If you think crowdfunding is as simple as posting your project on Kickstarter, Indiegogo or other similar platforms and surpassing your fund goals in just a few days, think again!
Crowdfunding platforms are not magical cash machines—you probably know that, I hope. Successful campaigns take a lot of preparation, constant engagement from your team, marketing know-how, project management skills and a whole lot more.
The reality is, 62.54% of all 284,739 projects on Kickstarter are rejected, and never see the light of day, according to the Kickstarter’s statistics page in February, 2016. Of all unsuccessful projects, 109,301, or 61.38% of projects, were not able to surpass 20% of total funding requested.
And did you know that 40,772 projects, or about 14% of all projects, were not able to attract a single dollar in pledges – they raised precisely $0. These people couldn’t get ANYONE to kick in a single dollar! We’d like for that not to happen to you.
While crowdfunding is a terrific way to fund a product, it is no cakewalk. But don’t be afraid. It’s not all a matter of luck. The skill of running a campaign can be mastered. You’ve just got to have your ducks lined up in a row in the following ways.
1. Mass Market Opportunity
“Everyone will buy this product!” This arrogant thought underscores an all too common fallacy in the world of entrepreneurs: confirmation bias. Yet, when you check your online reviews, your customers complain about unmet expectations or lackluster idea. Those negative comments feel like a gut kick — as if your customers have just said this:
Your Baby is Ugly.
Ouch. No one wants to hear it. I know, it’s cruel. But it is what it is. Entrepreneurs need to ensure there is a need for their “baby”, instead of blatantly blaming the masses of being ignorant just because they don’t appreciate your baby. There is clearly a gap between what we think people want and what they really want. It is crucial to understand what it is people need as the basis of a product rather than an idea as the basis of the product; a great idea but a useless product, so that you are wasting time nursing an ugly baby.
Here are some questions you should ask when you pull a product off Kickstarter/Indiegogo:
Does your product have mass-market appeal? Does it have the ability to move a consumer when they are at the walk/buy position – “I WANT THAT!” Does your product reach the widest possible market through a variety of demographics? This may seem really simple but often we unconsciously place obstacles in our own path. Just think, by making a product for a single gender you have already minus your market in half, unless you find a way to make it appealing to the other gender. In the end, it all comes down to the creative thinking process and your ability to spin the uses of the product in order to generate high levels of interest.
Do the “problems” need to resonate with everyone?
When considering your innovative product, does your idea have to appeal to 100% of the population?
The answer is no.
But it does have to appeal to the majority of members of a target market. Just think, if you could reach one percent of the Chinese population, you’d have over 10 million customers.
In fact, your target market can be large or niche in nature. When someone advise you that your idea is not a “mass market item” and hope you to could find ways to widen your audience, it does not mean you have to figure out a way to make a women’s beauty accessories appeal to men. It simply means you need to find ways to adjust your product to meet a significant need of a core demographic group. This core demographic group also needs to be large enough in order to generate enough revenue to be profitable. Henry Ford realized this when he created the Model T. Before him, the automobile was a niche product for the wealthy. Ford developed a vehicle that was accessible to all and made millions. A product that only appeals to a very niche market, such as powdered instant yogurt, does not have mass market appeal because of the wide availability of fresh yogurt.
In a nutshell, before you jump on your next idea, ask yourself these questions: First, “Who is my target audience?” Then, “Will my product appeal to everyone in this group?” And finally, “Is this group big enough for my project to be worthwhile?”
2. Product Differentiation
Imagine a customer is leaving a grocery store and choosing between calling an Uber or a cab. He knows he can get home with either choice, but he’s still faced with a decision. Should he call an Uber or opt for a regular cab instead?
Both Uber and cab drivers work hard to differentiate their products so that the user’s choice is easy. They want users to make a choice without second thought.
As you grow your business, you want to make sure you’re differentiating from the pack so that customers choose you over competitors again and again. In fact, experts project that companies with truly differentiated offerings have an 80 percent chance of long-term success, whereas businesses with ‘me-too’ customer perceptions have only a 20 percent chance. Ultimately, you want to create a product that stands out from the crowd that your customers don’t see your competitors as viable options.
What will cause customers to buy from you rather than your competitors? The answer is to meet these three critical areas:
- Define a unique selling proposition (USP), and keep it simple. Think about how you can improve the experience for your customer. Ask yourself:
- What problem does our product solve?
- How is our offering an advantage for the customer?
(Image credit: https://www.kickstarter.com/projects/2106691934/blocks-the-worlds-first-modular-smartwatch/description)
A good example is BLOCKS, the world’s first modular smartwatch, which is tailored to the users’ needs. The wearable has raised $1.6m during its modular smartwatch Kickstarter campaign with a total of 5063 backers.
- Flaunt your difference. When you are different, make sure you tell the world about it. It doesn’t do you any good to be different, if your customers can’t perceive the difference. The days are gone for the “if we build it, they will come” mentality. Marketing and target customer relationships are always required, no matter how obvious the differentiation is to you.
(Image credit: https://www.indiegogo.com/projects/mvmt-watches-affordable-stylish-high-quality-watches-59#)
So how did Jake Kassan, founder of MVMT Watches, raise 1,446% above his goal? He showcased his affordable yet very stylish MVMT model and described the insane markup of luxury watches to show that his watches are different than every other watch on the market.
- Be specific and concrete. If you’ve got numbers, flaunt it. Fuzzy marketing buzzwords like easier to use, lower cost, and higher quality might seem a little clichéd, and they are not effective differentiators. Instead, real data and testimonials say it best, such as get it done in half the time, or half the cost.
(Image credit: https://www.kickstarter.com/projects/powerpractical/the-pronto-fast-charge-battery)
A good example is the Pronto, a fast-charge battery pack, claiming to charge up to 12X faster than other batteries on the market today..
3. Effective Rewards Pricing
Having heard too many horror stories about Kickstarter reward costs running wildly over budget, it’s important that you have priced your products correctly.
Price your product too high and you’ll be scaring away potential backers. Price it too low and you may struggle to make a profit.
The simplest way to decide on pricing is to add up all your cost to procure your item from your supplier, pick a suitable profit margin and add this amount on top. But, in reality there’s more to it.
The environment you provide and your product selection, along with many other factors, determine the price you can get. Think about the kind of backers you want to attract. Do you want to cater for a small group of high-paying customers, or offer a low-cost product with mass appeal?
Also think about how your pricing positions you in the market, and who your most direct competitors will be. Dr. Tim J. Smith, managing partner at Wiglaf Pricing and author of Pricing Strategy, urges entrepreneurs to ask these three important questions:
- Who are my competitors?
- Is my product better or worse?
- Does the customer care?
If your product is better than your competitors, your price should be slightly higher. If yours isn’t as good, you should price downwards,” he says. Once you’ve figured out these questions, you should have a range of prices. A lot of backers on crowdfunding campaigns are early adopters that love backing innovative products with spare change to help them make decisions quickly. So if you make products that solve problems for mass consumer and priced just right, you will attract more backers instantly.
If you target backers who value your product the most and charge a premium price, you’ll be making greater profit margin but lower sales. If you use lower price to capture the mass market, you’ll be making less per transaction but selling a lot more units. So, it’s best to segment the market and give backers a choice by offering different levels of products at different price points
According to Kickstarter’s Creator Handbook, the most popular pledge amount is $25. Even if your product is expensive, it’s important to create at least one reward for less than $20. Projects without a reward of $20 or less succeed only 28% of the time, while projects with a reward of $20 or less succeeds 45% percent of the time.
Above all, price your rewards fairly and make sure you’ll be able to fulfill them after your project is successfully funded.
Consider making the pledge cost less than the MSRP of the product. It’s a nice way of thanking your backers for their early support and it will encourage more pledging. In Coolest Cooler’s case, the default pledge amount to receive a cooler was only $165, whereas the planned retail price is 300.
Case Study: Coolest Cooler
(Image credit: http://www.digitaltrends.com/home-theater/coolest-cooler-most-successful-kickstarter-campaign-ever)
At more than $13 million in funding in exchange for around 60,000 coolers, the Coolest remains the second highest-grossing Kickstarter campaign in the crowdfunding sites’ history behind the Pebble Time smartwatch. Below are lessons in rewards from Coolest’s campaign:
·Create Momentum with an Early Bird Reward
Coolest created a sense of urgency at the beginning of their campaign by offering a limited number of their cooler for just $165, instead of the retail price of more than $300 later on.
Since this reward was only available to the first 50 backers, it quickly “flew off the shelf.” The campaign quickly went viral, because people are more likely to talk about a purchase when they see it as a deal and because they want their friends to get the early-bird discount too.
·Encourage Bulk Buying
Offering multiples of your product is a good way to make some high-value rewards and start taking bigger bites out of your funding goal.
Coolest offered rewards that offered discounts for people who wanted more than one cooler: ten for $1,750.
Believe it or not, they had 304 backers of the 10 Coolest Cooler set. So they were able to surpass their Kickstarter campaign goal by ten times.
·Offer Limited & Personalized Rewards
Coolest offered a two 30-minute phone/Skype/meeting sessions to the first 30 backers willing to donate $500 to their campaign. Even at that high-price point, all 30 of the available seats sold out.
Some backers will be looking for rewards that set make them feel special. Give them a reason to pledge by making a limited number of unique, creative, or potentially collectible rewards.
·Offer a less-than-$20 Option
Coolest created a reward for a pledge of just $5 for the backers who just wanted to help out. Here’s the text from the reward:
“THANKS FOREVER: Your help at any level brings the COOLEST one step closer to a beach near you. For all backers at ALL levels I’ll write your name on my very own COOLEST so I can thank you every time I use it, and I’ll keep you informed with all the COOLEST updates.”
This $5 reward attracted 1,078 backers. Not only is that an a few thousand dollars in the bank for Coolest, they just built a healthy and well-qualified email list through Kickstarter.
·Budget for International Shipping Costs
You should factor the price of shipping the rewards into price point. Keep in mind that Kickstarter is a global platform with backers from all over the world. It is definitely expensive to do international shipping, but most often half of the backers live outside of the country.
Coolest concluded their rewards for international backers with shipping information:
“I’d love to send COOLEST coolers all over the world, but shipping these large boxes is pricey. We can ship to most of EU and Canada for this price, but if it’s substantially more than $100 bucks you may need to pay additional shipping.”
We know exactly how much hard work it takes to make your dreams a reality. Make sure your campaign has these three principles, and you’re well on your way!
Is there something missing from the list? I’d love to hear your thoughts!
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