How Crowdfunding Empowers Customers
Crowdfunding is drastically changing the way entrepreneurs and artists can fund passion projects and nifty gadgets — that much is clear.
More quietly, the new way of funding projects is also empowering the consumer. Instead of having only minimal say in a product’s development (through methods like focus groups and surveys), crowdfunding backers are voting with their dollars to bring quirky and unique products to market. In a December 2012 report, TrendWatching.com wrote that crowdfunding is turning consumers into “presumers.”
For SMEs and enterprises, crowdfunding can be an extremely powerful tool. It allows them to not only test market demand for a product, but also to ensure that no money is spent on unused inventory.
Below, we highlight a few examples of products and projects that were made possible (or are on the way towards being realized) with the crowd’s support.
Our Eric Blattberg featured this highly successful Kickstarter project in the not too distant past, showcasing the potential of crowdfunding to affect not just large companies, but entire cities. The Plus Pool is an innovative architectural project that aims to improve New York City’s environment and livability by filtering the murky waters of the East River. The team behind the project turned to Kickstarter twice — raising over $300,000 between two campaigns — to test filtration and build a prototype of the pool. The total cost of the pool will be in the $15 million range, and covering at least some of the early expenses through crowdfunding is wise. The campaign also acts as proof of concept when pitching the concept to city officials. The pool is not yet in the river, and won’t be for some time — but without the crowd’s pledges, it’s unlikely that the idea would have gotten off the ground at all.
Debbie Sterling saw first-hand the absence of women in STEM (science, technology, engineering, and mathematics) subjects while working towards an engineering degree at Stanford. So, she created a campaign on Kickstarter to make the engineering set GoldieBlox, which appeals to young girls. The campaign was highly successful and caught the eye of ToysRUs, America’s largest toys retailer. Thanks to the crowdfunding round, Sterling was able to prove that her toy, while unconventional (engineering sets are seldom marketed at young girls), did have tremendous support. ToysRUs saw the demand, and decided to put GoldieBlox on its shelves, as did other stores. The set was an instant success, and reached a top 20 position on Amazon.
Universal Music Group
Universal Music Group decided to take the crowdfunding approach even further, and is creating its own crowdfunding platform for out-of-print vinyl records. The project is not yet live, but in essence, it will allow customers to pre-order records that the label is no longer printing. Once enough people pre-order the record, ensuring healthy demand, UMG will print and ship the vinyls to the nostalgic (or hipster) fans.
These are just a few of the large companies experimenting with crowdfunding to improve market testing and customer satisfaction. To find out more, make sure to check out the Massolution NYC 2013: Crowd-Powered Business conference taking place on September 18 and 19 in New York!