With the rise in the popularity of Crowdfunding, entrepreneurs are looking for ways to leverage the power of their personal networks and social media to reach millions of consumers. Funding raised through Crowdfunding grew roughly 33% over last year.
So what is Rewards-Based Crowdfunding?
Rewards-Based Crowdfunding is a type of Crowdfunding in which people receive rewards for supporting a project. The rewards may be in the form of products, services, or experiences related to the project.
This approach enables entrepreneurs to finance their campaigns in exchange for a portion of their earnings. When done right, these campaigns can be incredibly successful. Businesses that use Rewards-Based Crowdfunding tend to have a higher than average response rate, often resulting in substantial sales.
This Crowdfunding style is so popular among business owners because it only provides the perfect vehicle to share their stand and also encourages (and incentivizes) community involvement by creating interest and excitement in their potential campaign backers.
Additionally, rewards help generate interest and drive investments to a given campaign if they’re compelling enough. For example, the Eiyuden Chronicles Kickstarter prompted my investment because one of the rewards levels offered the original soundtrack. You better believe I was all over that!
What ensures the success of a Rewards-Based Crowdfunding campaign?
Projects with a clear and concise pitch, attractive rewards, and a well-defined target market are more likely to succeed with rewards-based Crowdfunding.
Other tactics to help your crowdfunding project succeed are creating a solid social media presence and building a community of supporters before launching your campaign. To achieve that, gather emails from your potential project backers and produce a newsletter list to keep your supporters updated on your project’s progress and share information they want to know (and not what you want to write).
I recommend the book Traction, by Gabriel Weinberg if you’re unsure where to begin with marketing strategy and tactics. Weinberg’s book provides actionable tips for taking advantage of several (upwards of twenty) marketing channels. Note: There are a number of books titled Traction be sure you’re buying the one authored by Gabriel Weinberg.
What kinds of rewards are a good fit for a Rewards-Based Crowdfunding campaign?
The best rewards for a Rewards-Based Crowdfunding campaign are related to the project and appeal to the target market.
For example, if you are raising money to fund a new album, you could offer rewards such as a copy of the album, a t-shirt, or a personal thank you from the band. If you raise money for a new product, you could offer rewards such as the product itself, a discount on the product, or a behind-the-scenes look at the product development process. Be creative and think about what would appeal to your target market.
These types of rewards are good examples of what to offer in your campaigns:
- A copy of the album
- A t-shirt
- A personal thank you from the band
- The product itself
- A discount on the product
- A behind-the-scenes look at the product development process
- An in-person, one-on-one meeting
- Specialized consulting sessions
- Acknowledgment/shout-out on social media platforms
- Their name in the credits
One of the most successful rewards-based campaigns was Kickstarter’s Pebble Time watch campaign. The Pebble Time raised over $20 million throughout its 37-day campaign on Kickstarter. Another successful campaign was MakerBot Digitizer’s, also on Kickstarter, which raised over $2.5 million.
What are the pros and cons of Rewards-Based Crowdfunding?
Crowdfunding is a way to grow your customer base and boost sales. However, this model has significant downsides that you should be aware of.
Failing to hit your target goal will result in the company losing all money raised, even if they reach it afterward. A failed campaign may result in a crowdfunding failure that could have a damaging effect on a business and its (as well as the owner’s) reputation within their communities.
With less than a few months to plan a Rewards-Based Crowdfunding campaign, entrepreneurs must make quick decisions while balancing their bottom line. However, they must also be realistic about what they can deliver in that short period of time.
What are the legal requirements for Rewards-Based Crowdfunding?
Crowdfunding is legal and does not require you to register your company or obtain a license. However, there are some legal implications that you should consider to launch a successful campaign.
Reward-based Crowdfunding is a form of sales that falls under the regulation of the Federal Trade Commission (FTC). Because of this, businesses should have a complete understanding of all state and federal regulations governing sales before launching a crowdfunding campaign. In addition, international Crowdfunders should check with their country of origin and research applicable laws.
Examples of Rewards-Based Crowdfunding Campaigns
Below are several examples of Rewards-Based Crowdfunding campaigns that hit their fundraising gIn addition, Those examples provide another for what types of rewards and campaigns succeed.
- IgnitionDeck: https://www.peerbrick.com/projects/balsaminas-713/
- Kickstarter: https://www.kickstarter.com/projects/rabbitandbearstudios/eiyuden-chronicle-hundred-heroes
- Indiegogo: https://www.indiegogo.com/rewards/successful-campaigns
- MakerBot: https://www.kickstarter.com/projects/1775780533/makerbot-digitizer-3d-scanner-printer
- Pebble: https://www.kickstarter.com/projects/getpebble/pebbl e-the-worlds-most-beautiful-smartwatch
How IgnitionDeck Helps You With Your Rewards-Based Crowdfunding Campaigns
At IgnitionDeck, we specialize in building successful Crowdfunding Platforms for our customers. We do that through our Valet service and our IgnitionDeck Customization service. We have a proven track record of building solid, bespoke, Crowdfunding solutions and add-ons that help our customers move the needle in their business and deliver value to their project creators and backers.