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How Companies Use Indiegogo to Assess Consumer Demand

By Scott Kirsner |  March 16, 2016
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Earlier this year, the crowdfunding site Indiegogo launched a new offering called Indiegogo Enterprise, geared at large companies that want a new way to test concepts with consumers — collecting both feedback and pre-orders in the process.

We spoke with Jerry Needel, Senior Vice President of Corporate Partnerships, about how big companies like GE, Hasbro, and Anheuser Busch have been using the site as a complement to (or replacement for) traditional consumer insights work. Needel told us that Harmon Kardon, the audio products company, is about to launch a next-generation noise-cancelling headphone on the site.

GE Cooktop and Icemaker

Enterprise crowdfunding from our perspective got started in early 2015, when GE ran their two campaigns. One was for the Paragon induction cooktop. It’s a connected cooking pan that keeps your sauces at a precise temperature the entire time you’re cooking. They took about four months to get that campaign ready. They were building a capability internally. It raised about $350,000, and they got tons of positive media attention, which was great. The next campaign, the Opal icemaker, they prepped in a third of the time, and it raised $2.8 million. All of a sudden, we had other corporations reaching out to us wanting to do what GE did.

They took what had historically been a cost in market research, and turning it into a customer acquisition and sales driver. GE ran two market research programs on Indiegogo, but they generated $3.2 million in sales and acquired 8,000 customers. That made Opal the first-ever GE product that was cash flow positive before launch.

Hasbro: Sourcing Innovation

Hasbro’s approach was what we call “sourcing innovation.” Hasbro went to the Indiegogo community [for] submit ideas about what that next board game would be. People had to submit essay-length ideas — they got over 500 very high-quality submissions. Went through a process of evaluating and vetting them. We picked five finalists, and had them run campaigns with our coaching. They picked one, and Hasbro will be marketing it and distributing it. It’s about connecting with the armchair innovator — people who have ideas, but may not have the motivation or capabilities to do it on their own. (See the Hasbro Gaming Lab site for more. The winning game, created by Dan Goodsell, right, was called “Irresponsibility – the Mr Toast Card Game.” Goodsell received a $10,000 cash prize, a trip to Hasbro headquarters, and the opportunity to work with the company to make the game a reality.)

Shock Top: Sponsored Innovation

What we have been doing with Anheuser Busch is what we call sponsored innovation. Its about supporting innovation and entrepreneurs in categories that are important. California has a big drought. Anheuser Busch’s Shock Top brand wanted to have an impact, in a future-focused way. So they are providing support to entrepreneurs working on water-conservation products on Indiegogo. We can go through our database of 600,000 past campaigners, and we can turn them back on. We also know the campaigns currently on our site, and what other upcoming campaigns are out there. We can help make matches between the brand and the entrepreneur. With Shock Top, it involved financial support: Anheuser Busch provided anywhere from $50,000 to $100,000 to each entrepreneur, and they turned on their marketing machine to tell the story of that entrepreneur. That gave the entrepreneur access to things they wouldn’t normally get. They funded a trip for one entrepreneur to the Consumer Electronics Show. They had their ad agency create a commercial for free, and they did a bunch of PR around that entrepreneur. [That sort of sponsored innovation initiative] includes some light branding on [the entrepreneurs’ Indiegogo] campaign pages. (An example is the Evadrop Smart Showe, below.)

Canonical’s Ubuntu Edge “Superphone”

About three years ago, we had a campaign run by Canonical in the UK. They are the largest manufacturer of open source, Linux operating systems, branded Ubuntu. They have a large user base, and they wanted to get into mobile. They thought the best way to do it was to launch a superphone, and they needed to get $32 million. They ran a 30-day campaign and raised $13 million — it was the largest crowdfunding campaign in the world at the time, but they missed their goal. A lot of people looked at it as a massive failure. But they saw that there wasn’t enough demand to make that $32 million investment worthwhile.

There was very real price sensitivity. They started at an early bird price of $400 [for the phone]— and when it went up to $600, the whole campaign just stopped. We said, “If you want to get to the goal, you have to bring the price back down.” But they couldn’t do that and deliver the product profitably. And because this was such a big campaign, it dominated the news in mobile for an entire month. They got all these OEMs and wireless carriers reaching out to them to see how they could partner. They still got to become a player in mobile, because of the marketing benefits of running a crowdfunding campaign.

The Benefits

There are three benefits companies are getting from crowdfunding campaigns. They’re learning the same insights they would be through traditional product research, but the results are stronger — because it’s people voting with their dollars, versus hypothetical surveys. GE said it is twenty times cheaper to test and launch products this way, versus the normal way. Second, you turn what historically was a cost in market research into a sales and customer acquisition driver. Then, all this is done out in public, so you get free marketing and publicity.

What Works Now

In general, it’s still so early to say what can and can’t work. But…we listen to the business objectives. There’s a confidentiality spectrum that we want to understand and work within. Part of [crowdfunding] involves putting new products and new IP out into the public realm, and there are some things that companies are super-sensitive about. You need to figure out where on that spectrum they want to play. And we look at what has done well on crowdfunding in the past [in a particular sector.] Then we look at price point and delivery time. If you talk about [products] over $1000 and over 18 months to delivery, that is more challenging.

Fees and Team Size

Indiegogo charges a five percent fee of the money raised from a campaign, plus we charge a consulting or service fee — and most large companies have gone through our consulting process. But they do have the option to do it their own.

In terms of how many people you need to support a campaign, it depends . You need a quarterback, who is the campaign manager. That can come from any function in the company. You need marketing, PR and social media folks — and you’re going to need access to the product development and R&D folks, to be able to create accurate, meaningful content around the product and its history, and to answer consumer questions and comments. You want to be able to respond quickly on that stuff, and make sure your’e confident in all the delivery timelines.

What Drives Companies to Try Crowdfunding

One motivation is this idea of accelerating innovation. There are a ton of very established companies that are trying to win or survive through innovation, and they have challenges. The biggest one is these companies are building products that they think people want. I’ve sold surveys and research in my career. We are moving from hypothetical research to real-world validation. We’re going from asking, “Would you buy this product at this price and color?” to, “Are people buying this product at this color and this price?” That’s incredibly powerful.

Crowdfunding is able to provide a path to de-risking the biggest risk in product development. It’s the same reason venture capitalists send startups to Indiegogo to run crowdfunding campaigns — to see if there’s a market. You’re de-risking R&D, and making smarter use of innovation and new product development budgets. You can get a real-world check. It gives them really valuable feedback into certain features or design before [a product] goes into production.

Sometimes, a product has already been designed and is heading toward production, but they want input for future products or accessories. Or it helps them run A/B tests on price, bundling, messaging, or creative.

Advice

This is a platform and a medium where big companies haven’t participated in the past. People want to know, how do I position myself to be welcomed? What kind of team do I need to run a crowd funding campaign?

Some of our advice…

We always counsel people to be authentic: who they are, what they’re trying to accomplish, and where they’re coming from.

For our community, these are folks who have opted in to innovation; if they have the opportunity to be involved and have input into the process, and get it first and potentially cheaper than at retail, then…it’s a side note that it’s [a product] from a big company.

There’s a lot of trust that consumers have in large accompanies, whether it’s a GE or an Anheuser Busch — that they’re going to be able to deliver what they say they can deliver. It’s about proving demand so that they can move forward with a product that people want. You position yourself as entrepreneurs in a larger company. You’re trying to validate demand to convince internal folks to move forward.

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