February 7, 2014

How to Crowdfund in 7 Steps

Posted by Janna Leyde Category IconConversions & UX Category IconMarketing


First there was retail, and then with the rise of e-commerce came etail. Today, due to the demand for innovation, efficiency, and company-to-customer connectivity, the relatively-new division of pretail has emerged. In this new, hyper-connected field, customers can browse and buy before a product or service is even conceived, let alone available on the market. Pretail shopping is essentially crowdfunding, and it’s a 2014 e-marketer’s dream: engage a community of buyers; test a new product on a select audience; receive insta-feedback; and — potentially — increase revenue by selling something that doesn’t even exist yet.

Ten years ago, ArtistShare created the modern-day crowdfunding campaign. The company invited fans to financially contribute to artists’ projects in exchange for access to the artist’s creative process. Now, Kickstarter and IndieGoGo head up the crowdfunding and pretail industry with thousands of projects — from bots to bakeries — and millions of backers (also known as supporters or pre-consumers). Crowdfunding and the concept of pretail attracts the early adopters. This is the section of the consumer market that is naturally drawn to the idea of operating in beta. For example, Chicago-based designer Scott Wilson asked for $15,000 for his innovation (on Kickstarter), and within a month his campaign received nearly one million dollars for TikTok and LunaTik, his iPod Nano-turned watch. Today, both products sell on Amazon, in Walmart and, yes, even in Apple stores.

Be it a brand new company or an established business curious to see how a brand new product will fare, crowdfunding is a way to connect with the consumer, to build a bigger audience, and to insure that anything ranging from a leg warmer, home security system, toy robot, children’s book, pet feeder, cleaning service…you get the picture — is going to survive the e-market. To some of the early adaptors and innovators, this crowdfunding concept might seem simple stupid. But, before you (or your company) submits the next, best project to any website that will host a campaign, 2Checkout has laid out seven steps to a successful crowdfunding campaign, one that will capture an audience, welcome pretail, and boost revenue.

1. Establish Costs

Before submitting your proposal to a website and before drawing up incentives (rewards for support or pre-ordering), determine the exact cost of production, marketing, and distribution. Set a goal based on those costs, exactly — no more, no less. Asking for less runs the risk of letting down backers with a no show. Meanwhile, overshooting the goal can appear disingenuous. The good news is that crowdfunding campaigns welcome support well beyond meeting the goal. Just look at the 3Doodler campaign.

2. Keep It Simple

Create an efficient and informative elevator pitch — three sentences to address three main points. Tell potential backers (1) exactly what they are funding — a product, a service, a program, an initiative, a creative endeavor? Tell potential backers (2) exactly how their money will be spent — to the conception, the materials, the service, the design fee, the marketing efforts? Tell potential backers (3) exactly why they should contribute (these are the incentives, or as Indiegogo calls them perks) — for recognition, to pre-order, a chance to be a part of the conception, ownership?

3. Craft a Narrative

An elevator pitch is always important when it comes to sales, but when it comes to crowdfunding, a sales pitch alone won’t cut it. Here, people expect a backstory. Where did this idea come from? Why does the world need this music album, this pet collar, this 3D printer? How can they help? Once the story is straight, share it. Make a video (no more than two minutes). Answer interview questions. Write a blog post. Let the passion and enthusiasm behind the project sell itself, and people will be lined up to pre-order.

4. Know the Audience and Your Options

Not everyone has to be on Kickstarter. Sure, it might be the crowdfunding name dropped most often (same goes for Indiegogo), but do a little research to see what else is out there. Looking to fund an equity? Rock the Post. Want to build a neighborhood park? Fund Our Community. Publish a book? Pubslush. Are you a veteran? Sprigster. The more specific the crowdfunding company, the more established of an audience. Try out this map from Inc. to help navigate the where-to-host-a-campaign decision.

Courtesy Inc., http://www.inc.com/magazine/201306/eric-markowitz/how-to-choose-a-crowdfunder.html
Courtesy Inc., http://www.inc.com/magazine/201306/eric-markowitz/how-to-choose-a-crowdfunder.html
5. Share the URL

A crowdfunding campaign is entirely viral and lives within the space of one link, which makes for easy inclusion in email blasts and newsletters; a link is also easy to imbed on any website. Link, tweet, post, and ‘gram your heart out, because crowdfunding efforts rely heavily on spreading the information through social networks. That’s the connectivity bit. And remember that a crowdfunding site is only a host, not a marketer.

6. Schedule the Outreach

Set up a marketing schedule. Campaigns can run anywhere from 30 to 120 days. Before the campaign goes live, secure a few initial backers (friends, coworkers, loyal customers) so that there is guaranteed to be traction the day the project launches. Also ask initial backers to share the campaign with their networks. As the campaign continues, choose specific dates to reach out to media outlets, bloggers, and, social media influencers within the industry and ask them to share. One tweet can go a very long way, according to FundRazr.

Use business cards or any form of communications to reach customers
Use business cards or any form of communications to reach customers
7. One New Customer a Day

Tell one person every single day about the campaign. If it’s a grass roots, get-this-company-off-its-feet type project, create business cards (yes, people still use those) and hand them out to friends’ friends, your Starbucks barista, the guy at the gym, the cab driver your strike up a conversation with, etc. If it’s a business launching a new product, tell one customer a day about what’s new and why it’s exciting. Include the link in a purchase conformation email — or any other time there is an opportunity to e-interact. Constant buzz will sharpen the pitch and keep the passion alive. Constant buzz is the sure sell in a pretail market.