Is Rewards-Based Crowdfunding Right For Your Business?
Frequently Asked Crowdfunding Questions by Next Chapter
"Is rewards-based crowdfunding right for me?" - This is easily the most commonly asked question we receive and it is often the topic of conversation for our first consultation meeting with potential campaigners. And while it is a good question to ask it, the answer usually relies on a few other factors.
The first and most obvious response to this is that...
It depends more on you than your business
Yes, I know, not the answer you were hoping for. A nice tidy yes/no would much more preferable. Unfortunately, it actually depends more on you and the way you set up your campaign than anything else.
There are some general rules of thumb gathered from results of thousands of crowdfunding campaigns over the past few years. And without a doubt, rewards-based crowdfunding works best for products. The campaign offers backers the product itself as the reward thus generating its first customers and building its community along the way. Voila!
However, don’t despair if you don’t have products, as with the evolution of crowdfunding, and increased awareness comes much more creativity in terms of the rewards offered to backers for their support for non-product based businesses. In fact, one of the more popular types of early crowdfunding was for creative projects such as plays, art, and albums. This method of fundraising allowed the artist more autonomy in their creation. No longer did they have to pander to producers whose aim was to sell homogenous music to the masses. They could create for their niche and themselves alone.
Businesses within any industry can ask their target market to fund their project. It is just a matter of finding and getting them to ‘invest’ in you and your business. What you offer in return, is up to you.
What kind of reward will you offer your backer?
Rewards-based crowdfunding relies on the premise that your backer gets something in return for their pledge. Yes, often it is the product itself but just because the tech and gadget world have made this a popular model, doesn’t mean it’s the only way. Of course, you’ll offer your product as a reward if you have one, but what else could you offer?
The difference in the types of crowdfunding is important to note and you can read more about that here, but they are not all that dissimilar. For example, in donation-based crowdfunding, the backer receives the ‘warm fuzzy’ feeling for supporting a good cause but also sometimes receives recognition. Bekkers and Wiepking (2010) talk about the effects of conspicuous compassion which is essentially the desire to be recognized for generosity. The backer in this case still receives something in return - the ‘warm fuzzies’ and recognition for their support. Equity and lending crowdfunding models on the other hand offer financial incentives as a reward.
So, what can you offer your backer?
If you’re a service,
Can you offer discounts on that service?
Is a membership or a club a good option to provide as rewards?
Do you have any partnerships or collaborators that you can call upon to help create tangible rewards?
If you’re a software service,
Is there special access you can provide?
Do you have an annual research report that is of high value?
What are your natural partners and how can you work with them to offer packages rewards?
If you’re a clothing line already in business,
Do you have a ‘special edition’?
What can you pair up and discount to show added value and incentive?
Who are your natural partners? If you’re a yoga clothing company are there yoga studios willing to offer backers free membership? Or maybe even a juice company is willing to include samples with your rewards?
Getting creative is a key component to creating rewards that your potential backers will find fun and of high value. Need a little inspiration? Check out this list of 96 creative reward ideas from past Kickstarter campaigns.
Finally, the most important reason it depends more on you than on your business is the answer to this question:
Are you willing to put in the work?
Taking on a crowdfunding campaign can be one of the most rewarding and exhausting things a business can do. Not only will it turbocharge your business, but it will also bring in the funds you need and help you build a community of engaged supporters. The benefits of running a crowdfunding campaign are widely documented. What is recently being published more and more is the amount of effort and planning it takes to launch, run and fund a campaign.
We recommend that campaigners start their research and pre-launch marketing anywhere from six to twelve weeks in advance of their planned campaign launch. It takes this long to learn the tactics that make campaigns successful, research your target market, implement outreach and marketing strategies, finalize your pipeline, create your campaign page, and build a list of potential supporters. It also takes commitment to your project or idea. You will likely need to invest your savings into the campaign because it’s not free to run. More and more campaigns are investing tens of thousands into the campaign itself in order to be seen amongst all the competition.
In summary, launching a crowdfunding campaign is not simple or easy but it is fun and can build an incredible foundation for your business. It also takes a creative, resourceful and dedicated individual or team to be successful. This is why it depends more on you than on your particular industry or type of business.
We'll be hosting a webinar Jan. 25 @ 11:00 am to help you learn more and to get started with your crowdfunding campaign. Register for the webinar here. Or, if you can't make that time and if you'd like to receive a video copy of the webinar, email us at [email protected].
Think you have what it takes to run a successful campaign? Get in touch now to schedule a consultation with our team. Or, begin creating your campaign now.