that you’ve got a solid plan for capitalizing on the influx of information headed your way.

The idea behind the freebie is simple - expand your reach and possibly garner new customers who enjoy your offering, all in a no-pressure environment. In the world of online marketing, it’s also an excellent opportunity to build up your databases with new email addresses, websites, blogs and demographic information (although there’s only so much you can infer about your users from free and anonymous registration).

So, in effect, you’re not giving away something for nothing. You’re getting information in return, which you, in turn, can use to further expand your reach.

Also, make sure to take the time to specifically target bloggers related to your industry or who would be interested in your giveaway. Giving free stuff to people with a following is always a good idea. It’s human nature - we’re more apt to say nice things about someone who’s given us a free goodie.

Along with attracting new consumers, giveaways are also beneficial when it comes to retaining existing customers. Providing a tool, a service or a simple mindless gift for those long-time, trusted consumers is an easy way of saying thanks, as well as a great indication to fledgling and prospective customers that you offer more than a commodity.

These are avenues for strengthening identity and instilling loyalty.