Companies can use crowdfunding sites for more than just raising money. Businesses also are starting to rely on the tool for marketing purposes and as an online focus group.
“You get big companies, like Disney and Sony, who could just fund [projects] out of pocket, but they will use Kickstarter campaigns as an online focus group of sorts,” said Jim Cline, vice president of Colorado Springs-based Outwest Systems Inc. “It’s a good, cheap way for them to test the waters for the product they are developing.”
Cline said the company recently tried using the crowdfunding website Kickstarter to raise funds for its second product — the SharpShot EZ-Trainer, which is a laser dry-fire and airsoft marksmanship training target box that can be controlled with an app on a smartphone or tablet.
The campaign was unsuccessful; however, Cline did learn some tips about launching a more fruitful fundraising effort next time, as well as how it can be utilized as a marketing research tool.
“There are major companies who use Kickstarter now not just for the funding but to make sure there is going to be that interest group for their new product,” he said.
Kickstarter doesn’t permit investing or incentives like equity, but in turn, projects can offer the finished product the company is raising funds for, or a t-shirt or similar token.
“[The backers are] only charged if the project reaches its fundraising goal,” the website states. “You’ll provide your payment information when you pledge, but you won’t be charged. Your payment will only be collected if, at the time of the project’s funding deadline, the project has reached its fundraising goal.”
Richard Swart, global crowdfunding and alternative finance researcher at the University of California, Berkeley’s Haas School of Business, told Entrepreneur.com that “corporate America is into crowdfunding too.
“Corporations are realizing there is a lot of social engagement on crowdfunding platforms that can drive corporate innovation and offer alternatives to focus groups,” he said.
According to Entrepreneur.com, most of the larger companies disguise themselves “under the names of smaller subsidiaries to prevent prospective backers from reacting to the established brand instead of the product at hand.”
“When Sony ran a crowdfunding campaign for an E-Ink concept watch on a Japanese platform, it was listed as a project of Fashion Entertainments, a division of the tech company charged with developing next-gen wearable devices,” it said.
In February 2017, Econsultancy, a marketing consultant company, published an online blog titled “Big brands embrace crowdfunding for marketing purposes.”
“Beyond the marketing value of launching a new product or business line using a crowdfunding platform, brands increasingly use crowdfunding platforms to get market feedback and validation,” the blog said. “That can be particularly helpful, especially when launching a new product in a new category.”
There is some concern that if bigger corporations continue to use crowdfunding sites, it will hurt the way potential backers view them.
“For many consumers, crowdfunding platforms are seen as hubs in which entrepreneurs and young companies can obtain the support they need, financial and otherwise, to make their dreams a reality,” the blog said.
“In many cases, they are the places to find the next big thing before it becomes big. If entrepreneurs and startups are eventually drowned out by established companies using these platforms as proving grounds, particularly for already-developed products, it could diminish interest in crowdfunding, eventually reducing the value of these platforms.”