A new research revealed that claiming your product to be both “novel and useful” may actually ruin the chance to earn more in your crowdfunding goal
Aviation company PT Regio Aviasi Industri has recently broke a record for its project on Indonesian crowdfunding platform Kitabisa. The campaign aims to raise funding to help build the R80 airplane, designed by leading Indonesian engineer and former president B. J. Habibie.
By Tuesday, the project has successfully secured IDR2.6 billion (US$192,000) from 7,115 donors, out of the IDR200 billion (US$14 million) needed to build the prototype of the airplane.
By far this is the highest number ever recorded for a non-charity-related campaign, which is widely popular in the Indonesian crowdfunding scene. With 44 days to go, there is a strong possibility that this number will continue to grow.
So how does one run a successful crowdfunding campaign? One that is able to attract investors’ attention, so that it can fulfill its fundraising goal in time?
There are many ways to answer that question, but today we will go for the one backed by research.
In early October, a group of researchers from the Singapore Management University, HEC Paris, the University of Technology Sydney, and INSEAD published a paper titled Does the Crowd Support Innovation? Innovation Claims and Success on Kickstarter. It revealed the factors that affect the success –and failure– of a crowdfunding project.
The researchers analysed 50,310 projects on leading crowdfunding platform Kickstarter and uncovered the role of novelty and usefulness claims on the platform.
They eliminated arts-based projects from the list as it tends to be evaluated based on artistic value, and focus on US-based projects that fell in the nine largest remaining product categories in Kickstarter.
The researchers then used machine learning tools to extract a list of descriptors from the text, lead image and video of each project. They refer to the number of occurrences of the word “novel” and its synonyms as a proxy for novelty claims; the same also goes to the occurrences of “useful” and its synonyms. Finally, they compared the numbers with individual projects’ funding results.
It is concluded that, when used separately, claiming your project to be “novel” and “useful” do increase the total pledge amount. A single claim of novelty increases project funding by about 200 per cent, while a single claim of usefulness leads to an increase of about 1,200 per cent, as compared to projects devoid of any such claim.
However, when a product claimed to be both novel and useful, the total amount pledged was reduced by 26 per cent.
“Prior research has shown that products that are novel and useful typically succeed in the marketplace,” study co-author Amitava Chattopadhyay, Professor of Marketing and the GlaxoSmithKline Chaired Professor of Corporate Innovation at INSEAD, explained the results.
“But when projects make both claims, backers either assume a product’s benefits are inflated, that it carries a high risk of failure or that it divides the crowd between believers and sceptics, making it hard for backers to pick a side,” he continued.
He also noted that as compared to regular marketplace, in crowdfunding platforms buyers face a “very high level” of uncertainty, with possibilities of developers changing specifications along the way or even failing to come up with the final product.
Cathy Yang, Assistant Professor of Marketing at HEC Paris and fellow co-author of the study, confirmed that the higher level of uncertainty can drive backers to choose more “modest” form of innovation.
Steps to take
Based on the results of the study, e27 would like to recommend the following steps that you can try in running your crowdfunding project.
1. Know your product
The first thing that you need to do is to really understand your product because, surprise, sometimes there are cases when businesses failed to recognise the full potential of its own products. Make a list of all the things that your product is capable of doing, its unique selling points (USPs), and both of its strength and weakness. You might be surprised by what you can find in your list, and the image it eventually unveiled.
2. Know your potential buyers
Once you have discovered the “true colour” of your product, find out who are the people who might be interested in such product. Would a middle-aged man be interested in a floating, zen-like stone? People who are living in urban settings – what are the chances for them to have a pet? If our grandfather is buying something in Kickstarter, would he be interested in something that is useful or novel? Every product has its own target audience, so avoid saying “we are targetting the general public.” Dissect the so-called general public by age, social strata, and lifestyle. Do not be generic; be specific.
And finally, focus. Once you have determined what your product is, and who is going to buy them, you can finally decide how to approach the campaign. As the report suggested, even minor details such as your choice of words can affect your chance of securing funding greatly. Invest in good copywriting and content creation to execute the strategy that you have decided.
Image Credit: yarruta / 123RF Stock Photo
The post What you should –and should not– say when fundraising for a crowdfunding project appeared first on e27.