Crowdfunding was one of the most talked about topics in 2013, and with good reason.
In a collaborative economy, crowdfunding has helped hundreds of thousands around the world realise their vision – from artists looking for investors to bankroll their next work, teachers seeking materials for classrooms to entrepreneurs trying to secure startup capital for a new venture. Dreams have been given wings by way of funding and customer confidence.
The Crowdfunding Industry Report had projected the market to grow from $2.7 billion in 2012 to $5.1 billion in 2013. The fact that big brands such as Philip’s, Dominos, Hyundai and Warner Brothers have run crowdfunding campaigns is further reiteration of the strength of this space.
A Forbes article breaks down crowdfunding into two types: donation based (the birth of crowdfunding) and the more recent one of investment crowdfunding. It is the latter model that has been changing the shape of businesses of all sizes. And, in an economy that is getting more collaborative every day, investment crowdfunding will be the way forward.
Much has been written on how to crowdfund a campaign, but I’d like to focus on the marketing benefits of a crowdfunding campaign to entrepreneurs, businesses and brands at large.
Amongst the many crowdfunding success stories is the soon to be made movie Veronica Mars, based on the popular TV series of the same name that was cancelled in 2007. The producers of the film went to fans and supporters to get funding. They raised $5.7 million (against a target of $2 million) from 91,585 people. That’s 91,585 brand ambassadors who have engaged with the film before it has been produced! It is that many people who might have shared information via their digital platforms and word-of-mouth; extending the brand beyond its initial target. And, at least, that many people who will pay to watch the movie when it comes out.
Traditionally, businesses have engaged with customers after the product or service is ready to market. Crowdfunding has turned this theory on its head by giving businesses, artists, entrepreneurs and brands the ability to market directly to customers well before it launches. And, as crowdfunding is a pull strategy rather than push, it ensures an avid interest and engagement from customers – giving entrepreneurs sales confidence in their product or service.
Pre-plan your strategy
Businesses and entrepreneurs considering crowdfunding should be prepared to tackle marketing, customer loyalty and engagement strategies well in advance of product or service launch. If you have 91,585 people engaging with your brand, how will you communicate with them? What data capture and management systems do you have in place to consistently communicate with people engaging with your brand and how are you rewarding their loyalty?
Herein lies the beauty of social media and digital technologies. The wide acceptance of social media platforms has translated to a substantial number of businesses choosing Facebook, WordPress, Twitter, Pinterest, LinkedIn, Instagram and Google+ over CRM, market research and data management systems.
While large companies will continue to spend on traditional market research and product development, crowdfunding is a good alternative for small to medium sized businesses with budget constraints. Social media platforms are also pivotal in creating brand advocates who can assist in ongoing product/service development.
The other marketing benefit of crowdfunding is campaign flexibility. Crowdfunded campaigns can be adapted, scaled and changed almost real time depending on the feedback from funding public. For example, if people engage more on Twitter than Facebook, you know that’s where your core target audience lies. Accordingly, you can allocate time and budgets into building a relevant content calendar.
Crowdfunding also acts as a strong market research tool by giving entrepreneurs the ability to accurately assess demand. If people are not interested in paying even $1 towards funding, entrepreneurs need to question the validity of the product or service and its ability to sell. That’s thousands of dollars of marketing (and product development) dollars saved right there. Alternatively, if the product or service has strong demand, it creates conversation starters for strategy partnerships and acquisition opportunities. The end results are always the same – lower market research costs and in turn, mitigation of risks.
One of the main reasons crowdfunding has become so successful is because we as humans like to associate with like minded people and form communities. In the past, marketers and sales people would try to identify these communities and categorise them demographically or pyschographically. Now, social media and digital technologies enable quicker access to these communities through a more direct channel of communication. Crowdfunding provides a pathway to do so while generating much needed funds for the business.
As Rob Thomas, producer of Veronica Mars said, everyone should give crowdfunding a shot, regardless of their personal wealth.
Quick tips for anyone considering crowdfunding:
- Research and prepare for your campaign.
- Have engaging content that shows your brand or product’s personality.
- Engage participants and supporters throughout the campaign with updates to keep the momentum going.
- Create perks that corporate brands can invest in and/or become sponsors of.
- When it comes to corporate sponsorship, think of it more as you giving the brand an opportunity to connect with thousands of people instead of you seeking funding alone.