December 7, 2012
Crowdfunding, to borrow a phrase uttered by Abraham Lincoln, is of the people, by the people, and for the people. This new, democratized method of raising money is beginning to change the relationship between a business and the consumer.
While the concepts "co-creation" and "prosumers" have been around for some time, a recent briefing by the firm trendwatching.com claimed crowdfunding is turning customers into "presumers."
Presumers are individuals who want a deep, personal connection to the story behind the product, not just a chance at creating it. They wish to be the first ones to get the widget, and they want to be part of a community associated with it, the trend firm's briefing said.
"It's not necessarily consumer participation in design," explained Henry Mason, trendwatching.com's global head of research and managing partner. "Of course, there's an element of being able to influence how a finished product ends up... but I think part of what's driving this mainstream is the everyday consumers - do they have the time or the energy to actually co-create many of the products that they buy? No, of course they don't."
Crowdfunding platforms, however, do allow everyday consumers to influence products they purchase through comments and suggestions for improvement, at the same time becoming ambassadors for the widgets they are interested in backing.
The act of supporting a crowdfunding campaign itself already says a lot. Entrepreneurs can use this information to show potential investors that their products have support among the crowd. In that way, crowdfunding can be looked at as a type of focus group - a larger, more dynamic, and (because people are actually contributing money rather than opinions) more trustworthy one, as argued Crowdsourcing.org founder Carl Esposti in a recent webinar.
The ability to better measure pre-launch consumer interest in a product is likely catching the attention of large companies. Some of them, of course, are already using crowdsourcing for ideation and market research. Mason, however, thinks crowdfunding can also be implemented at some enterprises. One hypothetical he mentioned is an airline company crowdfunding a new route.
A company can set the crowdfunding goal to be the break-even point, and see whether enough individuals pre-order flights to warrant opening that route. In return, a company can offer air miles as perks, helping to build customer loyalty to its brand. If large enterprises do begin crowdfunding, it could rapidly accelerate the growth of the industry. There are signs, though, that crowdfunding is already evolving from an emerging trend into a more accepted way of funding products.
In the past, we've written about new companies looking to help entrepreneurs sell crowdfunded wares. Mason mentioned a consulting company that opened in London around the same time as Kickstarter moved launched in the U.K. It helps entrepreneurs with the crowdfunding process, from creating a video to finding a manufacturer. He thinks the emergence of such auxiliary services is a classic sign of a trend maturing. In the long run, this may mean backing a crowdfunding campaign will be a safer proposition for consumers - if there is a group of experienced individuals helping an entrepreneur, he or she is less likely to fail in delivering the promised product to backers.
That doesn't mean all crowdfunded products will be successful - there have already been a few sidetracked campaigns, and Mason believes there will be more such "horror stories" in the future. Still, he expects more professionals (rather than amateurs) to tap into a subset of the crowdfunding market, which will help allay consumer doubts.
Plus, "because of all the reasons we outlined [in the briefing] about why consumers like it, and the technological and social ecosystem that surrounds this trend," Mason thinks crowdfunding will be able to live through the scares that may be on the horizon.