Blog Post

Crowdfunding 101 – When and Why Should You Crowdfund?

Crowdfunding could power your next project in more ways than raising money

Crowdfunding, by definition, involves raising capital for a project through its target audience – or ‘crowd’ – contributing many small sums.

It is an increasingly popular alternative finance method that sidesteps more traditional funding avenues – such as bank loans or angel investors – by propelling the project directly to its consumers.

But what if crowdfunding could offer you more than just raising capital?

Here, we break down how reward-based crowdfunding could help you kick-start your next project, besides giving it a cash boost – and why, when it comes to crowdfunding, timing is everything.

  1. Engage new customers

While crowdfunding is a means to raise funds, it can also double as a powerful marketing exercise with your potential customers.

To attract as many backers as possible to your campaign, you must engage with your target audience and persuade them to support your project. In other words, through crowdfunding you are already marketing your product – making it an ideal way to engage new, loyal customers with presales or rewards.

Plus, applying your customers’ feedback makes them more likely to feel like stakeholders in the project and personally attached to its success.

  1. Gather community feedback

Raising your project’s profile with your target audience requires transparency and openness, which will inspire another highly valuable benefit – customer feedback.

If your campaign is aimed at raising funds to launch a product, you can use the feedback you receive from the community as part of your product research or to make improvements.

Your community’s feedback will be a realistic indicator of what people are willing to buy, highlighting whether they like the product, if they might like the product in the future following changes, or which type of product most interests them.

For example, a figurine toymaker might use crowdfunding to raise the money needed to buy new machinery or moulds. Through the campaign, he presents various options of superhero figurines in different sizes. Not only will he establish if there is a market for his product before investing in it, but he will also have a good idea which moulds and tools to purchase first, to meet customer demand.

  1. Launch your product

In business circles, crowdfunding is fast becoming established as one of the best ways to launch a new product onto the market.

Apart from crowdfunding’s ability to reach a potentially massive customer base – no matter if you are an established company or a fledgling startup – your customers will love the incentive of new products, offered at discounted prices or alongside attractive rewards.

And all this, at a fraction of the cost of a traditional product launch.

  1. Boost brand awareness

Having successfully engaged with your supporters, they may be inspired to become your project’s unofficial ambassadors. As they share it with their own networks, they help you get the word out about your project in the ultimate organic marketing and outreach exercise.

If enough buzz is created around a project in this way, the media may even pick up your crowdfunding campaign, giving your project yet another springboard to success.

When should you crowdfund?

With all these benefits available through crowdfunding, you may be tempted to get cracking on your campaign right away – but beware. A poorly prepared campaign that is launched before time can reflect badly on both you and the project in the long-term.

You should hit the launch button on your crowdfunding campaign only when the timing is right for you – meaning that you are fully prepared with a campaign plan, have carried out research on your idea, created compelling content, and have the resources available to guide the campaign through to its close (and beyond).

Speak to a member of the ZAAR team today to start your journey towards a successful crowdfunding campaign.