The past decade has seen a meteoric rise in the popularity of online fundraising with the development of platforms including Indiegogo (2008), Kickstarter (2009), GoFundMe (2010), and YouCaring (2011). Various crowdfunding platforms across the globe have raised billions of dollars and helped launch ventures of all kinds, from music and art projects to devices that leverage IoT connectivity to collect and share environmental data.
But crowdfunding isn’t just for indie musicians or tech start-ups. In an increasingly customer-centric marketing environment that is driven largely by online engagement, many global companies are realizing that open innovation platforms are the new age way of getting validation. Included among the Fortune 500 companies that have used crowdfunding platforms are market giants like Coca-Cola, who used Indiegogo to test interest on their new mineral water line Valser; and Hasbro, who began the Hasbro Gaming Lab on Indiegogo and the Next Great Game Challenge.
Here are five reasons why Fortune 500 companies are taking to crowdfunding - and it’s not about the money.1. Validate market research
Crowdfunding gives companies the chance to validate their market research and track customer feedback. Rather than having to manage and corral this information from multiple sources like focus groups or surveys, a crowdfunding platform allows for a localized and easily trackable gathering of valuable customer insights. This can be a very effective tool in helping companies minimize risk during new product development.
Indiegogo Enterprise allows large brands to test their new products with customers and get real-time, iterative feedback during the development process. The platform offers companies practical support with strategy as well as access to data and analytics. According to Indiegogo’s CBO Slava Rubin, the Enterprise offering is the fastest growing component of the business, with multiple Fortune 500 companies using the service. Among these, FirstBuild - a subsidiary of GE - famously launched their Nugget Ice Maker following a wildly successful Indiegogo campaign in 2015. The project was built on a pre-existing GE model that had been repeatedly stalled in development over concerns about whether or not it was marketable. Using support and feedback generated on the crowdfunding platform, GE was able to validate their existing research and launch the product successfully.
2. Test out new products before they go to market
Crowdfunding platforms allow for a collaborative approach and community development during the innovation process. Users who invest have an opportunity to provide input and suggestions. In this way, a crowdfunding platform allows companies to easily gather and leverage important voice of the customer (VOC) feedback while a product is still in development. By harnessing this feedback, companies can tweak product features, change pricing, and build a marketing strategy tailored to the unique audience they “co-created” the product with.
Additionally, if a product fails to resonate with consumers, the company can end the project early - saving the potentially enormous amounts of both time and money that the more traditional “launch-and-fail” method would have cost.
3. Help determine what products to invest in next
The data gathered from a crowdfunding campaign can help companies gain prescient insight into what their customers want, what they are willing to pay, and what new products might meet the interests of that audience. By leveraging insights gained from the success or failure of a previous campaign, companies can build a forward-looking strategy based on real-time customer insights. This kind of data can also help companies clear the way for existing innovations that had previously met delays in production.
4. Skip in-house bureaucracy and go straight to the customer
Gwen Nguyen, the VP of Indiegogo Enterprise, says that the company’s objective “is to provide actionable insights that give you the confidence to make a decision about your product: go or no go.” This is significant for public companies whose complex layers of decision-makers can make it difficult for innovations to get off the ground. When used effectively, crowdfunding platforms can become an extension of a company’s research and development, validating product ideas by going straight to the customer.
5. Get pre-orders
Crowdfunding campaigns can also help companies set up a successful product launch by offering pre-orders. Making a product available for purchase before it hits the shelves drives customer interest, generates excitement, and also gives companies a fair indication of how well the product might sell overall after release.
While Fortune 500 companies are obviously not in any lack of funds, crowdfunding platforms can still be valuable tools to help them drive innovation and new product development - as well as helping them determine which previously shelved prototypes might actually have a real shot in the market.