THE PSYCHOLOGY OF CROWDFUNDING Nick Kolenda

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COPYRIGHT 2016 © KOLENDA ENTERTAINMENT LLC

Intro 4........................................................................................

Strategy:ReducethePerceivedRisks 5.................................................Tactic1:ChooseanAll-or-NothingModel 5......................................................................Tactic2:IncludeaBreakdownofDonationSpending 6..............................................

Strategy:ConveyYourReputation 7........................................................Tactic3:DescribeYourEducationandPastSuccesses 8.............................................Tactic4:DonatetoOtherCrowdfundingProjects 9......................................................

Strategy:TriggerTheirSelf-Awareness 10.............................................Tactic5:LookintotheVideoCamera 10...............................................................................Tactic6:UseSecond-PersonNarratives 11..........................................................................

Strategy:AmplifyTheirFeelingofGuilt 12.............................................Tactic7:ReferenceanInexpensiveHedonicProduct 13................................................Tactic8:DisclosePersonalInformation 13..........................................................................Tactic9:PublicizetheNamesofPotentialDonors 15.....................................................

Strategy:ProvidetheRightRewards 16..................................................Tactic10:PublicizetheNamesofActualDonors 17........................................................Tactic11:GiveRewardsThatAreTangibleandPractical 18.......................................Tactic12:IncorporateMany(Fun)RewardTiers 19.......................................................Tactic13:AddNewRewardsintheFinalStages 20.........................................................

Strategy:AttractEarlyDonors 21...............................................................Tactic14:ShareItWithYourPersonalNetwork 21.........................................................Tactic15:OffertheLowestPossibleDonation 22.............................................................

Strategy:MaintainYourProject’sMomentum 24.................................Tactic16:ChooseaShorterProjectDuration 24...............................................................Tactic17:GiveFreeRewardsatVariousFundingLevels 25.........................................Tactic18:ProvideRemindersThroughouttheProject 26............................................Tactic19:TargetDonorsWhoCanEmpathize 27.............................................................

Conclusion 29............................................................................

IntroCrowdfundingispainful.

Withstandardconversions,peoplereceivevalueimmediately.Theybuyyourproduct.Thentheyreceiveyourproduct.Doneanddone.

That’snotcrowdfunding.Withcrowdfunding,theendproductdoesn’tevenexist.Youneedtoconvincepeopletogiveyoumoneyforsomethingthattheywon’treceiveformonths(andpossiblelonger).

Sure,youcanuseperksandrewardstoenticepeople.Butthemajorityofdonationscomefrompeople’sgenerosity.

Philanthropyisgreat—butit’sadamntoughconversion.

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That’swhyIscouredtheacademicresearchoncrowdfunding,philanthropy,andhelpingbehavior.Iwantedtounderstandwhenandwhypeopledonatemoney(andhowyoucanusethoseprinciplesinacrowdfundingcampaign).

Inthisarticle,IpiecetogetherthemostpowerfultechniquesthatIcoulddind.You’lllearnthepsychologybehindeachtacticandhowyoucanusethoseprinciplestoindluencemorepeopletofundyourproject.

STRATEGY:REDUCETHEPERCEIVEDRISKS

Fromadonor’sperspective,crowdfundingisrisky.Donorsarepayingsomeonetocreatesomethingthatdoesn’texist.Sothereareunknownvariables.

Italsodoesn’thelpthatover75%ofprojectsaredeliveredlate(Mollick,2014).

Toincreaseyouroddsofsuccess,youneedtoreducethatperceivedriskasmuchaspossible.Thissectionwillgiveyouafewtacticsthatcanhelp.

Tac$c1:ChooseanAll-or-NothingModel

Twomodelsofcrowdfundinghavebecomepopular:

• Keep-it-All(KIA)–Thecreatorkeepsthefunding,evenifthefundsdon’tsurpassthegoalthreshold.

• All-or-Nothing(AON)–Thecreatorkeepsthefundingif—andonlyif—thegoalthresholdismet.

IfprojectcreatorscankeepallofthefundswithKIAprojects,wouldn’tthatmodelbemoreuseful?Youmightthinkso…butthat’snotthecase.

Cumming,Leboeuf,andSwienbacher(2014)analyzed47,139campaignsfromIndiegogo—acrowdfundingplatformwiththeoptiontochooseeitherKIAorAONmodels.EventhoughmostpeoplechoseKIAprojects,AONprojectsweremoresuccessful:

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WhyareAONprojectsmoresuccessful?Becausetheyreducetheperceivedrisk:

“…AON is a clear signal to the crowd that the entrepreneur commits not to undertake the project if not enough is raised, [which] reduces the risk to the crowd…KIA projects tend to be less

successful, since the crowd bears the risk that an entrepreneurial firm undertakes a project that is underfunded and hence more likely to eventually fail.” (Cumming, Leboeuf, & Swienbacher, 2014, pp. 4)

SomecrowdfundingplatformsalsochargehigherfeesforKIAprojects(especiallyifthegoalthresholdisn’tmet).Soyoumightbepayinghighercostswiththoseprojectstoo.

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Tac$c2:IncludeaBreakdownofDona$onSpending

BekkersandWiepking(2010)examinedwhypeopledonatetocharities.Amongtheirdindings,oneprimaryfactorwasef+icacy.Donorsneedtofeelliketheirdonationismakingadifference.

Theproblem?Mostprojectcreatorsdescribetheirprojectusingaggregateframing.Theyneed$XX,XXXtoaccomplishagreatproject.Thentheydescribetheproject,whyit’sgreat,andblahblahblah.

Withthatapproach,potentialdonorscan’tappreciatethevalueoftheirdonation.Theycan’tenvisionthespeci+icbeneditsthatthey’reproviding.

Toalleviatethatblindness,separatetheprojectintospecidiccosts.Specifyhowmuchmoneywillbeattributedtoeachaspectofyourproject.Whenyouprovidethosedinancialbreakoutsandroadmaps,potentialdonorsaremorelikelytofundyourproject(Ahlersetal.,2015).

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Nowthatwetalkedaboutsomegeneralrisks,thenextstrategywillexplainoneofthemostimportantrisksthatyouneedtoreduce.

STRATEGY:CONVEYYOURREPUTATION

Agrawal,Catalini,andGoldfarb(2013)examinedthetypesofrisksthatdonorsencounterincrowdfunding.Theyidentidiedthreetypes:

• CreatorIncompetence• Fraud• ProjectRisk

Amongthosethreefactors,onlyoneisrelatedtotheprojectitself.Mostoftherisksarerelatedtoyou,thecreator.

“Potential backers are usually unsure of proponents’ abilities and do not know whether proponents are trustable…Therefore, considerations of quality and trustworthiness are important when deciding to support a project.”(Guerini,Franzoni,&Rossi-Lamastra,2013,pp.3)

Giventheimportanceofcreators,you’llnoticeaweaknessinmostprojectdescriptions.Mostcreatorsfocusentirelyontheprojectitself:whyit’sgreat,whyit’sdifferent,whypeopleshoulddonate,etc.

That’sabigmistake.Sure,potentialdonorsareinvestingintheproject.Butthey’realsoinvestinginYOU.Donorsmustfeelsafegivingyou—someonethey’venevermetbefore—theirhard-earnedmoney.

That’swhyyoucan’trelyonthegreatnessofyourprojectalone.Youalsoneedtoconveyyourpersonalbackgroundandreputation.

Thissectionwillexplaintheareasofyourbackgroundthataremostimportanttopotentialdonors(andthebestwaystoconveythatinformation).

Tac$c3:DescribeYourEduca$onandPastSuccesses

Howcanyourevealyourreputation?Twousefulsignalsincludeyoureducationandpastsuccesses.

Education

Educationplaysamajorroleinventurecapital.Forexample,digitalstartupsaremorelikelytosecurefundingifsomeoneontheirfoundingteamholdsadoctoraldegree(Hsu,2007).OtherresearchhasfoundsimilareffectswithMBAdegrees(Ahlersetal.,2015).

Ifyoureceivedahigherlevelofeducation,don’tbeafraidtocasuallymentionyourdegreewhendescribingyourbackground.

PastSuccesses

Donorswanttoinvestinsomeonewithaproventrackrecord.Infact,researchshowsthatpeoplearemorelikelytodonatetoaKickstarterprojectifthecreatorwassuccessfulwithotherKickstarterprojects(Kuppuswamy&Bayus,2013).

Butyoudon’tneedexperiencewithcrowdfunding.Haveyoueverlaunchedandcompletedasimilarprojecttotheonethatyou’repromoting?Ifso,thenmentionit.Thatpastsuccesswillmakepotentialdonorsmorelikelytoinvest(Hsu,2007).

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Tac$c4:DonatetoOtherCrowdfundingProjects

Ifyou’vereadIn+luencebyRobertCialdini,thenyouknowthepowerofreciprocity.However,reciprocityhastwomainfacets:

• DirectReciprocity–Ifyouprovidevaluetosomeone,thatpersonfeelsobligatedtogivebacktoyou.

• IndirectReciprocity-Ifyouprovidevaluetosomeone,otherpeople(whonoticethekindact)feelobligatedtogivebacktoyou.

Whenpeoplethinkofreciprocity,theyusuallythinkofdirectreciprocity.Butindirectreciprocityplaysapowerfulroleinonlinecommunities,suchasopen-sourcedevelopment(Kogut&Meitu,2001).

Crowdfundingcommunitiesarenodifferent.Forexample,potentialdonorsintheKickstartercommunityaremorelikelytofundyourprojectifyou’vedonatedtootherKickstarterprojects(Guerinietal.,2013).

Infact,Kickstarterrecognizes(andapplies)thatpower.Inyourpublicprodile,theydisplaythenumberofprojectsyou’vebacked:

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Whenpotentialdonorsjudgethevalueofyouroffering,theyoftenusethatmetrictojudgeyourreputationwithinthecommunity:

“Kickstarter displays the number of projects that proponents have supported in their public profile…We conjecture that this information makes early backers more willing to pledge money in

favor of proponents that have behaved as good members of the crowdfunding community…” (Guerinietal.,2013,pp.7).

Beforelaunchingyourcampaign,buildyourcommunityreputation.Donatetootherprojectssothatyoucantriggerindirectreciprocity.

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STRATEGY:TRIGGERTHEIRSELF-AWARENESS

Thisstrategyismyfavorite.Ifyouwanttoindluencepeopletodonatemoney,youshouldtriggertheirself-awareness:

Self-awareness–Whenyoubecomeintrospectiveandrecognizeyourownthoughtsandfeelings

Whenwebecomeself-aware,weexperiencediscomfort(Mor&Winquist,2002).Asaresult,webecomemorelikelytoengageinprosocialbehavior(e.g.,donating)toovercomethatnegativefeeling(Gibbons,1990).

Toindluencepotentialdonors,youshouldtriggertheirself-awareness.Thissectionwillexplainafewtechniques.

Tac$c5:LookintotheVideoCamera

Whenweencounterapairofeyes,webecomeself-aware(andmorelikelytoengageinprosocialbehavior).Inthisarticleonstockphotos,Idescribedastudyillustratingthatpower:

“Bateson, Nettle, & Roberts (2006) provided customers with an unsupervised ‘honesty box’ to pay for their lunch. Over the course of 10 weeks, the researchers showed different banners behind the

counter: either a flower or a pair of eyes. Whenimagesofeyesweredisplayed,theresearchersreceived3xmoremoney.”

Eventhoughimagesofeyesarepowerful,they’renottheonlyway.Eyecontactisanothermethod.Inaseparatestudy,door-to-doorsolicitorsreceivedmoremoneywhentheylookedpotentialdonorsintheeye(Bull&Gibson-Robinson,1981).

Youshouldfollowthatrulewhendilmingyourvideo(andyes,youshoulddilmavideo…crowdfundingprojectswithvideosaremoresuccessful;Xuetal.,2014).

Whendilming,dowhateverittakestolookintothecamera:

• Useateleprompter• Memorizeyourscript• Beauthentic

Whateveryoumethodyouchoose,youshouldbelookingintothecameraforthemajorityofthevideo.Avoidinterview-stylevideoswhereyou’renotlookingdirectlyattheviewer.Thoseshotstriggeralowerdegreeofself-awareness,sothey’relesseffective.

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Tac$c6:UseSecond-PersonNarra$ves

Thistacticcombinestwotechniques:2ndpersonpronounsandhypotheticalnarratives.

First,youcantriggerself-awarenessbyincorporating2ndpersonpronouns(e.g.,youandyour)intoyourprojectdescription.Those“self-referencing”pronounscausepeopletorelateyourmessagetotheirownlife(Burnkrant&Unnava,1995),whichincreasesself-awareness.

Youcouldalsoachieveasimilareffectbyincorporatinganarrativeintoyourdescription.Narrativeshelpovercomeresistanceintwoways(DalCin,Zanna,&Fong,2004):

• Theyreducetheaudience’stendencytocounterargueyourmessage• Youraudienceidentidieswiththecharactersinthenarrative,relatingthemessageto

theirownlife

Inyourprojectdescription,youcancombinethosetwotechniques.How?Describeanarrativewithasecond-personperspective.Youdon’tneedtocreateablownupdictionalstory.Anyactionfromasecond-personperspectivewilltriggerself-awareness.

Supposethatyou’retryingtofundaplay.Ratherthandescribetheplotoftheplay(e.g.,ourplayisaboutXYZ),narratetheplotfromtheviewers’perspective(e.g.,whenyouwatchourplay,you’llseeXYZ).Thatframingwilltriggerself-awareness,makingpotentialdonorsmorelikelytofundyourproject.

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STRATEGY:AMPLIFYTHEIRFEELINGOFGUILT

It’ssadbuttrue.Weoftenperformgooddeedssimplybecausewefeelguilty:

“Good deeds are often motivated by feelings of guilt. When we feel guilty over neglecting our mothers, we phone them. When we feel guilty over damaging property, we offer to pay for it. When we intentionally or unintentionally hurt our relationship partners, we apologize.” (Estrada-Hollenbeck & Heatherton, 1998, pp. 215)

Ifpotentialdonorsfeelguilty,they’llexperienceastrongerurgetoperformaprosocialaction(e.g.,donatingtoyourcampaign).

Becarefultriggeringthatguilt,though.Ifyouapproachthisstrategyincorrectly,itcanbackdire.Ichosethetacticsinthissectionverycarefully(becausethey’relessmanipulative).Soproceedwithcaution.

Tac$c7:ReferenceanInexpensiveHedonicProduct

Itsoundsstrange,butthere’sascientidicreasonbehindthistactic.

Savary,Goldsmith,andDhar(2015)werecollectingdonationsinadieldexperiment.Dependingonthegroup,theycomparedthepriceofadonationtoaspecidicproduct:

• UtilitarianComparison:“Pleasedonate$2toDoctorswithoutBorders.Forreference,thisisaboutthepriceofabarofsoap.”

• HedonicComparison:“Pleasedonate$2toDoctorswithoutBorders.Forreference,thisisaboutthepriceofa[popularlocal]cookie.”

Surprisingly,hedoniccomparisonsindluencemorepeopletodonate.Sincethoseproductsareassociatedwithself-indulgence,peoplefeelmoreseldishiftheywouldratherpurchasethathedonicproductthandonatetothecause.

“If a donation appeal prompts consumers to compare the choice to donate with a hedonic product, choosing not to donate may suggest selfish motives (i.e., self-indulgence), which increase the negative self-attributions associated with not giving.” (Savary, Goldsmith, & Dhar, 2015, pp. 9)

Peopledon’twanttothinkofthemselvesasseldish.Sothey’remorelikelytoavoidthatnegativeattributionbydonatingtoyourproject.

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Tac$c8:DisclosePersonalInforma$on

Socialpsychologistshavecometoappreciatetheidenti+iablevictimeffect(Small&Loewenstein,2003).Weshowmoreempathytowardspecidicpeople(comparedtoanunidentidiablegroupofpeople).

Forexample,participantsinonestudyweremorelikelytodonate$5toanAfricangirlnamedRokiainsteadofdonatingthatmoneytomillionsofpeoplewhoweresufferingfromseverehunger(Small,Loewenstein,&Slovic,2007).

Themorepersonalinformationyouinclude,thestrongertheeffect.Inanotherstudy,theamountofmoneythatpeopledonatedtoasickchilddependedontheamountofinformationthatthosepeoplereceivedaboutthechild(Kogut&Ritov,2005):

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Whenwritingcopy,reinforceyourpersonalidentity.Revealcertaindetailsaboutyourself:

• Yourname• Yourage• Hobbiesandinterests• Apicture

Thatpersonalinformationwillstrengthenyouridentity.Suddenlyyou’renotsomerandomstatistic—you’rearealperson.Witharealpersonbehindtheproject,potentialdonorswillexperienceastrongerfeelingofguilt(andthusastrongerurgetofundyourproject).

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Tac$c9:PublicizetheNamesofPoten$alDonors

Identidiabilityhasadlipside.Anditappliestodonors.

Whenyoupublicizetheidentityofpotentialdonors,theyfeelgreaterpressuretodonate.Forexample,participantsinadictatorgameweremorelikelytoplayfairwhentheiropponentreceivedapictureofthem(Burnham,2003).

Theresearcherattributedthatdindingtoinnatesocialnorms:

“When people make decisions in public, they face social sanctions that increase the benefits to prosocial behavior and decrease the payoffs to anti-social behavior….even selfish humans are more likely to act fairly when in public.” (Burnham, 2003, pp. 141)

Howcanyouapplythistactic?Perhapsthebestapplicationofthiscurrenttechniquelieswithcrowdfundingdevelopers.Ifyouhelpmanageacrowdfundingplatform,considerpublicizingthenamesofpeoplewhoshowinterestinacampaign.Forexample,youcouldaddthesesections:

• PeopleWhoHaveVisitedthisProject• PeopleWhoHaveLikedthisProject• PeopleWhoHaveUpvotedthisProject

Withinthosesections,includeacompilationofFacebook/Gravatarprodilepicturesofthosepeople.Byrevealingtheiridentity,youaddmorepressureonthosepeopletodonatetothosecampaigns.

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Ifyou’reaprojectcreator,youcanstillusethistechnique.However,thenexttacticdescribesabetterapplication.

STRATEGY:PROVIDETHERIGHTREWARDS

Crowdfundingplatformsvarybytheirrewardssystem:

o Donation-based–Norewardso Reward-based–Non-dinancialrewards(e.g.,products)o Lending-based–Financialreturns(e.g.,interest)

o Equity-based–Equityreturns(e.g.,shares,dividends)

Whenpossible,avoiddonation-basedplatforms.Giventhedifdicultywithprosocialconversions,alwaysprovidesometypeofrewardtopotentialdonors.

Whattypeofrewardsshouldyouoffer?Ontheirwebsite,Kickstarterdescribesthedivemostcommonrewards:

1. CopiesoftheProject(e.g.,acompletedalbum)

2. LimitedEditions(e.g.,acompletedalbumwithabonustrackforbackers)

3. Collaborations(e.g.,twobackersgettodothebackgroundhandclapsforasong)

4. Experiences(e.g.,backersgettovisittherecordingstudio)

5. Mementos(e.g.,backerswillbethankedinthealbumbooklet)

Thoserewardsaremostcommon.Butwhichrewardsaremorepersuasive?Thissectionwillgiveyousomeguidanceontheanswer.

Tac$c10:PublicizetheNamesofActualDonors

BekkersandWiepking(2010)analyzedover500studiesoncharitablegiving.Theyrevealedahandfulofunderlyingmechanismsthatdrivepeopletodonate.

Onekeyfactorisreputation.Peopleexperienceconspicuouscompassion:theydonatebecausetheywantotherpeopletoperceivethemascompassionate.

“What really drives their behaviour is the need to be seen to care. And they want to be seen displaying compassion because they want to be loved themselves.” (West, 2004, pp. 5)

Howcanyouapplythatprinciple?Supposethatyou’recrowdfundingaplay.Intheofdicialprogram,publicizethenamesofdonorsbasedontheirdonationamount:

• HighDonations:ExecutiveProducers• MiddleDonations:Producers• SmallDonations:SpecialThanks

Thatstructurealsocreates“aspirationalgroups"(Cowan,Cowan,&Swan,1997).Potentialdonorsfeelpressuredtoreachthetopechelon(sotheydonatemoremoney).

Youshouldalsoemphasizethatthepublicityiscompletelyoptional.Researchshowsthatgivingpeopletheoptiontoreporttheirnameincreasesdonationsize:

“…giving people the option to report their contributions results in more giving than required reporting. It would appear that something about empowering people with the choice to announce their contributions — even though it is a “false” choice that no one would reject — might actually focus them more on being leaders and example setters.” (Andreoni & Petrie, 2004, pp. 21)

Givingpeopletheoptiontopublicizetheirdonationmakesthemconsiderthe“leadership”qualitiesofthedecision(whichthenindluencesthemtodonatealargeramount).

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Tac$c11:GiveRewardsThatAreTangibleandPrac$cal

Harms(2007)foundthateconomicvaluewasoneofthestrongestmotivatorsforcrowdfundingsupporters.Potentialdonorsneedtofeellikethey’rereceivingafairamountofvaluefortheirmoney.

Theresearcherfoundthattangiblerewardsgeneratedthestrongestperceptionofvalue:

“…a guaranteed tangible output of the project has a positive effect on the intention to invest. To receive a tangible output is of importance to consumers and presents an intention driving value.” (pp. 44)

Amongtangiblerewards,practicalrewardsgeneratedthestrongestmotivationtoinvest.

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Tac$c12:IncorporateMany(Fun)RewardTiers

Mostcrowdfundingplatforms,suchasKickstarter,offertieredrewards:

• For$1,yougetX• For$5,yougetY• For$25,yougetZ

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KuppuswamyandBayus(2013)analyzedallKickstarterprojectsfrom2009to2012.Theyfoundthatsuccessfulprojectsofferedalargernumberofrewardtiers.

Andthatdindingmakessense.Otherresearchshowsthatdonorsparticipateprimarilyforfunandenjoyment(Bretschneider,Knaub,&Wieck,2014).Withmorerewardtiers,potentialdonorsmightdindyourprojectmorefunandappealing.

Giventhatresearch,itmightnothurttoaddmorefunand/orexperientialrewardsintoyourproject.

ButNick!Didn’tyoujusttellmethatrewardsshouldbetangibleandpractical?

YesIdid.Tangibleandpracticalrewardsareeffectivebecausetheyusuallyprovideeconomicvalue.Butfunrewardscanalsobeeffective—theyjustneedtoprovidevalue.Aninformalmeetupmightbeintangible,buttheexperiencewouldbeavaluablerewardforrecipients.

Andthatshouldbeyourgoal.Incorporateasmanyvaluablerewardsaspossible(assumingthatyoucandeliverthoserewardsforaminimalinvestment).

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Tac$c13:AddNewRewardsintheFinalStages

Incrowdfundingplatforms,creatorsoftenadjustprojectdetailsalongtheway.Forexample,somecreatorswilladdContentRewards—theyaddsomethingnewtotheprojectitself:

• Newidea• Newconcept• Newcover

Althoughthatapproachmighthelp,researchersfoundamoreeffectivestrategy.Youcangenerateamorepowerfuleffectbyaddingnewrewardtiers,especiallytowardthedinalstagesofaproject(Xuetal.,2014).

Theresearchersattributedthatdindingtocontrasteffects:

“…the initial reward offered by the campaign may tend to serve as a contrasting reference point and the additional rewards change funders or potential funders’ perceptions on the campaign and thus affect their pledge decisions.” (Xu et al., 2014, pg. 9)

Tolearnthepsychologybehindreferencecomparisons,youcanrefertomyarticleonpricing.

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STRATEGY:ATTRACTEARLYDONORS

Earlycontributorsarevitaltoaproject’ssuccess:

“In general, the existence of many early participants triggers even more participation. Conversely, when initial participants are few, an initiative’s fate is cursed; a lack of early participants generates a negative, though often unmotivated, expectation.” (Guerinietal.,2013,pp.3)

Guerinietal.(2013)proposedthreereasonsforthatindluence:

1. ObservationalLearning–Peopledevelopastrongerbeliefthattheprojectisimportant

2. Word-of-Mouth–Earlybackerstelltheirconnectionsabouttheproject

3. HelpfulFeedback–Creatorsreceiveusefulinsightstoadjusttheprojecttobetterdittheneedsofpotentialdonors

Thissectionwillteachyouafewtechniquestoattractearlydonorstoyourprojectsothatyoucanincreasetheoddsofyourprojectsucceeding.

Tac$c14:ShareItWithYourPersonalNetwork

Multiplesstudiesincrowdfundinghaverevealedapowerfulindluencefromgeography.Themajorityofdonations—especiallyearlydonations—comefrompeoplelivinginthesamegeographicalareaastheprojectcreator(Guerinietal.,2013).

Butlet’sthinkaboutthat.Whenyoupullbackthecurtain,you’llnoticeanunderlyingfactor.It’snotthegeography,perse,that’sgeneratingdonations.Thoseearlydonorsaresimplypersonalconnectionsoftheprojectcreator:

“Friends and family funding plays a key role in the early stages of fundraising. Friends and family disproportionately invest early in the funding cycle, generating a signal for later funders through accumulated capital.” (Agrawal, Catalini, & Goldfarb, 2013, pp. 5)

Themajorityofcrowdfundingdonationscomefrompersonaloremotionalconnectionswiththeprojectcreator(Bretschneider,Knaub,&Wieck,2014).Infact,aproject’ssuccessispositivelycorrelatedwiththenumberofFacebookfriendsoftheprojectcreator(Mollick,2014).

Ifyou’rerunningacrowdfundingprojectforalargerbusiness,youmightbetemptedtoonlypromotethatprojecttoyourcompany’saudience.However,indoingso,you’dbeexcludingthemostpowerfulaudience:yourpersonalnetwork.

Tomaximizethesuccessofthatproject,youneedtoshareitwithyourpersonalconnections—friends,family,coworkers—especiallytowardthebeginning.Youneedthoseearlydonationstoincentivizeotherpeopleoutsideyourpersonalnetworktofundtheproject.

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Tac$c15:OffertheLowestPossibleDona$on

Mostcrowdfundingplatformsdisplaythenumberofcurrentbackersofaprojectinaveryprominentplace:

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Potentialdonorsusethatmetrictodeterminethevalueoftheproject:

“…these statistics invite conjectures about the (unknown) quality of the project. A sizable amount of early capital and numerous early backers are hints that many have already scrutinized the project, liked it, and trusted its proponents and their ability to successfully complete the project.” (Guerini et al., 2013,pp.4)

Becausethatnumberprovidesastrongindluenceindonating,youshouldindlatethatmetricasmuchaspossible.

Whencreatingrewardtiers,alwaysofferthelowestpossibledonation(usually$1).Albeitasmalldonation,you’llbeincreasingthetotalnumberofbackers.Thatindlatedmetric,inturn,shouldhelpyoucollectmoredonationsmovingforward.

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STRATEGY:MAINTAINYOURPROJECT’SMOMENTUM

Soyou’veattractedearlydonorsthroughyourpersonalconnectionsandlowdonationtier.Nowwhat?Howdoyoumaintainyourproject’smomentum?

Unfortunately,it’snotthateasy.KuppuswamyandBayus(2013)analyzed25,058Kickstarterprojects.Theyfoundthatbackersupportfallsintoa“bathtub”shapedpattern.Themajorityofbackersemergeinthebeginningandendofaprojectlifespan:

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Sohowcanyoumaximizedonationsduringthemiddlephase?Thissectionwillexplainacoupleideas.

Tac$c16:ChooseaShorterProjectDura$on

Whenstructuringyourcampaign,youcanoftenchoosethedurationofyourproject.Ifso,youshouldchooseashorterduration(Kickstarterrecommends30days).

Mollick(2014)analyzed48,500projectsandfoundthatprojectswithshorterdurationsweremoresuccessful.Why?Theresearchersuggestedthatlongerdurationssignifyalackofcondidence.

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Tac$c17:GiveFreeRewardsatVariousFundingLevels

Eventhoughmostcrowdfundingplatformsofferrewardsbasedondonationtiers,youcouldalsoofferrewardsforcertainfundinglevelsreached.

Supposethatyou’refundingaplayandyourprimarygoalis$5,000.Youneedtohit$5,000inordertokeepthefunds.

Withintheprojectdescription,youcoulddescribedifferentrewardsthatwillbedeliveredduringtheprojectifcertainincrementsarereached:

• Whenwereach$500,I’llpostavideointroducingthecast.• Whenwereach$1,000,I’llholdaninformalmeetuptotalkabouttheplay.• Whenwereach$2,500,I’llpostafulltranscriptofthedirstscene.

Noneofthoserewardscostmoney.Yettheyincentivepeopletodonate,evenintheearlystagesofacampaign.

Thatstructurecanhelpdonorsappreciatethevalueoftheirdonation.Ifyourprojecthasonelargefundinggoal,onedonationisasmallfractionofthetotalgoal.Notveryimpactful.Butifyourprojecthassmallerinterimgoals,onedonationconsumesalargerfractionofeachgoal.Sodonorscanmoreeasilyappreciatethevaluethatthey’reproviding.

Andithasotherbeneditstoo.Intermsofmotivationresearch,peoplearemorelikelytocompletealargegoalifthatgoalisbrokenupintosmallerunits(Gal&McSchane,2012).

You’llalsotriggermorereciprocity(Cialdini,2006).Bygivingeveryonefreerewards,they’llexperienceastrongerobligationtodonate.

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Tac$c18:ProvideRemindersThroughouttheProject

Onmostplatforms,projectcreatorscanpostupdatesabouttheproject.Xuetal.(2014)foundthatprojectsaremoresuccessfulwhencreatorsprovideregularupdates.

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Theresearchersalsoexaminedthetypesofupdatesthatindluencedthesuccessofaproject.Theyanalyzed8,529Kickstarterprojectsandfoundseventypesofupdates:

1. SocialPromotion–Encouragingpeopletospreadthewordonsocialmedia

2. ProgressReport–Describingthecurrentstatusofthecampaign

3. NewContent–Addinganewfeatureorideaintotheproject

4. Reminder–Remindingpeopleabouttheloomingdeadline

5. AnswerQuestions–Addressingquestionsthathavebeenasked

6. NewReward–Addinganewrewardlevel

7. Appreciation–Thankingsupportersfortheircontribution

Amongthoseupdates,reminderupdatesgeneratedthestrongestindluence.Theresearchersattributedthatdindingtothepowerof“theask”incharityfundraising.

Otherstrongupdateswereprogressreports,newrewardsandsocialpromotions.Theweakestupdatewastheappreciationupdate.

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Tac$c19:TargetDonorsWhoCanEmpathize

Whenpromotingyourcampaign,don’tblastiteverywhere.Bestrategic.

Tomaximizeyourdonations,youneedtotargetpeoplewhocanappreciatethevalueandimportanceofyourcampaign(Bekkers&Wiepking,2010).

Whoarethosepeople?They’reusuallypeoplewhocanempathizewithyoursituation.Forexample,peoplearemorelikelytodonatetoacharitydightinganillnessiftheyknowpeoplewhoaresufferingfromthatillness(Bekkers,2008).

Youcanapplythatsameinsighttocrowdfunding.Ifyou’relaunchingacrowdfundingcampaigntofundyourplay,youshouldsendyourcampaigntopeoplewholaunchedsimilarcampaignsinthepast.Thosepeoplecanempathizewithyourexactsituation.

Inparticular,youshouldtargetcrowdfunderswhoweresuccessful.Thosepeoplewillbeaprimetargetbecausethey’llfeelagreaterobligationtogiveback(Bretschneider,Knaub,&Wieck,2014).

Youcouldalsotargetactors,directors,andothernotabledigureswithinthetheatricalworld.Thosepeoplewillexperiencestrongerempathycomparedtopeopleoutsidetheworldoftheater.

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Conclusion Welp,congratsfortrudgingthroughtotheend.Crowdfundingwillalwaysbeachallengingconversion.Buthopefullythetechniquesinthisarticlecanreducesomeofthatdifdiculty.

Willthesetechniquesmagicallycatapultthesuccessofyourcampaign?Probablynot.

Canthesetechniquesprovideamodestbumpinperformance,increasingyouroddsofsucceeding?Absolutely.

Sinceyou’llbespendingatonoftimeplanning,creating,andpromotingyourcampaign,youshouldbeincreasingyouroddsasmuchaspossible.

Soifyou’rerunningacrowdfundingproject,Iwishyouthebestofluck.