What can Businesses Learn from the Rise of Crowdfunding?
The Oxford Dictionary defines crowdfunding as: “the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.”
There are now numerous major platforms such as Kickstarter, which provide an easy method of pitching ideas to the public and allowing them to collectively fund and support the ideas being put forward.
High profile examples such as the Pebble smartwatch (raised $10.3M), the Oculus Rift virtual reality project (raised $2.4M and was consequently sold to Facebook for $2B) and the Ouya Android-based games console (raised $8.6M) have proven crowdfunding to be a viable method of starting a business or launching a new product.
Why does it work?
- Logic would entail, that if enough people invest in the idea of a company to the extent that they pledge money, then they will be somewhat reflective of public opinion / the opinion of the target audience.
- The business ensures that they have a powerful base of brand advocates / influencers
- The social funding of a project operates as a form of social proof – it generates interest and offers a compelling reason for others to pre-emptively believe that they will be interested in the project.
- The business / project is held accountable by a large group of investors.
- There is continued debate among a large number of investors about company and product decisions.
What can we learn?
There are a number of takeaways, regardless of how your business is funded or owned.
The concept of building brand ambassadors is important for any brand to succeed. Your business not only needs to be able to consistently deliver excellent experiences, but also understand the specifics of exactly why it is succeeding. Only by continuing to listen to, respond and react to customer feedback, can businesses demonstrate that the company proactively engages with new ideas and opinions.
Gartner estimates that 80% of your future revenue will come from only 20% of your current customer base. Your ability to establish and grow this group of ‘super customers’ will play a significant role in determining future success.
Treat all Customers as Investors
After choosing to spend their money with your business, all customers should be treated as investors. That said, you don’t have to ask for financial investment, in order to make your customers feel invested psychologically or emotionally in your brand.
By actively inviting customers to feed back on their experience, you create a level of participation otherwise absent after a sale. By then demonstrating that your business cares about their opinion enough to respond and act on the feedback received, they can feel as though they have played a key role in plotting the road map of your company.
Social Proof is Important
As decision-makers, we naturally take cues from others. Your business needs to be able to demonstrate across touch points the endorsements of previous customers. Although they might not be investors per se, they still hold significant influence. What’s more, without such a vested interest in your company, their opinions as consumers potentially offer more value to peers than those with a financial investment in the company.
Are you accountable to your customers?
If a crowdfunded company veers too far from the stated objective, or fails to meet expectations, there will be dissenting voices to keep them on track. There is something of an irrational fear when it comes to negative feedback. Across the 1500 or so businesses that currently gather ratings and reviews with Feefo, over 94% of all feedback left is positive. That said, when a company receives a negative review, this is an opportunity to rectify a mistake, identify a weak point in your customer experience or perhaps explore new product opportunities.
Crowdfunded businesses are succeeding as a result of a continued communication between investors and creators. Businesses of all descriptions can effectively recreate this dynamic – firstly, by empowering customers and inviting them to provide feedback, and secondly, by placing genuine value on the feedback that they receive.
To learn more about how Feefo customer feedback can help your business, please contact us:
T: 08456 800 320