This is a guest blog post by Taylor Dawson, a Product Evangelist at FirstBuild, GE’s incubator for the next generation of home appliances.
Summer 2014. I have just become employee number 5 in a startup called FirstBuild, a company wholly owned by GE Appliances. Our mission: to create the next generation of home appliances through open innovation. The idea was to create a brand, a factory and a philosophy that would allow us to be more nimble, reducing the time to market by a factor of 10 and the cost of initial development by a factor of 100.
By the time FirstBuild was created, crowdfunding had already made its way into the mainstream. With multi-million dollar mass market products and multi-billion dollar startup acquisitions in the rearview, crowdfunding was now the gold standard in market validation. Indiegogo was a natural partner for FirstBuild. They had built an early adopter community hungry for innovation, and they had a willingness to help us learn the ropes.
Through Indiegogo, we launched both the Paragon Induction Cooktop campaign, which went on to raise over $300,000, and the Opal Nugget Ice Maker campaign, which raised over $2.7 million. Before we were to achieve those milestones, we had a lot to learn. Most of us at FirstBuild came from corporate jobs at GE. We were good at doing business in our own way but had little experience with the type of scrappy, direct-to-consumer interaction needed to create a successful crowdfunding campaign. That experience gap translated into a steep learning curve. One of the most important things we had to learn was how to build an email list.
My goal here is to share the basic principles that we have learned about the importance of using an email list to target an audience and run a successful crowdfunding campaign.
Why crowdfunders build an email list
As it turns out, crowdfunding success is subject to some basic mathematical principles:
Most campaigns make the majority of their money in the first 3 days of the campaign. The reason is that successful campaigners bring their own audience of enthusiasts. Enthusiasts are the dedicated followers who want to know the details at every stage of the campaign and the best way to communicate with them is through email.
Only 5-10% of your email list are buyers. While everyone on your email list is interested in your campaign in some way, only a small percentage of them will actually purchase the product. This number could be less than 5% or more than 10% depending on a number of factors: the product price, where the leads came from, or even the value proposition you offer. Nonetheless, 5-10% is a good benchmark.
These two facts mean that crowdfunding success can be engineered. Smart campaigners use simple math to estimate the number of email addresses they need to collect in order to reach their crowdfunding goal.
When FirstBuild was launching our first campaign, we found this basic calculation to be a great source of motivation. We really just needed a few thousand qualified email addresses (of people who specifically registered interest in our product) to meet our crowdfunding goal. Breaking it down in this way demystifies the key factor that leads to success. Yet once we learned how to quantify our goal, we still needed to build the list.
The mechanics of building an email list
The key to getting email addresses is to have a quality landing page (check out our live Paragon landing page here). A landing page is a single webpage that clearly communicates your value proposition and calls the audience to action. Once you have that landing page, you will send all of your traffic, whether media, friends, or Google ads, to that page.
Building a list of qualified email addresses is about finding your target audience. And there are two main ways to get in front of that audience: earned media and ads.
1. Earned Media
Media outlets are constantly on the lookout for interesting new products. If your new product or project is interesting and unique, you can find a media outlet that will cover it.
The key questions we ask ourselves are:
- Where does our target audience hang out?
- What websites do they visit?
- Where do they get their news?
By identifying a few media targets, we can spend our time efficiently. Sometimes small niche audiences can be a more effective source of leads than large publications that reach a huge audience.
The goal of media outreach is to get positive stories placed in relevant publications. When media placements are secured, it is critical that campaigners get the landing page URL published in the article. The link to the landing page is your lifeline to securing the email addresses that you desperately need.
Beyond targeting media, we reach out to the broad range of networks that we have built. We have social networks, partner networks, newsletters, customer networks, community members, blogs, podcasts, and trade shows. What does a well-coordinated media campaign look like from the outside? You want to appear to your target audience as the ubiquitous and obvious solution to their problem.
But realistically, few people or companies have the network that they need to get them to the magic number of qualified leads. Outreach is crucial to building a core group of enthusiasts and gaining credibility. But the really successful campaigns are also growing their lead lists through targeted digital advertising. This can be done in any number of ways: Google AdWords, social networks, paid banner ads. We have had a great deal of success with Facebook advertising.
Again, it is all about math:
- How much do you pay per click-through?
- What is the conversion rate on the landing page?
- What is the expected conversion from lead to purchase (we assume 5%)?
These numbers will give you a rough estimate of cost per acquisition. As long as that cost is less than a conservative estimate on product profitability, ads are profitable.
To date, Facebook has been our advertising platform of choice. The reasoning is twofold:
First, Facebook offers a very sophisticated set of tools that allow us to target an audience with precision. Targeting is crucial because it allows you to speak to the most relevant audience, keeping the cost per click low. For example, we found through a survey that women in the southeast were 10 times more likely to prefer nugget ice than the average American. So we used Facebook to specifically reach out to women in major southeastern cities. We created several specifically targeted ad campaigns, each based on a different hypothesis about our target market. Each campaign could then be evaluated on the basis of cost-per-click.
And speaking of cost per click, the other reason we prefer Facebook: Facebook outperforms other platforms on cost-per-click, sometimes by a factor of 10. Saving money on click-throughs means we can get more people to our site and grow the email list faster.
Speaking to your audience
As the email list grows, you now have an opportunity to speak to your audience. Videos, images, blog, and media placements are all great content to put in front of your audience to keep them hungry for launch. This content shared by email or through social channels is a great opportunity to use your email list to garner referrals from your supporters.
It is tempting to believe that your campaign will be different. You’ll create a viral video, you’ll run a killer contest, people will share your amazing Facebook post. The bad news is that it’s not going to happen, but the good news is that you don’t need it to happen.
My parting advice: Don’t let fear of the unknown or oversized expectations keep you from getting started. Set a goal that you can realistically achieve. For our first campaign, after all our efforts, we ended up with about 1,300 people on our well-qualified email list. I promise anyone can do that by following these steps. The best part? Those 1,300 people converted on the first day at an amazing rate of 28%!
Crowdfunding campaigns are made or broken before they even launch. Fortunately, reasonable results can be predicted and achieved with focused effort placed on growing the email list and communicating effectively. Start building your email list today!