If you’ve been following any of our content, you’ll know that we were one the first to use the $1 reservation funnel in crowdfunding. It’s a strategy that we’ve used to help creators launch successful Kickstarter campaigns and more importantly, do so profitably so they can start their business on the right foot.
Crowdfunding is risky for creators. They put in a lot of time, money and effort to build their prototype and campaign, but still, over 59.9% of campaigns fail. That means over 25,000 projects fail every year.
The $1 reservation funnel reduces risk for creators. LaunchBoom creators have a failure rate of less than 3% and the $1 reservation funnel is the most important part of the marketing strategy.
But recently, we’ve seen a few naysayers in the tabletop games community say some not-so-kind words towards the whole strategy in forums, comments, and videos. We even had someone send one of our client’s hate mail.
Now, we’ve read the comments, heard their complaints, and considered their points. And here’s our response to all their concerns…
But before I dive into that, let me give you an overview of what the $1 Reservation Funnel is (for everyone who doesn’t know).
Contents
What is the $1 Reservation Funnel?
To explain what the $1 Reservation Funnel is, we need to talk about pre-launch. The pre-launch is the most important part of a Kickstarter campaign. Having a great pre-launch means having an explosive day 1 which carries momentum for the rest of your campaign. Having a bad pre-launch means the campaign will have an uphill battle ahead and may be dead in the water.
Here’s a typical pre-launch marketing strategy:
- Collect emails (usually from paid ads)
- Launch your campaign
- Hope those emails turn into backers
When we started helping creators in 2013, this is how we ran our pre-launch marketing campaigns. But we quickly ran into a problem: we had no idea if the emails we collected would actually back the campaign.
We would spend thousands of dollars collecting emails, then cross our fingers and hope for the best. Sometimes we would have a great launch. Other times, our email list would flop.
The results were not predictable, meaning it was incredibly risky for creators.
We had to find a way to know how likely someone on the email list was to buy before we launched. That way, we would know if the marketing dollars we were spending would generate a return on investment.
So thus came the $1 reservation.
Instead of only asking for an email, we would also offer a bonus discount or item for $1 afterwards. The $1 would be completely refundable. We thought that this would be a win-win for the creator and backer. The creator would have a better idea if someone was likely to back the campaign, and the backer would get a discount or bonus item.
And it worked.
Not only were we getting $1 reservations. We found that those who put down $1 were 30 times more likely to back a product than those who didn’t.
But it wasn’t just about the higher conversion rate, it was about marketing to the right people. We weren’t optimizing our ads for emails that could swing either way – we were optimizing for $1 reservations from superfans ready to back the campaign. That meant that creators could get higher return on their ad spend, which significantly decreases the risk of crowdfunding.
This is why the $1 reservation is so effective. It’s a way to gauge whether creators are reaching the right people with their ads. With the $1 reservation, creators knew which ads were resonating with diehard superfans – and which were only reaching on-the-fence casuals.
The $1 reservation funnel became a tried and true method to make sure our creators weren’t wasting money reaching the wrong people, give them certainty over their launch, and significantly decrease their risk when launching their product.
Objections to $1 Reservation
Okay, that all sounds great – so what were the complaints?
Well, as some creators, including some of our clients, started running the $1 reservation – there were some people from the tabletop games community who started to complain (some quite aggressively). Here are the main objections that we gathered:
- It feels predatory. Some people feel it’s wrong that creators were asking for money so early in the process (before they launched). They felt the the creator was taking advantage of them to get some extra cash.
- It’s another FOMO tactic. There’s a group of backers on Kickstarter, particularly in the tabletop game space, who are very against fear-based marketing tactics. This is understandable since FOMO tactics can feel manipulative. And to some people, this strategy felt like another FOMO tactic.
- It’s not fair to people who learn about the campaign later. This objection is centered around the idea that people who back the campaign later can’t get the bonus gift promised to $1 reservers who got advertised to. This feels unfair to them (especially if they’re the backer that learned about it later) – and leaves a bad taste for some backers who like to see everyone receive the same benefits.
- It sets a precedence that has the potential for abuse in the future. The idea here is “when does it stop?” Will creators be charging $20, $50, $100 before they launch? At that rate, can’t they just take the money and run?
While I don’t share the same sentiment with all of these objections, I can see where they’re coming from. I’ve backed a lot of crowdfunding campaigns and don’t like it when I feel like I’m being manipulated, misled, or treated unfairly.
Now, the question is: Is this all true for the $1 reservation funnel?
Addressing Concerns about the $1 Reservation Funnel
Let’s address these point-by-point.
“It feels predatory.”
I’m not really sure why people feel this way. The creator is asking for $1. I can’t even buy a bottle of water in San Diego for $1. The creator is giving an item of value for it too (likely worth more than $1).
Also, in most cases, the creator paid significantly more than $1 to find and reach these people – whether it’s through paid ads, conventions, or influencers. After payment processing fees, creators are usually left with about 66 cents. In the world of predatory money-grabbing schemes, this would be terrible (pay $10 to get $0.66).
Not to mention, people do not have to pay $1 to participate in the campaign. They’ll still get notified about the campaign when it launches and can choose to back the campaign then.
But what really nips this concern in the bud is that the $1 is completely refundable. With our system, we make sure to emphasize that. If someone decides they don’t want to back the campaign, they can always get their $1 back.
Now, there are some mentions of the $1 triggering the psychological phenomenon known as sunk cost fallacy. Sunk cost fallacy is the cognitive bias for people to feel the need to continue investing in something because they’ve already paid a cost in it – even if the continued investment is not optimal for them. For instance, you buy a movie ticket – jump into the theaters and within 30 minutes are bored. Instead of hopping out and saving yourself 90 minutes of boredom, you sit through all 2 hours because you’ve already put in 30 minutes. Or if you start watching a series only to find the quality tanks halfway through the season – instead of stopping your binge, you continue and watch through another 6 hours of subpar media because you didn’t want to “waste” the first 6 hours.
While the $1 reservation can have this effect, it is not the purpose or intention of the strategy. However, we’re hoping that two things can help decrease the effect of sunk cost fallacy with how we run the $1 reservation funnel.
The first is to emphasize the refundable aspect of the $1 and make it clear that they can always get their $1 back whenever they want. Ideally, this would take away the feeling of “I already put in a $1…I guess I have to go through with the rest”. If someone ever wanted to back out of the $1 – even if midway through the campaign – they could get their $1 back.
The second is to make sure to disclaim the Kickstarter price of the product when asking for the $1. This way anyone giving the $1 knows exactly what they’re buying into. There’s no forced upsell into something the person can’t afford. If the price of the product is too high, they can immediately opt out. This also helps creators because creators can test out the market viability of their product price before they launch.
“It’s another FOMO tactic.”
I can see why the $1 reservation feels this way. Creators are giving backers a gift for putting $1 down now so they know the person is committed. But if the person doesn’t do it now, they might miss out on getting this item.
Though this isn’t a complete fix, offering the bonus gift as an add-on during the Kickstarter campaign for not a lot more ($5 or so) can help alleviate this feeling. So it’s essentially a really low discount (you save $4 – still not enough for a decent coffee in San Diego). If anyone wants to wait and not get pressured to put down $1 – they can. Creators should make sure to avoid words like “exclusive” or “limited time” that create a feeling of urgency and fear.
The point of the $1 reservation is to find the people most likely to back the campaign, not manipulate backers to give money upfront. If urgency and exclusivity alienates the creator’s audience, they don’t have to use those tactics for this to work.
“It’s not fair to people who learn about the campaign later.”
I get this feeling – especially when I find out about a campaign towards the end of the cycle or even if I found out about a game after the Kickstarter ended. It feels like I can’t get the product (usually game) in full. And a lot of times, I’m willing to pay extra just to get my hands on the bonus items I missed — which comes the fix: offer the bonus gifts as add-ons during the campaign and as items backers can purchase on the creator’s e-commerce store (when the creator is at that stage).
Now, some people will still be bummed they got the higher price, but a lot more people will be okay with it if the price increase is nominal (like the $4 bump I mentioned above). Those who were willing to trust the creator enough to put $1 down early get something small but special – everyone else can get the same thing just for a little bit more. Because by the time the campaign is live, the bonus gift no longer helps the creator with their marketing efficiency. Since there’s no major benefit to offering it below cost anymore, creators can offer it as another item for sale.
“It sets a precedence that has the potential for abuse in the future.”
This is the objection I’m most concerned about. The last thing I want is for this system to be abused to hurt backers. We made this to cultivate crowdfunding by decreasing risk for creators. Decreasing risk means creators can continue making great games and cool products for backers, which helps the crowdfunding community thrive.
My answer to this – be honest and transparent. Creators should share why they’re asking for the $1. Share the price of the product on the reservation page. This will help backers see if this is something they want to commit to now or not.
And a side benefit to this…we’ve found it’s great at telling creators if their product costs too much. Cause if people are putting in their emails, but not reserving when they see the price – there’s a good chance their perceived value of the product is not matching the price displayed.
On top of that, I’m trusting in the competence of backers. Backers aren’t stupid. They’re not going to put down $20 to reserve a product that costs $40. So something like this isn’t going to work if creators just start asking for ridiculous dollar amounts to reserve their product.
That said, we HAVE used higher reservation amounts. For instance, we’ve used $50 reservations for several tech products and glamping campaigns. But this was a $50 deposit for a $2000 product or a $500 stay at a resort. So the ratio made a lot more sense. Because these products were so much pricier, they required a little bit more of a commitment to ensure our emails were truly qualified. Even so, the cost of reservation wasn’t crazy when compared to the final price of the product – and was always 100% fully refundable.
Now, I’m not expecting this explanation to transform critics into evangelists of the $1 reservation system. What I am hoping will happen is that backers will be open to the benefits of this strategy and not just focus on their own concerns. Let’s not jump to conclusions, but have an open discussion.
Conclusion
The $1 Reservation Funnel is an effective way to significantly decrease risk for creators. By qualifying the pre-launch list as they are building it, creators know that their marketing efforts aren’t wasting money (but multiplying it) and can accurately predict demand for their product before they sink more costs into finalizing it’s development and launch.
As a show of gratitude for trusting creators so early, backers receive a benefit. This is meant to be a way to create a win-win for the creator and the backer. The backer gets something extra, and the creator gets certainty over their marketing and their launch.
I have personally seen this strategy help hundreds of creators successfully and confidently launch their products. Many of these products would have never been funded (and a result, manufactured) if it wasn’t for the predictability and effectiveness of the $1 reservation funnel.
Crowdfunding is risky for creators. You put in a lot of time, money and effort to build the campaign – and over 59.9% of campaigns fail. With the $1 reservation funnel, creators can find backers that absolutely love their product, get funded, and focus their efforts on making it a reality — instead of relying on chance.
