When UC Berkeley decided to offer its executive education course on corporate crowdfunding, some faculty members wondered what relevance crowdfunding had to major brands. Especially because the original intent of crowdfunding was to help struggling small businesses—not billion-dollar brands.
However, many companies are starting to realize that crowdfunding represents a unique marketing opportunity for forwarding-thinking companies to dramatically strengthen consumer ties with their brand. Crowdfunding can also be used to drive innovation, and it is the newest (and probably most effective) form of crowdsourced product innovation.
Crowdfunding is the collection of finance from backers (the “crowd”) to fund an initiative, and it usually occurs on Internet platforms.
Since emerging in 2008, crowdfunding has become a multibillion-dollar global industry with thousands of platforms offering funding opportunities to entrepreneurs, community organizations, and lately major corporations, such as Dodge, Honda, Coca-Cola, American Express, and DC Comics.
Corporations with access to debt and securities markets don’t need to use crowdfunding to finance operations for growth capital. However, what smart CMOs and CEOs have realized is that crowdfunding does a remarkably effective job in helping to drive marketing initiatives to existing customers and acquiring new customers.
Forget the hypothetical value of a social media mention, such as a Facebook like.
When you can get a customer or social follower to contribute cash to a corporate-sponsored campaign, you have the deepest form of social media engagement possible.
What Strategic Corporate Crowdfunding Looks Like
The first model of strategic corporate crowdfunding is not to create an opportunity for customers to finance the purchase of your product for themselves but usually for a social cause or community organization.
Dodge did a fantastic job with its DodgeDartRegisty.com campaign. (check out Video)
The registry allowed customers to have backers fund parts of the car. For example, a customer’s aunt could buy the steering wheel.
The magic of this model was revealed when community organizations started trying to fund the purchase of Dodge Darts to deliver food to the homeless and to provide access to transportation in women’s shelters. The campaign then went viral with more than 1,000,000 social media impressions.
Though fewer than 40 cars were purchased directly, the company engaged and mined data from tens of thousands of potential new customers and saw sales more than double the following quarter.
Video: NCFA interview with Richard Swart, UC Berkeley Directory Crowdfunding Research, on Global Crowdfunding
Dell used a similar logic by having customers fund the purchase of a laptop for first-generation, low-income college students.
The second model of strategic corporate crowdfunding is to use crowdfunding campaigns for community projects for entrepreneurs whose missions align with the company.
Honda used a campaign on Indiegogo.com to raise funds to save the American drive-in theater. This marketing strategy is about social engagement and brand positioning.
Kimberly-Clark uses a hybrid model with its Huggies MomInspired campaign. The company provided grants to moms to develop innovative products for children. What Kimberly-Clark created is an external R&D laboratory, which led to significant opportunities for revenue increase.
Huggies now learns from its customers—without focus groups or formal market research. Its cost per social impression is 40% lower than other forms of marketing, and the company has not had a single negative social comment.