Why You Should Crowdfund Before You Groupon
In recent months, Chattanooga has been a terrific model for growing businesses to utilize crowdsourcing to raise capital for new projects, build their fan bases, and tell their business’ stories. Crowdsourcing, a method for outsourcing a task to a large group of people, has largely been used by businesses to raise capital for new ventures. The typical crowdfunding project probably looks like this: Your organization needs money for a project and doesn’t have it readily available. Rather than apply for a bank loan, you tell the world why you need a certain amount of money and offer incrementally larger incentives to funders to give to the cause. Kickstarter, the current king of crowdfunding sites, only awards organizations the money that has been pledged if they reach their stated goals, and then they take five percent of the funds. If the project fails, the money is refunded to the donors.
Another site, Indiegogo, helps mitigate the risk of not reaching your total by letting your organization keep the money even if you don’t reach your goal. (They charge nine percent if you don’t make your goal and four percent if you do.)
Crowdfunding is a stark alternative to growing a customer base through daily deal sites like Groupon and LivingSocial. The idea behind these sites is that your company will attract a host of new customers via a large email list by offering your product or service at a deep discount and will fall in love with you so much that they then come back and become regulars paying full price! As a consumer, I love these sites. My wife and I plan our dinners out, activities, and are even thinking about booking our next vacation through them. I mean, who doesn’t like paying half price? As a marketer, however, I hate it. Most folks, myself included, don’t sign up for Groupon or Living Social to discover new places; we’re there for the deal and most of the time will leave when it’s done. We’re buying based on price, not because of brand affinity. Not to mention that businesses are offering services at half price, and then giving away half of that, and then receiving that money in three increments over 60 days.
Here are three of the biggest advantages I see to utilizing crowdsourcing to grow your business to daily deal sites.
Crowdfunding gives your organization an immediate core group that is passionate about your product or cause.
Those who invest in crowdfunding projects want you to succeed so much that they are willing to pay you extra for the incentives you are offering in order to see you succeed. Because crowdfunding sites are easily shareable, the passionate followers you have created can tell your story to their friends via their social networks. Think about it: Chattanooga small business Pure Sodaworks had investors from as far away as Spain, Sweden, England, Australia, and Latvia. Investors, not deal seekers, feel a part of your business and are going to be your key audience even after your crowdfunding project is done. By the way, you’ve now got their names and email addresses, too.
Customers give because your product is remarkable, not because the price is remarkable.
One of the greatest things about crowdfunding your project is that you receive a pretty great metric on whether your venture will work, as you have it laid out before you spend the money on the investment. The people who are giving you money want your product, not a less expensive alternative (Think about it, that guy in Spain could have gotten cheaper soda than by giving money to Pure Sodaworks.) These investors are your best evangelists, or “sneezers” as Seth Godin likes to call them. You can now utilize this list (and their money!) to grow your business after your crowdfunding venture is complete, and you aren’t giving away your valuable product when you crowdfund because your costs are covered.
Your campaign has greater longevity, is more easily updated, has a broader reach, and is archived on most crowdfunding sites.
Depending on the site used and the amount needed to be raised, crowdfunding campaigns typically last anywhere from a week to a month. During this time, your company is blessed with terrific content to share with the public and is given a rare opportunity: participating in marketing that directly brings in money! Rather, with daily deal sites, the longer you keep your deal up, the longer you are receiving essentially 25% of what you normally receive for your product or service. Also remember, you can’t control who buys your coupon. It could be a current customer who has happily been paying full price. Truly remarkable crowdfundings are featured on prominent areas of crowdfunding sites as well. While most daily deal sites limit your advertisement to the local list that has been generated by the site, crowdfunding opens your project to investors from around the world. (A Russian newspaper is currently writing an article about Pure Sodaworks.) After your project, your page lives on at the crowdfunding site and becomes a terrific success story.
Certainly, there are ways to make daily deal sites work for companies. Options like limiting the number of coupons you offer, making them available to new customers only, if possible, and specifying a time that the coupon can be used all help your project hurt less. I have to wonder though, why would you want to hurt less if you can have the best of all worlds with a killer marketing project that raises much needed capital and generates a group of passionate followers who feel a deep connection to your company? Crowdfunding has transformed companies and has become such a hit that Congress is scrambling to figure out how to regulate it. The next time your organization has a new venture you want to pursue, consider inviting your customers in to the story of your company by utilizing crowdfunding to earn, not leech your hard-earned dollars.
→ Ryan Russell, Strategist, Social Media + PR, AREA203 Digital …@ryanwprussell