Every year in the innovation labs of the world’s top companies, tens of thousands of amazing product ideas are conceived and prototyped. From this multitude, only a select few are ever seen in the marketplace. An even smaller number go on to become successful products. GE’s FirstBuild, and a number of other companies on the cutting edge of innovation, have recently turned to crowdfunding to address these problems.
In the handful of years since its inception, crowdfunding has primarily been used by start-up businesses and entrepreneurs to provide access to capital. Yet last February, GE’s FirstBuild launched it’s first of two successful crowdfunding campaigns, driving over $3 million in pre-sales and acquiring nearly 10,000 customers. Why? Because FirstBuild, a wholly-owned subsidiary of GE charged with developing its next generation of innovative appliances, found in Indiegogo a place where we could put our products to a real market test.
Since that time, some of the world’s largest brands, like Phillips, Hasbro, and ShockTop, have jumped on the crowdfunding bandwagon, launching campaigns to validate product concepts and even source innovative product ideas. While this may seem like unnatural behaviour for a large corporation, it actually makes perfect business sense.
‘Enterprise Crowdfunding’ reverses the age-old product development model by prioritising market validation ahead of the capital-intensive process of preparing for mass-manufacturing. Through crowdfunding, companies can test out new ideas by conducting a real-time market test before investing in manufacturing. Furthermore, every interaction with customers on Indiegogo represents an opportunity to understand customer needs early. Every moment spent on marketing establishes a baseline for future product positioning and customer acquisition. Crowdfunding is a smart way for enterprises to build a brand. Through crowdfunding, satisfied early adopters become future product evangelists.
What does this mean? It means that crowdfunding offers a path to market for products that otherwise would have remained an engineer’s or designer’s unfulfilled dream. In 2015, FirstBuild proved the market wanted two new products through crowdfunding. Crowdfunding is one of the best tools for proving marketability for products when uncertainty is high. That’s why GE’s FirstBuild is returning to Indiegogo this July to launch a cold-brew coffee maker that reduces brew time by 98 per cent (URL to be provided shortly).
The great news for enterprises is that there is a known path to success. After a modestly successful first campaign for the Paragon Induction Cooktop, FirstBuild’s second campaign raised nearly 10 times more, and ranked in Indiegogo’s top ten grossing of all time.
We are now teaming up with Indiegogo to share our top tips for Enterprise Crowdfunding best practice:
- Have the right product. Perhaps the most important aspect is having the right product and knowing you can execute on that concept. Good products need to have approachable price points, solve an immediate need or pain point, and be vetted for feasibility by the engineering team.
- Have the right team. Successful crowdfunding requires a range of skills, from product management to branding. Our first campaign, Paragon, focused most of the workload on one or two people. Our second, Opal, utilised a larger team with defined roles including a digital marketer, a video producer and a product manager. This helped lighten the workload and distributed the effort in a way that helped optimise our results.
- Embrace that this is a new model. Larger companies need take on the agility and quickness of a start-up to be successful at crowdfunding. Crowdfunding is a relatively new approach, so it is important to be open minded and willing to experiment. Think of the social media rise in the early 2000’s.
- Test and learn like it’s your job. FirstBuild spent a lot of time on content marketing for the first campaign, Paragon. This proved to be very time consuming with little return while a late PR effort provided 90 per cent of our first-day sales. For the second campaign, we doubled down on PR early and shared content with the leads generated thereby. Being able to test and optimise your plans in real time is better than following a strict set of best practice guidelines.
- Do pre-launch digital marketing. Without a crowd, crowdfunding doesn’t work. It seems simple but it couldn’t be more important. Companies need to build a list of qualified leads before the campaign is live to ensure a strong launch.
- Start generating leads early. Email converts 34 per cent higher than other forms of outbound marketing. FirstBuild first started building leads for the Opal campaign 6 weeks prior to the launch. Through trial and error, we were able to optimise our messaging and began adding as many as 1,000 leads to our database per day. As the launch got closer, we started emailing out with clear call to actions such as ‘Don’t miss out on Early Bird savings’. We actually raised $450,000 from just one email sent!
- Invest in learning who your target audience is. Knowing as much as possible about what your target audience looks like gives you a much better chance to target them once the campaign goes live. Target audience testing begins in the pre-launch digital marketing. Market research need not be expensive. Some of our best targeting and timing tactics have come from information that is free on the internet.
- Go more nuts on digital once the campaign is live. Additional digital marketing helps to maintain momentum from start to finish. Learnings from your pre-launch spend lead to optimised ad copy and messaging to target your relevant audience. Knowing your margins and acquisition costs will afford you freedom to boldly invest in digital marketing.
- Maintain momentum. A crowdfunding campaign is a living, breathing, organic thing. It needs constant traffic, visibility and momentum. Projects that post updates at least once every five days raise 218 per cent more than campaigns that don’t, so make this easier by planning updates in advance. Promoting a crowdfunding campaign needs regular attention. If you stop for just one day the momentum can be lost.
- Fulfilment. It is essential to know that you can manufacture and deliver the product. Make this apparent of the campaign page. Customers have faith in the campaigns that they are confident can, and will, fulfil.
‘Enterprise Crowdfunding’ offers a unique opportunity to large organisations around the world. Having experienced two really successful campaigns I recommend this route to other large organisations looking at testing new ideas, gaining insight into customer needs and building brand awareness.
Taylor Dawson, Product Evangelist, FirstBuild Microfactory
Image Credit: NakoPhotography / Shutterstock