Based upon our experience working with thousands of crowdfunding campaigns on Kickstarter and/or Indiegogo, here are some basic tips for setting successful funding goals…
Successfully setting your funding goals starts with accurately estimating your project costs. Underestimating your costs can potentially result in severe fulfillment problems, especially if your campaign proves to be wildly popular (like Coolest Cooler)—so, it’s important to avoid being careless in making such estimates.
Unit costs may include not only manufacturing expenses but also crowdfunding platform usage fees (5%), marketing agency fees (perhaps 35%), payment collection fees (3%-5%), bank wire-transfer fees, post-campaign pledge-management fees, packaging costs, shipping costs (since “free” shipping is generally better for sales than add-on shipping costs), reserve funds for lenient return policies, and taxes (for which you should consult a tax advisor), all of which may total over 50% altogether. Some campaigners may want to reserve some profit margins for themselves, as well, but most campaigners prefer to reinvest all profits into growing their respective customer bases.
Knowing your costs accurately can also help you to create a good budget, which you can then present on your campaign page (along with a good schedule) to provide prospective backers with evidence that your team is competent.
Massive fundraising goals can potentially daunt prospective backers, which is why we recommend reconsidering any goal higher than $50,000. Although it’s certainly possible to achieve relatively-lofty goals (which arguably show confidence in your project’s success), we’ve noticed that potential backers are far more likely to pledge to campaigns that are making rapid progress toward (or, better yet, beyond) minimal goals. For whatever it may be worth, Kickstarter’s official statistics show that the vast majority of Kickstarter campaigns raise less than $10,000, while Indiegogo’s statistics show the same thing. So, we recommend setting official fundraising goals between $5,000 and $15,000 if at all possible; if you need more, then that’s fine.
Considering that backers respond so favorably to minimal goals, you might feel tempted to set your funding goal lower than you truly need to fulfill your promises, while planning to cancel your campaign if it seems unable to raise as much as you actually need. We know that some campaigners do this, but it’s arguably deceptive—plus, it may actually deter pledges from savvy backers who suspect what you’re doing and don’t appreciate such underhanded character. It’s always good policy to never do anything in secret that you wouldn’t want known publicly, including in business. So, if you can’t transform your idea into reality for any less than $25,000, then we recommend that you ask for exactly that amount.
Although Kickstarter requires fundraising goals to be fixed, Indiegogo allows fundraising goals to be either fixed or flexible. Flexible goals mean that, even if you fail to achieve your stated funding goal, you still get to keep everything that you raise. This is a great option for charitable projects, but it’s also favored by scammers—and this fact (much like the practice of setting an overly-low goal) may deter savvy backers who fear to take excessive risks with their money. Also, studies show that (for whatever the reasons may be) any crowdfunding campaigns with flexible goals are statistically more likely to fail than those with fixed goals.
Psychological studies also show that people tend to respond better to precise numbers than to rounded ones in sales and/or marketing. This is why, in marketing our services to potential clients, we replace statements like “we helped raise $275,000,000+” with “we helped raise $279,618,561+” to improve our click-through rates. People’s improved responsiveness likely results from their unconscious presumptions that this same precision gets applied to other activities, such as developing consumer products.
So, in summary, ask for precisely the bare minimum that you need to successfully fulfill your project (no more and no less), and don’t accept any less than this. For all of these reasons, it’s usually best to focus on raising a minimal amount to produce a minimally-viable product, while deferring costlier enhancements until additional funds can be raised, either through achieving “stretch” goals (as explained next) or through running follow-up (“2.0”) campaigns.
Stretch goals are a series of unofficial fundraising goals (higher than your official one) that you normally present somewhere within the main part of your campaign page. These secondary goals are coupled with promises to enhance your basic product with additional styles or colors or sizes or accessories or whatnot that you can’t possibly provide cost-effectively without mass-producing your product on a larger-than-minimal scale. So, you’re essentially promising potential backers that, the more funds you raise you beyond your official goal, the better your final product will ultimately be (without altering your stated prices).
The goal of obtaining a better product for the same price can help you to incentivize your backers to pledge more and/or to recruit others to join them in doing so, which is helpful in affiliate marketing. Affiliate marketing involves inviting each new backer to become an affiliate and, as such, to be rewarded with a cut of each pledge that they independently bring to your campaign, which is an effective crowdfunding marketing technique. In fact, in our experience, affiliate marketing (which we conduct through our popular Cashback Network) is usually our third most-effective way to raise funds for our crowdfunding clients.
This lure of raising additional funds can motivate some campaigners to offer stretch goals that don’t actually require additional funds to implement—but this risks being counterproductive because, in such cases, some savvy backers will usually realize what’s being done and then perhaps warn others about it. So, offer your backers your best possible product upfront, and don’t needlessly withhold enhancements from them in an attempt to finagle additional funds from them. Laudable character naturally leads to a good reputation, and a good reputation (spread via word-of-mouth) will naturally boost sales over the long run.
Although you can potentially decide all of your campaign’s stretch goals well in advance (whether by considering what you believe is needed or by examining similar projects for ideas), it’s generally good practice to let your backers finalize these goals. You can do this by unofficially surveying them mid-campaign, which may elicit some amazing possibilities that you never considered! Learning from your customers and figuring out how to give them exactly what they truly want (as long as it’s not evil) is always a good business practice, especially since your business exists to serve both the market generally and customers specifically—and, so, the better you serve society, the likelier your startup will not only survive but even thrive indefinitely.
You can also find all of these same tips in our comprehensive Ultimate Crowdfunding Success Guide, along with plenty more advice for running a successful crowdfunding campaign from conceptualization to fulfillment. Please download your copy today!