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Crowdfunding Best Practices

Crowdfunding: Don’t Overlook The Planning Stage

In Chapter 1, Mark Pecota from Launchboom share the importance of planning for your crowdfunding campaign, including building a strategy and budgeting.
Crowdfunding: Don’t Overlook The Planning Stage
Jules

By Jules

 

December 29, 2020

By Mark Pecota from Launchboom

Your crowdfunding campaign’s make-or-break moment actually comes the second you click the button to launch. Whether you smash through your original goal and meet with wild success or watch the clock tick down without getting near your funding goal depends largely on the work you do before your campaign is ever launched. If you don’t plan out how to crowdfund, your campaign is doomed to fail.

So what’s involved in planning your crowdfunding campaign?

Create a Strategy: “Test. Launch. Scale.” Framework

Everything LaunchBoom does boils down to “Test. Launch. Scale.” We love it so much we named the three phases of our system after it: TestBoom, LaunchBoom, ScaleBoom. This framework is the core strategy of building a long-term, successful business.

Most people will visualize the model from left to right as shown below.

But I like to visualize it in a circle, because the framework feeds on itself.

Here’s how the model breaks down

PART 1: TEST

The core strategy of the Test Phase is to validate product demand during pre-launch. You’ll do this by testing product positioning and audience targeting in the market before you go to crowdfunding. Companies that are able to test product ideas cheaply, quickly, and accurately are able to greatly reduce risk and only launch products they know the market wants.

PART 2: LAUNCH

Products that pass the testing phase have the greenlight to launch through crowdfunding. The core strategy of the Launch Phase is to pre-sell a large amount of your product to the market. You’ll do this through a combination of tactics:

  1. Build a community of people that want to buy your product BEFORE you launch.
  2. Hit your crowdfunding goal quickly within the first 24 hours of the campaign.
  3. Rise to the top of the crowdfunding platform rankings and get free traffic.
  4. Continue momentum with qualified traffic from ads, email lists, and PR.
  5. Continue to pre-sell and upsell products to your backers once the campaign is over.

PART 3: SCALE

Once you have manufactured your product and have inventory on hand, it’s time to transition to the Scale Phase. The core strategy of the Scale Phase is to build off of your previous crowdfunding success and drive sales to your ecommerce website. Because you learned so much about marketing your product during parts 1 and 2, you’ll be able to scale your marketing efforts quickly.

The Framework Feeds On Itself

Like I said before, the “Test. Launch. Scale.” framework is meant to feed on itself and grow your business. Once you get to the Scale Phase, you can begin to work on the next product that you want to test in the market. Ideally, you’ll have multiple product ideas that you can create functional prototypes of and then test them against each other. The one that has the best metrics during the Test Phase can be chosen for the next product launch.

If you’ve successfully delivered a great experience throughout the entire process, you’ll now have a large group of happy customers that will support your next campaign. That’s why we keep launching more products for our clients at LaunchBoom. We often see each campaign not only growing larger than the last, but becoming more profitable as well.

Using this framework, you’ll be able not only to have a successful product launch, but build a successful brand.

Establish a Timeline

A crowdfunding campaign has a lot of moving parts, and you need to keep track of everything in meticulous detail. Your campaign’s start and end dates are the most obvious milestones that should be in your calendar, but there are a lot of other dates that you need to check off as you go, and establishing a timeline before you really dive in will help you set your entire campaign up for success. We’ll lay out some activities that you should be doing in each stage, but you should figure out a timeline for checking these things off before you launch your campaign.

Pre-launch

  • Plan your start and end dates
  • Create your campaign page, images, and video
  • Reach out to your platform to develop a relationship and ask for feedback
  • Advertise your campaign (and test along the way)
  • Build your email list and cultivate your community
  • Talk to manufacturing and shipping partners to get a timeline from them

During your campaign

-Keep advertising!

  • Update your backers when you hit certain milestones, unlock or announce new stretch goals, or have something interesting to tell them

Post-launch

  • Launch your post-campaign sales strategy
  • Get started with your manufacturing partner on the timeline you established before you launched
  • Update your backers often to keep them engaged and informed

The most important aspect about your timeline is understanding that plans may change. No matter how well you plan out when everything should happen, you don’t have complete control over everything, and delays might pop up. Be upfront with your backers about any changes in plans, and be willing to be flexible as things come up.

Choose the Right Crowdfunding Platform

Kickstarter or Indiegogo? It’s an important question, and there’s no one right answer. Each platform has pros and cons, and creators need to consider a lot of different factors before making the decision. While there are few hard and fast rules, we can provide some guidelines that will help you make your decision.

Project type

If you’re launching a game, go with Kickstarter. That’s one of those few hard and fast rules that we mentioned a moment ago. Kickstarter has built an incredible community around launching games, so if that’s what you’re doing, Kickstarter is the way to go.

Similarly, tech and innovation projects have largely moved to Indiegogo. That’s where the community is, so that’s where we recommend launching that type of product.

Funding model

The two funding models for crowdfunding campaigns are fixed and flexible funding. Fixed funding campaigns will only be successful if you reach your set goal; if you don’t reach that number, the money will be returned to the backers and neither you nor the platform will get any of it. Flexible funding campaigns will collect the money whether you reach your goal or not, and the platform will collect a fee before sending the money to you.

Kickstarter only offers fixed funding, while Indiegogo has both fixed and flexible funding.

Your location

Kickstarter is available in 25 countries, while Indiegogo is available in 21. Make sure you check this vital information!

Fee structure

The platforms have slightly different payment processing fee structures, and they each charge a percentage of your overall funds raised. The exact numbers on these change from time to time, so we encourage you to visit the support pages for Kickstarter and Indiegogo to see what the fees are when you’re making your decision.

Marketing differences

There are a lot of different marketing tools out there to help you promote your campaign, some of which are native to the platforms and some of which are outside tools. Indiegogo allows you to use Google Analytics, Google AdWords tracking, the Facebook pixel, tracking links, promotional opportunities through the platform, upsells, secret perks/rewards, and limited perks/rewards. Kickstarter only gives you access to Google Analytics, tracking links, promotional opportunities through the platform, and limited perks/rewards.

These differences are very important to understand. Indiegogo offers more ways to track your ads, which can help you target potential backers. Kickstarter, on the other hand, has fewer ways to track ads, but has a larger organic community to draw from. We encourage you to think carefully about what’s important to you from a marketing and advertising perspective before deciding on a platform.

Other differences

There are differences in the level of creator support, what’s needed before you launch, what you’re able to offer, and how the platforms handle post-campaign life that you’ll want to consider as well.

The bottom line is that there’s no easy answer as to which platform to launch on. It’s the biggest decision you have to make before you launch, and you should give it a lot of thought. Kickstarter may have more brand recognition, but Indiegogo can make up for it with innovative features and an extremely active tech community. It never hurts to reach out to both platforms to see which can do more for you.

Build a Community

Building a dedicated community that’s excited to back your product on day 1 is the most important thing you can do before you launch. These are people who sign up for an email list, follow you on your social media platforms, and talk about your product to others. This dedicated group of followers are the people who will launch your product, so finding them and nurturing them before you launch is essential to making sure your campaign succeeds.

This community is built through interaction. You’ll find them through your advertising, which will lead them to your email list and your social media presences. You’ll nurture them by sending updates, hosting live events on your Facebook page, and interacting with them in every way you can. Post photos! Show a walkthrough of your first prototype! Let everyone know that your cat sat on your plans and you had to bribe him with treats to get those specs out on time!

The more you interact with your community, the more invested they’ll be in your product. That’s the kind of community that will make sure your project gets funded, and they’ll bring their friends and family along, too.

A reservation funnel will help you create a community that is 30x more likely to convert. Next up we’ll teach you how to build one.

Use a Reservation Funnel to Build a More Qualified Community

Since LaunchBoom’s inception in 2015, building a highly qualified pre-launch email list has been a key part of our launch strategy. The pre-launch email list is how we get our clients funded in the first 24 hours (which we call having a “LaunchBoom”). Flash forward to 2017 and we started experimenting with a change to our pre-launch strategy that transformed the entire crowdfunding industry.

The challenge with building a pre-launch email list is measuring how qualified it is—and by qualified, I mean how likely email subscribers are to buy your product when you launch the crowdfunding campaign.

For the first 2 years, we wrestled with this question with little luck. I even hired a data scientist to look at all our campaigns and try to find correlation between pre-launch metrics (like cost per lead, email open rate, lead to reach ratio) to the likelihood that they would buy.

The short and disappointing answer: he couldn’t find any strong correlation.

It all changed one seemingly normal day. One of our video editors, Rebecca, sent me a link to a product she liked. It wasn’t launching a crowdfunding campaign, but was taking $1 deposits on their website. If you put down a $1 deposit, you’d reserve the product at the best discount when they launched.

I immediately knew this simple idea was something big. I got in contact with the founder of that project, and he graciously shared their strategy behind the $1 reservation. He felt it was a better way to build a pre-launch email list. Here’s the top reasons why:

  1. Making a purchase on a website (even for $1) is a much better indicator of purchase intent than just giving your email.
  2. By tracking those that make $1 deposits, you can optimize Facebook advertisements for $1 deposits vs. leads.

Within a week, we started testing this strategy out for our clients and began to see results almost immediately. That was back in early 2017. Since that time, we’ve learned a lot and iterated on the funnel. Let me show you how it works.

How The Reservation Funnel Works

Even though our reservation funnel is quite simple to understand, getting all the pieces to work well together has taken a long time and a lot of testing.

OVERVIEW

STEP 1: FACEBOOK AD

User clicks on a Facebook/Instagram ad and is taken to a landing page.

STEP 2: LANDING PAGE SIGNUP

We send them to a landing page where the main call-to-action is to give us their email address so they can get notified when we launch.

STEP 3: RESERVATION BRIDGE

After they’ve given their email, we thank them and also make an offer. They can put down a $1 deposit to become a “VIP” and reserve the product at the best discount when we launch. There is no checkout on this page, which is why we call it a “bridge.”

We’ve found that adding this step between the initial landing page and the checkout increases the conversion rate. This is because having the checkout on this page would be jarring for the visitor. They aren’t expecting it and it comes across as too promotional. Instead, we thank them for signing up and explain the opportunity to become a VIP. If they want to, they can press a button to be taken to the checkout page.

STEP 4: RESERVATION CHECKOUT

If they click on the button to reserve the product, they are then taken to a checkout page to complete their $1 reservation.

The Difference Between VIPs and Non-VIPs

In the Reservation Funnel, you will be collecting leads. Your leads will be broken out into two separate segments we call...

  1. VIPs - those who put down a $1 deposit to reserve your product.
  2. Non-VIPs - those who do not put down a $1 deposit to reserve your product.

For the rest of the article, I will use VIP & Non-VIP to describe these two different segments. Understanding the differences between these two different segments is extremely important to the success of your campaign.

VIPS ARE 30X MORE LIKELY TO PURCHASE

Since we’ve been pioneering our reservation funnel since 2017, we’ve collected some great data on its effectiveness.

Here’s the most important stat: VIPs are 30x more likely to purchase when we launch than Non-VIPs.

That statistic is an average, and I’ve seen it be higher and lower. For example, on our campaign for the OGarden Smart, the VIPs were 60x more likely to purchase than Non-VIPs. We generated $129,820 from the pre-launch email list alone.

Simply put, the reservation funnel allows you to...

  • Optimize your advertisements for purchase intent vs. lead intent.
  • Allocate ad budget more effectively and get a higher return on ad spend (ROAS).
  • Build a community of people that is 30x more likely to buy your product when you launch.

Calculate Your Crowdfunding Goal

One of the most important things you need to do before you launch is to decide on what your crowdfunding goal should be. You want to know what your break-even number is, and then you need to decide your goal based on that.

Don’t guess! You don’t want to set your goal too low and then end up not raising enough money to cover your expenses. Likewise, you don’t want to set your goal too high and then not come close to reaching it. Having a funding goal that you know you will cover all of your expenses and won’t be out of reach is important to your campaign’s success.

So how do you go about creating this goal?

  • Calculate your fixed costs

These are things like molds & tooling, package design, and travel & trade shows. They’re costs that you will have to pay once, rather than things associated with the production of each unit. For our example, we’ll say our fixed costs are $13,500.

  • Calculate your variable costs

These are the components of your product that will have to be paid for each unit that you produce. Think about things like the battery, casing, buttons, gears, packaging, and assembly for each unit (or whatever different components your particular product will need). Break this down as much as you can so you understand how much each piece is going to cost. For our example, we’ll say our variable costs are $10.40 per unit.

  • Figure out your average order value

Most likely, you’ll plan to offer different prices on your product at different points during the campaign (think about Early Bird specials and VIP pricing, for instance). Your average order value will generally be about 1.25x your most discounted price. For our example, we’ll say our average order value is $100.

  • Calculate your break-even count and funding amount

Subtract the number you got in step 2 from the number you got in step 3 to get your profit per unit:

$100 - $10.40 = $89.60

Now divide the number you got in step 1 by your profit per unit to get your break-even count:

$13,500 / $89.60 = 150.669

This number represents the units you need to sell to break even. In this case, we will need to sell 151 units. With this information, we can now calculate our break-even price by multiplying our break-even count by our price per unit:

151 units x $100 = $15,100

We now know that our funding goal for our sample project here should be $15,100 if we want to break even on the campaign. If we want to make a profit, we can make that goal higher. We can also adjust the price per unit if it makes sense with the product, or seek to lower fixed and variable costs by working with other vendors if possible.

Again, the important thing here is that you should not guess on these numbers. Setting a funding goal isn’t about what you really hope to raise; it’s about making sure you set an amount that will cover your costs and perhaps make a little profit (if that’s your goal).

Plan a Realistic Crowdfunding Budget

Crowdfunding is about raising money, but you’ll have to invest in advertising in order to get those funds. Think about all the ways in which you want to advertise during your pre-launch, your campaign, and your post-launch periods, and plan your budget accordingly. You may have the funds to advertise everywhere that you want, but you might find that you’ll have to be more selective about your advertising channels. It’s all about knowing what your budget is, and again, it’s important not to guess.

In Summary

You’ve got a great idea for a product and your campaign is ahead of you. We know that it’s tempting to dive straight into your campaign, but doing the necessary legwork before you click the button to launch your campaign will be the difference between meeting your goals and not raising enough funds. Take the time now to set yourself up for future success!

I applaud you for reading this guide to ensure you’ll have a successful campaign. As a next step I’d recommend joining our Crowdfunded Community on Facebook to learn from other project creators just like you as well as get your questions answered.

You can also learn more about how to have a successful crowdfunding campaign from my bestselling book CROWDFUNDED: The Proven Crowdfunding System For Launching Products, Raising Millions, And Scaling Brands Using Indiegogo And Kickstarter.

If you’re ready to start working on your campaign, book a call with us to find out how we can help!


<- Introduction: Crowdfunding 101                Chapter 2: Marketing & Promoting ->

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