by Hannah Sieber, co-founder and COO of EcoFlow Tech
Crowdfunding has become common place for new products and new brands. Kickstarter companies alone have raised more than $786 million in funds (Forbes) and while many companies still use this method for raising money for production, others are recognizing the marketing value running a campaign can have. It’s a great tool for companies to introduce a new brand and test product-market-fit in an early, low-risk environment; cultivate a group of early adopters who become product evangelists and provide crucial feedback and support; get early customer feedback on product concept and design and build brand equity for a product. A successful campaign often makes journalists eager to write about a company and imbues confidences in retailers and future resellers.
My company, EcoFlow Tech, raised more than one million in sales and achieved our goals of getting customer feedback and generating buzz. However, having a high top-line sales numbers doesn’t necessarily mean you will hit your goals, or even that your campaign was a success. Read on for what additional factors to consider so that when all is said and done, you can call it a win.
Know what you need in the end.
Start by asking the basics — what margin do you want? While many think about crowdfunding as a top-line sales number, it’s critical to evaluate all the costs associated with the campaign, as the balance between raise and spend absolutely factors into your outcomes. With that number in mind, think strategically about the costs for website and campaign development, PR, digital marketing and all aspects of product costs, even the “hidden” ones.
The first spend – website and campaign development.
One of the first non-product costs is building out your campaign and website. Find someone with a strong user experience (UX) background to help you think through the funnel for each stage of the campaign. Your website will serve a different purpose at different times. In the very beginning focus on attracting visitors to your site for email collection, with the goal being to build an email database of interested, qualified candidates that can convert to sales when your campaign launches. After the campaign launches, update the website and provide a significant amount of product information that would encourage users to buy the product, shifting the focus from email collection to funneling users to the crowdfunding page.
Campaign development includes both content and strategy. Content is king – so it’s worth investing in the right resources to make sure your videos resonate, your photographs entice people and your copywriting speaks to consumers.
Campaign strategy also includes your perk strategy, stretch goals and overall pacing of the campaign. In terms of sales, most campaigns follow the shape of an inverted bell curve so it’s important to keep the pacing up in those middle weeks. This can be done through launching new perks, running flash sales and targeting the non-purchasers from your email list. My company did this by offering bundles of products together at a discount one week into the campaign and running holiday flash sales.
The biggest driver of success is also the hardest to measure.
PR is arguably one of the most important drivers of success, yet is one of the hardest to measure, and therefore can feel like one of the riskiest places to spend money.
We ultimately hired an agency since we decided the additional placements they would get would cover the cost of hiring them. (Think total publication views x conversion rate = total sales and cost of agency / profit from those sales = units needed to sell to break even). The challenge then becomes how do you calculate that conversion rate?
If the goal of your PR effort is to drive sales, you want to look at outlets that are more likely to convert. Those can be from smaller niche press, technical press or business press. When evaluating which outlets to engage, consider looking at each publication’s unique views per month, so you can evaluate their audience size and audience demographics. In our case, some of the niche publications who reviewed us resulted in more tracked sales than big name tech publications like CNET.
Even from a high-converting publication, how do you know how many people who viewed an article bought your product? Tracking can you help you solve some of the mystery — most pre-order campaigns allow you to easily track the last webpage someone saw before landing on your campaign. For example, you can see if they landed on your page from Forbes.com, their search browser or your website. However, even knowing where they landed from is often not enough to fully track a sale.
It can take three impressions before someone remembers your brand or product (Business Insider). That means if publication one and two mentioned your brand, but publication three is where a consumer clicked on your page and purchased from, the former won’t get any credit for a tracked sale, however they are all equally as valuable in bringing you a customer.
Managing digital marketing spend.
Another often large expense is digital marketing. Digital marketing refers to any dollars invested in online advertising through platforms such as Google Adwords or Facebook Ads. There isn’t a perfect metric for how much you should spend on digital marketing, as it really depends if your goal is building a brand (optimize for impressions on your website), closing sales (optimize on conversion rate), keeping cost low (optimize for cost of acquisition) and much more. It’s worth tracking your spend-to-raise ratio closely so you know the value of every dollar brought in.
It’s also important to know what you want to track. Your click-through-rate (CTR) helps you track engagement with your ads and website more broadly. A high CTR can indicate you have good branding and are getting a lot of impressions to your website, but it doesn’t take conversion into account. On the flip side, looking at your conversion rate is a great metric, but that doesn’t factor the cost you pay to acquire each consumer (COA). How you define conversion will also change across the campaign. For example, conversion rate is how many people are converting based on how you have defined conversion – in the lead gen phase it might be “left an email address,” in the pre-order phase it may be “how many people made a purchase.”
Don’t overlook “hidden” product costs.
Finally, don’t forget to factor in your product costs. While this may seem obvious, make sure to consider any hidden costs that may come with the product, such as logistics, insurance, warranty accrual, etc. I also highly recommend factoring in some type of selling, general and administrative (SG&A) cost to cover your overall costs for running the campaign. This could include the monthly salaries of the internal team working on the campaign and any expenses you may incur for transportation, food, etc.
In the end, the amount you raise in a crowdfunding campaign is less important than if you met your stated margin and awareness goals. If you go into your campaign with a clear desired outcome and take the time to plan for all the costs required to run a successful campaign you’ll we well poised to be a crowdfunding success story.
Hannah Sieber, Forbes 2018 30 Under 30 nominee, is co-founder and COO of EcoFlow Tech where she is responsible for ensuring that any individual, from Denver to Delhi, be able to purchase, receive, and enjoy a product that fulfills their need and creates a more sustainable, greener lifestyle. Before EcoFlow Tech, she led the San Francisco Center for Economic Development’s Southern China effort where she worked with Chinese companies across the Pearl River Delta on building and financing strategic projects in San Francisco.