Pros and Cons when using crowdfunding to launch your product.
Crowdfunding is a great way to bring your new (or existing) product or service to the market. From fully launching a brand to testing the market, crowdfunding can be a powerful tool for any entrepreneur. However, crowdfunding is not the be-all-end-all solution. There are many pros and cons that you should consider before choosing to crowdfund.
1. Advantages of crowdfunding for your product launch
It’s a great opportunity to test the market
There is always one question that comes to mind when an entrepreneur wants to launch a new product or service, will it work? Crowdfunding is an excellent way to test the market. The methodology is simple. Crowdfunding allows many potential customers to believe and invest in your product or service. More often than not, we have seen brands grow in a larger marketplace after a successful crowdfunding launch.
All communication is kept in one place
The crowdfunding platform you choose will allow you to communicate with all of your backers in one place. This communication includes campaign updates, FAQs, replying to backers in the comment section, etc. Your campaign page itself is also a great way to share your story and prepare your brand for the marketplace.
Your financial risk is low
Unlike traditional funding strategies and methods, crowdfunding is much more cost-effective for start-ups and entrepreneurs. Crowdfunding also allows you to launch an idea or prototype of your product or service without worrying about purchasing inventory or mass production. As a founder, inventor, or entrepreneur, you can thoroughly test the market with a relatively low budget.
Developing a trusting community
Crowdfunding is known as one of the best ways to build a loyal fan base for your brand and its products or services. Not only does it give backers the chance to pre-order your products, but it is also a place where you can build trust in your brand and gain a supporting community. This will help you turn supporters into future customers.
There are many platforms to choose from
Choosing the correct crowdfunding platform for the type of product or service you want to launch is very important.
Different platforms come with different advantages and disadvantages for those who want to launch a campaign. At BackerGeek, we recommend Kickstarter or Indiegogo for traditional crowdfunding. Not only are they the most popular, but they are also the best of both worlds for almost all projects.
You do not have to give away equity
After your campaign reaches your funding goal and you are shipping the last of your rewards to backers, you are so-to-say done. You have a group of happy customers that will continue supporting your brand, and you have not handed out any equity shares from your business.
2. Disadvantages of Crowdfunding for your product launch
Crowdfunding platforms charge fees
When planning and thinking about your overall strategy, it is important to keep in mind that major crowdfunding platforms such as Kickstarter and Indiegogo take a percentage of your raised funds in return for hosting your campaign. You can find these fee percentages on their websites.
A good campaign requires good resources
Launching a crowdfunding campaign is way more than just setting up a project page and hoping for the best. Failing to plan is planning to fail. Launching a crowdfunding campaign is an investment of time and money. You need to make sure you have a great strategy in place. We suggest working with experienced professionals to increase your chances of success.
There will always be a chance of failure
There are many things you can learn from an unsuccessful campaign. Always remember, great entrepreneurs never get it right on their first try. You need to view your crowdfunding failure as an opportunity to build business resilience and self-alignment. We suggest seeking help from professionals to mitigate as many risks as possible.
We have seen this happen time and time again. A project might fail because there are already many other similar products on the platform you have chosen to launch. It is important to think carefully about the originality of your project. If your campaign is truly unique it has a higher chance of success.
Crowdfunding does not work for all businesses
Crowdfunding works better for some businesses than others. Are you unsure if you are a good fit? Contact us today, our expert team will be thrilled to help you out!
Now that we have covered some important pros and cons of crowdfunding, we hope you have gained some insight into the industry. Of course, if you have any questions or you are considering a campaign launch, feel free to book a call with us today!
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