How to identify your crowdfunding campaign objective before you set your funding goal.
At first glance, setting your funding goal for your crowdfunding campaign appears to be a straightforward task. Shouldn’t it be the amount you need to create your product?
The answer to the above question is increasingly becoming “no” for many campaigners and it has to do with their campaign objective.
Why? Well, Kickstarter & Indiegogo have evolved past the ideas they were founded on. Even though Kickstarter will prominently state that they are not a store, the platforms are being treated like any other ecommerce platform. This has attracted companies that have realized crowdfunding is more than a strategy to acquire funds, it is part of a comprehensive marketing strategy.
The goal of this article is to help you identify your campaign objective which will help you set your funding goal.
What Is Your Campaign Objective?
Your Campaign Objective is how you define success for your campaign. To help identify what it is, let’s start with some questions.
Answer these questions:
- What are your fixed costs to create your product? (cost of minimum order quantity, molds, tooling, etc.)
- If you lost money on the crowdfunding campaign, would you still go through with it?
- If yes, how much are you willing to lose?
- What’s more important to you: showing a high amount raised on your campaign OR getting funds to create your product?
With the answers to these questions, now ask yourself…
Which statement do I identify with more?
- Funding Strategy — If I don’t hit my funding goal on Kickstarter or Indiegogo, then I won’t create my product.
- Marketing Strategy— I already have the funds to create my product or have other means to get the funds to create my product. Kickstarter or Indiegogo is my way of getting mass exposure for my product.
These two paths are not mutually exclusive. Meaning, crowdfunding can both be a funding strategy and a marketing strategy, but it’s important to know which one is really driving your decision to crowdfund.
Crowdfunding is a Funding Strategy
If you identify more with crowdfunding being a funding strategy, then it is pretty black and white. You should choose a funding goal which is the minimum amount required to create your product. Nothing fancy here because if you don’t hit that funding amount, you won’t create your product so it’s not worth risking it.
Crowdfunding is a Marketing Strategy
If you identify more with crowdfunding being a marketing strategy, then you should choose a funding goal you believe you can reach within 48 hours.
Getting funded quickly has it’s advantages:
- Increased buyer confidence —many backers hold off on backing projects that aren’t funded. The Moment 2.0 creators had a goal of $500K and said “between $300–500K we heard from a lot of potential backers who were going to wait until we crossed the funding line. Pick too low and you won’t have enough money to deliver. Choose to high and you risk losing momentum and worsening conversion rates.” (source)
- Get press coverage more easily — crowdfunding campaigns already have a bad rap in press because of the amount of high profile projects that failed. As a result, getting top tier media to cover your project is becoming more difficult — if you aren’t funded yet, you’ll have an even greater challenge getting coverage.
- Get traffic from Kickstarter’s popularity rankings — Kickstarter has two primary sorting algorithms: Magic and Popularity. Magic is its default ranking which relies less on sheer number of backers/day and funding amount. Popularity is a highly trafficked ranking algorithm that definitely takes into account your funding amount. If you reach your funding goal quickly and are extremely funded, you will be high up in the rankings, giving you access to free traffic.
How do you choose a funding amount you can hit within 48 hours?
To know your funding goal that is achievable within 48 hours, you need to understand how much traffic you will be able to send to the campaign during that time. The top sources of traffic will be your email list, paid advertising, PR, and the crowdfunding platforms. A pre-launch email list is typically responsible for most of the sales during the first 48 hours of a campaign. It is the marketing channel we spend the most time building before we launch the campaign.
Here’s how you can use your email list to set your funding goal using very conservative numbers. For example, let’s say a campaign has…
- An email list of 10,000 subscribers
- We estimate that 2% of those subscribers will back the campaign
- That equals 200 backers within the first 48 hours
- Those 200 backers will spend $150 on average
- Which equals $30,000 in revenue within the first 48 hours
With these numbers, we’d set the goal at $30,000 as we would expect to be able to hit that funding goal just from the email list.
With All Of This Said…Never Choose A Funding Goal That Is TOO Low
Don’t let all this talk about strategically setting your funding goal low cloud your judgement. In the end, you have to set a funding goal that will allow you to create your product. Might seem kind of silly to have to say that, but I’ve seen creators take a huge risk by setting the goal lower than what they actually needed. Moreover, there was no funding back-up plan. As you can imagine, things didn’t end well for them.