Crowdfunding is building momentum at an incredible rate. The primary benefit seems obvious: easy access to cash in order to start a business or raise money for a meaningful cause. But, a
successful crowdfunding campaign offers more benefits than just a quick buck.
Why are small businesses, startups and nonprofits getting so excited about crowdfunding? As we uncover below, the benefits of crowdfunding offer priceless opportunities to those looking for money to support their next creative project.
Proof of Concept
Crowdfunding was designed to allow artists, musicians, authors and entrepreneurs the opportunity to raise money for a project even before a final product was complete. For small business owners and entrepreneurs having the chance to validate their product before investing thousands of dollars is priceless.
With a crowdfunding campaign it’s easy to quickly perform a feasibility study in a matter of days or even hours. For instance, evaluating the potential cost to create a product as well as the eventual price point and profit margins can be determined quickly.
In addition, using crowdfunding to demonstrate feasibility can help reveal any technical issues, budgeting and overall marketing strategies without investing any money upfront. Other benefits of using crowdfunding to develop a proof of concept is to identify the strengths and weaknesses of a project as well as potential opportunities.
Estimate Demand and Mitigate Risk
Will anyone buy our product or donate to our cause? This is a question that most entrepreneurs have a difficult time answering while developing a project from scratch. They can research, analyze and speculate but it all comes down to their customers. Will they buy into the project or cause?
Is the market for their product larger than expected? Or worse, is it smaller?
There are hundreds of heartbreaking stories about entrepreneurs who invested their life savings into the next great business or widget and eventually lost it all. With crowdfunding they could have estimated demand for their project without spending a dime. And if the crowdfunding campaign was successful they would have access to the capital they need to keep going.
Test Marketing Material
Contrary to popular belief most groundbreaking products do not sell themselves. And it does not happen overnight. While certain products appear to have overnight success, the real truth is that the entrepreneur had painfully researched consumer demand and implemented a strategic marketing plan. Crowdfunding provides the opportunity to test marketing materials and find out what message resonates with the customer.
The best part is that if a marketing message falls flat, it can be revised or eliminated completely without harming the product or brand message.
In addition to testing sales copy and video message on the fundraising page, crowdfunding allows entrepreneurs the opportunity to test their social media marketing efforts and advertising campaigns quickly. These lessons will be valuable after a project is funded and business continue to promote and sell their product.
Extra Promotion and Exposure
Crowdfunding offers a great opportunity for entrepreneurs to reach an audience they might not otherwise be exposed to. Not only can a project gain serious momentum through social media efforts but also with bloggers and news outlets.
Popular projects are often featured on the homepage of crowdfunding sites giving fundraisers rare advertising opportunities. A remarkable product or cause can gain traction immediately thanks to the power of the established community on these crowdfunding sites.
Gather Customer Data and Feedback
Another valuable benefit of crowdfunding is the access to customer data that might not otherwise be available. Entrepreneurs can find out who their customer is, where they’re from and why they chose to support the project. Of course the most important customer data that is collected is their email address, providing the opportunity for constant contact, updates and upsells down the road.
The community platform of crowdfunding sites allows the chance for entrepreneurs to collect open and honest feedback about their project. Do special features need to be considered on the next edition or should certain elements be dropped completely? Answers to these questions can be collected quickly and new opportunities can present themselves in unexpected ways.
Bonus: Quick Access to Cash
The greatest part about crowdfunding is that not only do entrepreneurs receive the above benefits for free, but they also get sales and donations too!
It would seem that the money would be the primary benefit, but it’s not. Crowdfunding can and should be used to test new projects, markets and opportunities even before it’s time to raise money.
Entrepreneurs that use the benefits of crowdfunding in their favor will find that raising money is simple once the fundamentals are conquered. The best part is that starting a campaign is usually free! No need to risk the time, money or energy to create a project that no customer wants.
We outlined the five primary benefits of crowdfunding but there are many, many more. As most entrepreneurs will agree, crowdfunding offers the opportunity to start a project that matters and build an audience of loyal customers for free!
What do you believe are the greatest benefits of crowdfunding?