Crowdfunding that has a reward-based system can attract many investors to become entrepreneurs.
This type of crowdfunding raised $71,440,507.00 in Asia-Pacific. This is a great opportunity for backers to have goods or services at a discounted price, before everyone and/or limited editions.
To know what a project initiator can achieve through crowdfunding in Japan, click here!
Types of reward
For the most part, there are three types of reward:
- Pre-order: the initiator offers his product before its release.
- Service: the initiator offers a service in exchange for the money raised.
- Recognition: the initiator thanks his backer, sometimes with a small gift related to the campaign.
Obviously, the reward offered will depend on your project and on the number of money backers will give to support you.
This concept became mainstream with the global platforms Kickstarter and Indiegogo. In Japan, the best known platforms are Green Funding, Makuake, and Campfire. However, even though launching a new campaign looks really attractive, you need to know a few things before anything else.
Let’s start with the advantages and disadvantages of reward-based crowdfunding.
The reward offered depends on your project and the amount of money your backers supports you
Advantages
- An effective way to raise funds without asking a lender
- Directly reach consumers: they can buy your product or service before the public knows about it
- Good publicity for your company
- people become familiar with your brand and what you sell.
- Can gather even more money than initially
- you can consider stretch goals and improve your product and/or give more to the backers to attract new customers).
- Can create many campaigns
- when the deadline is reached you can start your campaign on another platform.
- Focus on demonstrating to people that your product is legitimate and high-quality
- it is less of a traditional advertisement campaign.
- Small startups succeed more than big companies:
- do not need any previous business experience or a huge workforce.
- A cheap means to raise capital, but it costs time (a lot of time)
- you do not offer a monetary reward, as in the case of investment.
disadvantages
- Can lose credibility if you do not (or not fully) deliver the service or good
- or if the delivery is extremely late.
- The rate of success can be pretty low depending on the platform
- Kickstarter: less than 40%
- Even if you succeed, other problems can occur at the end of the campaign:
- the wrong calculation, lack of workforce, a system not good enough, the demand exceeding what you imagined it to be, etc.
- Seems easy to raise funds when you see all the successful campaigns
- but note that they are well promoted on the platforms. Usually, companies do not raise a lot.
- Some platforms do not accept all the projects
- (depending on the site)
- It takes a lot of time
- you have to plan everything before starting a campaign to attract more people and to be sure that your project is feasible.
- A different type of marketing
- it is not the same marketing that with traditional lenders or when you want to sell a product already launched. You must manage multiple social media channels, sometimes a blog, the target is not the same (backers do not have the same need that traditional customers), etc.
- Stressful
- there is a deadline, you have to be present on social media, share updates regularly, reply to backers as much as possible, deal with unexpected problems…
- Requires a lot of resources
- (workforce, campaign promotion, campaign tracking, charges, etc.).
- It is sometimes difficult to reach the target audience
- you have to bank on communication.
How to Succeed
Now you know the pros and cons of reward-based crowdfunding, how do you succeed?
First, you need to choose the right platform. You can take a look at the three main crowdfunding platforms in Japan. It’s recommended to use Green Funding since it has a success rate (89%) with an average amount of support: 3.4m JPY, the highest level in the industry. The team focuses on the success of your campaign, unlike other platforms, and is very supportive.
To choose the right platform you can look at cost, but remember the charges can range from 5% to 13% depending on the site. Include your calculations, as well as the initial cost of the platform, the price of manufacturing, shipping, etc. Your target amount must be fair so you can even explain it to your potential supporters to earn credibility.
Transparency is the keyword to get people to trust you and back you.
You have to understand your crowd; what they need and what people want. Try to see things as backers do, do your research about reward-based crowdfunding supporters (their psychology, how they can use your products, and why they should use yours, for example). Many people must be willing to back your project, so show them the best reason to do so.
Transparency is the keyword to get people to trust you and back you.
It is also important to advertise your campaign with press coverage and/or a Key Opinion Leader (also known as an influencer). These are a good investment as an advertisement. So do not neglect the communications part! Be present, create special social media channels, a blog, and a website, build your network, use your friends, family, and colleagues’ network and make your product known. So make frequent updates them by emails or on your channels, reply to backer’s questions and potential questions in your pitch, and an FAQ.
Also use images and videos of your product with descriptions based on scientific facts, if possible to attract new supporters. You can ask an agency to help you become known, to support your campaign, and attract customers (like with campaign tracking) if you do not have enough visibility after a certain time – or right at the beginning, depending on what you want.
Above all, incite backers to share your campaign on social media: word-of-mouth will help you a lot. This is how you can succeed. So give your people incentives: offer them exclusivity (your product should not be already available in the country you are targeting), limited editions, discounts, etc. People are eager to buy your good or service if it is presented as an opportunity, and as valuable to them. So, offer several options for your rewards and differentiate big, small, early, and late donors. You can also check other projects (not to imitate them but to do better) and if no similar project is posted on the platform. If there is, wait a few weeks or months, or use another platform.
P.S.: At the end of your campaign, keep your backers’ email addresses! It is easier to keep customers than to attract new ones.
