What Really Makes a Promotional Campaign Succeed on a Crowdfunding Platform?
Guilt, Utilitarian Products, Emotional Messaging, And Fewer But Meaningful Rewards Drive Donations
ABSTRACT
Online crowdfunding is a popular platform for entrepreneurs to engage consumers by raising funds for creative projects. The purpose of this research was to conceptualize a theoretical framework for crowdfunding appeals and investigate the relationship effect of appeal modes, product, and message characteristics as well as presentation characteristics on donation levels. A stratified random sample of 200 campaigns on Kickstarter.com was analyzed in a regression-based study. Guilt appeals, utilitarian product types, an emotional message frame, and reward tiers were significantly—and positively—related to funding level, measured as a percentage of the funding goals. Entrepreneurs further can use this framework to develop crowdfunding campaigns that can serve as effective marketing tools.
MANAGEMENT SLANT
Marketers and advertisers who use crowdfunding as a means to develop (and promote) new products may benefit from a framework that helps them achieve their funding goals.
Donations more likely will be higher if fund-raisers use guilt appeals in their Kickstarter campaigns.
Kickstarter campaigns that feature utilitarian products (as opposed to hedonic products) have higher donation levels.
Donations more likely will be higher if Kickstarter fund-raisers use an emotional message frame that emphasizes a positive state of being.
Kickstarter campaigns that deploy few meaningful reward categories more likely will be funded.
INTRODUCTION
Crowdfunding, a form of online entrepreneurial financing that raises funds by tapping the general public (Belleflamme, Lambert, and Schwienbacher, 2013), has witnessed a surge in popularity among consumers. Despite a significant failure rate—only 44 percent of projects on the popular crowdfunding website, Kickstarter, meet their funding goal1—the amount of money raised at crowdfunding sites has surged from $89 million in 2010 to an estimated $5.1 billion in 2013.2
Funds raised for each project have varied from a few hundred to several million dollars. The highest reported funding by a crowdfunded project to date is Star Citizen, an online space-trading-and-combat video game developed by Chris Roberts, a U.S. video-game designer and independent film producer, and Cloud Imperium Games, which claimed to have raised $91.35 million.3
Prospective entrepreneurs continue to pursue crowdfunding in record numbers through online portals. By doing so, they aspire to create campaigns that will be fully funded.4 According to crowdfunding.com, GoFundMe and Kickstarter were the top two crowdfunding sites in terms of volume in 2014; other sites on crowdfunding.com's top-10 list included Indiegogo, teespring, Patreon, YouCaring, and CrowdRise.
Crowdfunding often supports novel projects that would have had difficulty finding support through traditional funding efforts. Case in point: NASA's International Solar-Environment Explorer (ISEE), launched in 1978, took a one-year journey to the sun before being converted into a comet hunter, but NASA ended its mission in 1997. Since then, it had been floating aimlessly. In 2014, a group of amateur scientists decided to reboot the satellite. NASA agreed, but could not support it financially. An independent team subsequently successfully raised $160,000 through a RocketHub crowdfunding site. The group as of spring 2014 made a two-way contact with ISEE from the Arecibo Radio Observatory in Puerto Rico and was “in command” of the comet hunter.2
Independent crowdfunding portals are gaining ground. Most of the $91.35 million raised for Chris Roberts' Star Citizen video game campaign was on Roberts Space Industries' own website; just over $2 million came from Kickstarter. By running an independent campaign, Star Citizen's fund-raisers bypassed the rules—and fees—of popular crowdfunding platforms. The Star Citizen campaign ran for over two-and-a-half years, a funding period that exceeds Kickstarter's 90-day limit. Additionally, fund-raisers do not have to pay a commission to a branded crowdfunding platform; Kickstarter collects a five percent commission if a project reaches its funding goal.
In addition to launching business ideas, entrepreneurs are using crowdfunding platforms as a marketing tool to promote their projects. Crowdfunding videos can be easily integrated into websites, repositioned as content marketing, and shared virally on social media. Similar to Superbowl advertisements that find new life on YouTube and social media, crowdfunding projects depend on intense consumer engagement, specifically word of mouth and online sharing behavior.
The use of crowdfunding as a marketing tool to generate buzz for a new product has led some market research scholars to pose the question, “Could crowdfunding replace traditional marketing?”5
Thus, the purpose of this research is to conceptualize a theoretical framework that will help entrepreneurs achieve their crowdfunding goals and help them develop crowdfunding campaigns that can serve as effective marketing tools. In this direction, the current authors asked,
What makes a crowdfunding campaign successful?
How can insight into that success benefit marketers and advertisers?
To the authors' knowledge, there is little research to guide practitioners in designing campaigns that lead to successful crowdfunding (Mollick, 2013). Because this is a relatively recent phenomenon, only a few studies have revealed attributes that could be applied to successful crowdfunding campaigns. Integrating extant research findings, and using data from actual crowdfunding campaigns—specifically at Kickstarter—the authors identified three factor categories that lead to successful outcomes, as measured by higher donation levels:
appeal modes
product type and message frames
presentation characteristics.
LITERATURE REVIEW
According to Wordspy.com, a website that tracks new words and phrases as they enter the language, the term “crowdfunding” first was used by Michael Sullivan in fundavlog—an unsuccessful online incubator for projects related to video-blogs—in August 2006.6
One of the earliest crowdfunding successes was the Pebble smartwatch developed by Canadian engineer, Eric Migicovsky. In 2011, Migicovsky raised $375,000 from capital investors for a prototype he called “inPulse,” but failed to secure additional funding, so he turned to public donations. In 2012, he changed the name of his concept to “Pebble” and formed a start-up company called “Pebble Technology.” To finance Pebble, he developed a campaign at Kickstarter. In just 30 days, Migicovsky raised more than $10 million and successfully funded his Pebble project: In 2013, Pebble smart-watches were produced and delivered to public donors and retailers.7
To the authors' knowledge, there is scant research on other successful outcomes of crowdfunding, although several theoretical perspectives shed light on contribution and donation behavior.
One stream of research examines the effect of various appeal modes on donation intent, such as
guilt appeals (Basil, Ridgway, and Basil, 2008; Hibbert, Smith, Davies, and Ireland, 2007);
self-benefit and others-benefit appeals (Brunel and Nelson, 2000; White and Peloza, 2009);
nostalgia appeals (Merchant, Latour, Ford, and Latour, 2013; Zhou, Wildschut, Sedikides, Shi, and Feng, 2012).
A second stream of research suggests that product characteristics can influence donations and contributions (Chitturi, Raghunathan, and Mahajan, 2008).
Finally, presentation characteristics can impact the effectiveness of the campaign (Chandy, Tellis, MacInnis, and Thaivanich, 2001; Clow, James, Kranenburg, and Berry, 2006).
In the current study, the authors integrated previous research to advance their theoretical framework, which examines the impact of three categories of attributes on donation levels:
appeal modes;
product characteristics and message frames;
presentation characteristics of the campaigns.
During a three-month period in 2013, the researchers tested the relationship between these factors and donation levels using a rigorous coding of a random sample of 200 live campaigns on Kickstarter, a prominent crowdfunding platform. They analyzed the data using a multiple regression model, with the dependent variable of funds raised expressed as a percentage of funding goals.
To the authors' knowledge, this real-world setting of the crowdfunding data was the first of its kind. Although this real-world data was more time consuming to gather and code, it had the advantage of incorporating the complexities of the marketplace. The researchers believe their work provides reliable insights into what really drives the success of online fund-raising campaigns.
The authors took into account the following considerations informed by existing studies about advertising and charitable donations, and they are of the opinion that
Crowdfunding overlaps with advertising:
Similar to charity advertising, crowdfunding can be used to secure donations (Merchant, Ford, and Rose, 2011; White and Peloza, 2009).
Crowdfunding can be a form of promotion.
Entrepreneurs can launch creative Kickstarter campaigns to create awareness, buzz, and initial purchase of products and services.6
Kickstarter videos can often be shared via social media and other online outlets, and, essentially, serve as long-form commercial advertisements.6
In the pre-Web 2.0 era, by and large, the roles of fund-raising, controlled messages, and promotion were assumed by traditional advertisements.6
Through Kickstarter campaigns, entrepreneurs can manage a controlled appeal and message.
Crowdfunding and charities have fund-raising in common, but they also can operate from very different platforms:
Crowdfunding may not be for a charitable cause at all. A primary motivation for many crowdfunding campaigns is to secure financing and ownership of potentially profitable entrepreneurial projects (Belleflamme, Lambert, and Schwienbacher, 2013).
Online branded platforms such as Kickstarter provide a systematic framework for fund-raising that is difficult for traditional charities to match.
RESEARCH QUESTIONS
The authors identified the three categories of attributes as antecedents of crowdfunding campaign success:
appeal modes;
product characteristics and message frames;
presentation characteristics.
Appeal Modes
An “appeal mode” is the type of message used in a marketing communication to encourage donations. Appeal modes that have received scholarly attention include guilt appeals, self- and others-benefit appeals, and nostalgia appeals.
Guilt Appeals
“Guilt appeals” highlight a feeling of responsibility to make a contribution, and this responsibility positively influences donation behavior (Hibbert et al., 2007). Guilt appeals frequently appear in charity and health advertisements, which, for example, may feature images of impoverished children to elicit more guilt (Burt and Strongman, 2005; Huhmann and Brotherton, 1997).
A few Kickstarter campaigns may use negative images of children in their appeals, but fund-raisers sometimes emphasize their own impoverished conditions for the same purpose. As an example, Rascal Department Production created a campaign for a web-based “Whatever This Is” film serial. The sponsors explicitly stated that they needed donations to fund their creative endeavor because “making rent is hard enough.”
Empathy and self-efficacy are two antecedents of guilt that may lead to charitable donation intentions (Basil et al., 2008; Fisher, Vandenbusch, and Antia, 2008).
Empathy involves viewing another person's situation from the perspective of that person (e.g., “imagine that you are a child with no home”).
Self-efficacy highlights one's ability to comply with the socially responsible behavior (e.g., “your $2 will help these children”).
Other variables that can positively influence the effectiveness of guilt appeals include a public (versus private) donation context (Basil, Ridgway, and Basil, 2006) and negative (versus positive) image valence (Burt and Strongman, 2005).
Broadly speaking, crowdfunding entrepreneurs can control the amount of guilt elicited in their appeals. Scholars have found evidence that the level of guilt felt by the consumers can be influenced by the advertisement appeal (Coulter and Pinto, 1995). High-guilt appeals sometimes can cause consumers to think that marketers are manipulating them, and consequently, consumers feel no guilt and more likely will develop negative attitudes (Cotte, Coulter, and Moore, 2005).
Self-Benefit and Others-Benefit Appeals
Self-benefit and others-benefit appeals also are commonly used by fund-raisers to encourage donations (White and Peloza, 2009).
Self-benefit appeals highlight a message where the main beneficiary of support is the donor. For example, “donating to this campaign is one of the most rewarding things you will ever do,” is an example of a self-benefit appeal.
An others-benefit appeal highlights that the main beneficiary of support is the fund-raiser or some other individual. Some examples of others-benefit appeals include,
“Your donations help us achieve our goal.”
“Your donations will help create new jobs for people.”
Overall, the literature reports mixed results regarding the effectiveness of self-benefit and others-benefit appeals (White and Peloza, 2009). As such, the current authors do not make a clear assertion about the valence of this effect and believe that the real-world data that they used is particularly useful in these instances to develop additional support for these assertions.
Nostalgia Appeals
“Nostalgia” appeals elicit images of an idealized past and regret that times have changed (Merchant et al., 2013). Nostalgia appeals also may positively influence charitable donations (Ford and Merchant, 2010; Merchant et al., 2011; Zhou et al., 2012).
A food-based Kickstarter campaign, for example, might induce consumers to donate by expressing that the food product will be made the way “Mom” made it, thereby conjuring images of old times. Other fund-raisers may link their projects to past popular culture. Some examples of Kickstarter projects that invoke nostalgia include a “Back to the Future” movie-themed museum and recreating a line of action figures similar to the 1970s Mego line.
The current authors' first research question, thus, explored the relationship between different appeal modes on donation levels:
RQ1: What is the effect of appeal modes on donation levels?
Product Type and Message Frames
Donation behavior may be influenced by the nature of the product (utilitarian versus hedonic) and message frame (rational versus emotional).
Product Type
Marketing scholars generally distinguish between two types of products: utilitarian and hedonic (Chitturi et al., 2008, p. 49).
Utilitarian products have “functional, instrumental, and practical benefits”;
hedonic products have “aesthetic, experiential, and enjoyment benefits.”
Although most products have both utilitarian and hedonic aspects, the current study conceptualized hedonic (or utilitarian) products as those that are relatively superior in hedonic (or utilitarian) qualities (Dhar and Wertenbroch, 2000; Okada, 2005).
Previous research has suggested that utilitarian products may be more effective than hedonic products in positively impacting charitable behavior (Strahilevitz, 1999; Zhang and Gelb, 1996). Utilitarian products offer usefulness and functionality, which significantly increases an individual's likelihood of charitable behavior. Thus, the authors asked,
RQ2a: What is the effect of product type on donation levels?
Message Frames
The literature distinguishes between “rational” and “emotional” message frames (Chandy et al., 2001; Zhang and Gelb, 1996).
A “rational’ message frame is one that shows how the use of a product or service could help prevent or solve a problem—in other words, the message highlights the utilitarian aspects of a product.
An “emotional” message frame, on the other hand, focuses on achieving a positive state of being—in other words, the message highlights the hedonic aspects of the product.
Previous research has suggested that message frames are most effective when they match the product's use condition. In other words, rational message frames are better for utilitarian products, whereas emotional message frames are better for hedonic products (Johar and Sirgy, 1991; Zhang and Gelb, 1996). Other scholars have argued that effectiveness of the message frame depends on involvement. Rational messages are more effective in high-involvement situations, and emotional messages are better for low-involvement situations (Dens and Pelsmacker, 2010).
Additionally, rational message frames are more effective in new markets, whereas emotional message frames work better in older markets (Chandy et al., 2001). Finally, rational message frames work better in Western, individual cultures, whereas emotional message frames work better in Eastern, collectivist cultures (Lin, 2001; Okazaki, Mueller, and Taylor, 2010). As such, a variety of (possibly conflicting) scenarios may affect the efficacy of rational messages versus emotional messages. Thus, the authors asked,
RQ2b: What is the effect of message frames on donation levels?
Presentation Characteristics
The presentation characteristics of a Kickstarter campaign may influence sponsors' propensity to donate. Specifically, the length of the video and textual pitches, the types of images, the level of professionalism, and the number of reward tiers can impact the level of donation for a campaign.
Length of Video and Textual Pitch
The length of a pitch can impact its effectiveness. In traditional advertising contexts, the length of a commercial can influence the effectiveness of the marketing promotion (Swaminathan and Kent, 2013).
On Kickstarter, a project creator may produce and upload a short or lengthy video, or no video at all. The sole constraint is that videos must be five gigabytes or less in file size. Similarly, Kickstarter does not designate a word limit to textual pitches. The pitch could be as short as a few sentences; lengthy business plans may run thousands of words. So, this is very much a variable in control of the fund-raisers. Thus,
RQ3a: What is the effect of video and textual pitch lengths on donation levels?
Professionalism
The professionalism of the crowdfunding pitch also can influence levels of donation. Specifically, visual elements in advertisements can impact the audience's quality expectations and the source credibility of the marketers (Clancy and Rabino, 2007; Clow, James, Kranenburg, and Berry, 2006).
In crowdfunding, a professional-level text and video pitch can signal to donors the quality of the campaign's product and ability for fund-raisers to execute and deliver the product. Use of professional-level videos is significant on Kickstarter, as is evidenced by the high proportion of film and video projects. Thus,
RQ3b: What is the effect of professionalism on donation levels?
Image Valence
“Image valence” refers to the types of images that accompany textual-advertising appeals. In a Kickstarter campaign, fund-raisers could manipulate image appeals via photographs and the video pitch.
Scholars traditionally have categorized image valence into two types:
positive, which depicts images of happiness;
negative, which depicts sadness, loss, or disgust.
Both positive and negative images may be used (Chang and Lee, 2009; Small and Verrochi, 2009), and it is also possible that positive and negative messages may be used in the same campaign. In other words, inclusion of (say) positive images does not exclude the use of negative images. Therefore,
RQ3c: What is the effect of image valence on donation levels?
Reward Tiers
To encourage donations, project creators offer rewards to donors. Each level is known as a “reward tier,” and there is no limit to the number of reward tiers a project creator can offer. Generally speaking, project creators tie the size of the reward to the level of donation—the larger the donation the bigger the reward.
For film projects, a small donation (say, $5) may result in a “Thank You” card, whereas larger donations may result in rewards such as a DVD copy of the completed film or even speaking roles or producer credits.
Oftentimes, there's a seemingly excessive number of reward tiers, which may create more confusion and reduce the likelihood of donations. According to Tom Gerhardt and Dan Provost, co-creators of the Glif iPhone stand, many projects make the mistake of having too many rewards or too complicated of a structure: “However simple you think your pricing tiers are, make them even simpler.”8
The current researchers believe that the reward tiers should be few and tied to meaningful levels of donation categories. In fact, a reward level should be added only if it is necessary; otherwise, it creates redundancy and can harm the project. “The more complicated and numerous the reward tiers, the more backers you will lose to choice overload.”9 Consequently,
RQ3d: What is the effect of the number of reward tiers on donation levels?
Funding Period
Kickstarter allows project creators to designate the funding period for the campaign anywhere from 1 to 60 days.
In traditional advertising contexts, prolonging consumer exposure to advertising is a major issue for marketers—a loss of exposure can result in a loss of sales. Similar to traditional advertisements, the funding period of crowdfunding campaigns can influence the amount of time donors may be exposed to the project. The number of days may determine the level of funding: Logic would suggest that Kickstarter campaigns with longer funding periods will have more time to garner donations and, thus, more likely will have higher levels of funding than campaigns with shorter funding periods.
Kickstarter suggests, however, that projects with shorter funding periods are more successful because projects with longer funding periods allow donors to forget or back out.10 Additionally, pledges tend to peak near the beginning and the end of a campaign, with pledges slowing down considerably during the middle period. Thus, projects with longer funding periods essentially are “extending the trough.”
Funding Goal
It is possible that the funding goal may impact the success of the campaign. Bigger projects may seem more daunting, thereby discouraging potential donors. On the other hand, it is also reasonable to assume that donors have a sense of what a project entails and will therefore be willing to donate what is needed, as long as the request is not unreasonable given the scale of the project. The current researchers leaned toward the latter, but in the absence of any theory or evidence they did not make any directional hypothesis but treated this as control variable instead.
In conclusion, the dimensions that comprise a crowdfunding request include appeal mode, product characteristics and message frame, and presentation characteristics. On the basis of a review of the advertising and donations literatures, the authors posit that these dimensions may influence donation levels in crowdfunding environments.
Since donation research in crowdfunding contexts is scant, the current research studied the impact of appeal modes, product and message characteristics, and presentation characteristics on donation levels.
METHODOLOGY
Research Context: Kickstarter
The authors chose Kickstarter, an online crowdfunding platform typically used by entrepreneurs and artists to finance creative projects like films, games, music, art, and technology, as the context of this study. Along with GoFundMe and Indiegogo, Kickstarter has emerged as one of the top crowdfunding platforms in the digital marketplace in terms of dollars raised and number of successfully funded projects.5
As of September 2015, Kickstarter had raised over $1.95 billion for roughly 93,000 projects. Film & Video and Music were the biggest categories of projects, with a success rate of 37.8 percent and 51.3 percent, respectively.11
Some of the Kickstarter projects that successfully were funded include
“Veronica Mars” (the movie; $5 million),
the Pebble e-paper smartwatch ($10 million),
an emoji translation of Moby Dick ($3,676), and
the launch of the ArduSat satellite into space ($100,000).
Starting a Kickstarter campaign is fairly straightforward. Project creators set their funding goals and deadline on the website and compose a detailed pitch, which summarizes the project and why they are seeking public support. If people like a project, they can donate money to make it a reality. Project creators offer awards to encourage donations (aka “pledges”)—the bigger the pledge, the bigger the reward.
For example, the “Veronica Mars” movie campaign awarded donors a PDF of the screenplay for a $10 donation or a speaking role in the film for a $10,000 donation. Funding is an all-or-nothing deal, and project creators must reach their self-established funding goals to receive the donation money.
As of September 2015, 37 percent of projects had successfully met their funding goals.
Data and Sampling
The researchers accessed Kickstarter data between August and October 2013. At the time of the study, Kickstarter had 4,331 live campaigns across 13 project categories. The authors debated the merits of using all 13 categories versus focusing on one (or two) categories. The latter option would have reduced intercategory variation.
The authors believed, however, that using all categories would provide a more complete picture with robust findings in terms of generalizability across a wide variety of projects.
During the above time frame (August–October 2013), film (22.9 percent), music (16 percent), and publishing (13.7 percent) were the biggest categories of projects on Kickstarter (See Table 1). The proportion of these projects reflected the mission of Kickstarter as a fund-raising platform for art and creative projects.
The researchers used stratified random sampling to select a sample of 200 campaigns. At the beginning of the research period, they compiled all active campaigns on Kickstarter and separated them by category. The fund-raisers designate categories. Within each category campaigns were randomly selected to reflect their relative proportion on Kickstarter. This resulted in 46 film/video campaigns, 32 music campaigns, and 28 publishing projects that added up to 53 percent of the sample. The researchers did include all product categories, but the other 10 categories were smaller, totaling 47 percent of the sample.
They tracked each campaign for the course of its funding period and included in their sample only the projects that completed their campaign period. Therefore, the resulting sample included campaigns that met their funding goals, as well as those that were unsuccessful.
Two judges—an author of this study and a research associate—independently coded the dataset. Prior to coding, a training session was held for the judges, where codes were defined and coding procedures were outlined. On the basis of the training, both judges worked separately to code all 200 Kickstarter campaigns. After coding was completed, the judges discussed the coding results for agreement. On the basis of these discussions, a consensus was reached, and the resulting coding matrix was used for the analysis. The section that follows discusses the variables and their coding.
Constructs and Operationalization
Dependent Variable
“Percent goal” is the percentage of funding generated by the campaign, as measured by the funding received divided by the original goal. Project creators designate the funding goal—the target amount requested to “kickstart” the project.
Independent Variables
“Appeal mode” is the type of message used to elicit donation behavior. The literature identifies several major appeal modes including self-benefit, others-benefit, guilt, and nostalgia. Appeal mode was coded as a binary categorical variable for various appeal modes including guilt, self-benefit, others-benefit, and nostalgia. A “1” denotes the presence of the appeal mode in either the text or video pitch, and a “0” denotes the absence of the appeal mode.
Product Type
“Product type” specifies if they are utilitarian or hedonic. Utilitarian products serve a practical or functional purpose; hedonic products fulfill emotional or fantasy-based needs. Product type was coded as a categorical variable, where 0 = utilitarian and 1 = hedonic.
Message Frame
“Message frame” highlights the positive or negative nature of the message. Emotional message frames elicit an emotionally positive, hedonic state of being. Rational message frames identify problems and how to solve them and elicit a utilitarian state. Message frame was coded as two separate variables (“emotional” and “rational”):
In the “emotional” frame variable, for any project, 1 indicated the presence of an emotional frame and 0 indicated its absence.
In the “rational” frame variable, for any project, 1 indicated the presence of a rational frame and 0 indicated its absence.
At Kickstarter, project creators create their appeals in text and video. The current researchers split length into two types:
the length of the textual pitch, measured by number of words;
the length of the video, measured in seconds.
Professionalism rates the craftsmanship of the video pitch, quality cinematography, depth of field, sophisticated video editing (e.g., video transitions, cuts), multiple camera angles, and audio editing. Amateur-level videos are comparatively less polished, with shaky or grainy video, single shot takes, and low-quality audio. Image appeal was coded as a continuous variable, where 1 = very amateur and 5 = very professional.
Image Valence
“Image valence” determines whether the campaign elicits positive- or negative-valenced images through its wording, pictures, or video. Positive-image appeals are happy and joyful. Negative-image appeals are solemn and serious. Image valence was coded as two separate variables (“positive” and “negative”).
Thus, when considering both variables, for any project, a “1, 0” code indicated a purely positive image, a “0, 1” indicated a purely negative image, a “1, 1” indicated the presence of both positive and negative images, and “0, 0” indicated an absence of any distinctly positive or negative image.
Reward Tiers
“Reward tiers” represent the number of levels of rewards used to entice donations. Typically, the size of donation impacts the reward—the larger the donation, the larger the gift.
Control Variables
Funding Period
“Funding period” is the number of days the Kickstarter campaign is “live.” Kickstarter allows creators to set a funding period up to 60 days.
Funding Goal
Funding goal is the actual dollar amount being sought. This will presumably be tied to the size of the project.
FINDINGS
Intercoder Reliability
The intercoder reliabilities were high for all the subjectively coded variables.
Specifically, the percentage of agreement among the two coders for the categorical variables were as follows:
Guilt Appeal (94 percent)
Self-Benefit Appeal (87.5 percent)
Others-Benefit Appeal (88.5 percent)
Nostalgia Appeal (96 percent)
Product Type (95 percent)
Emotional Message Frame (90 percent)
Rational Message Frame (93.5 percent)
Image Valence (94.5 percent).
For the variable, Professionalism (rated on a scale of 1 to 5), the correlation between the two judges' ratings was 0.78 (significant at 0.01 level). All differences in coding were subsequently resolved through discussion.
Descriptive Statistics
Within the sample, 89,690 backers raised $7,048,653 and successfully funded 82 (41 percent) projects. This closely matched the 43.6 percent success rate reported by Kickstarter in 2013, providing partial validation for the sampling procedure. The median funding goal (amount asked) was $7,583 (M = $32,858), which indicates that most campaigns on Kickstarter are small-scale projects.
The average funding period was 31.62 days. Most Kickstarter campaigns featured products that were hedonic (n = 176, 88 percent) in nature, reflecting Kickstarter's mission statement as a platform for creative projects, such as film, music, and art. However, 24 (12 percent) projects were utilitarian in nature, such as USB drives, tools, and educational books. The mean number of reward tiers was 11. The average pitch length was 1,007 words (approximately two single-spaced pages), and the average video length is 180 seconds, or 3 minutes (See Table 2).
Regression Analysis
The research team used multiple regression to investigate the effect of the hypothesized factors on donation level. The linear regression equation is as follows: In the equation,
the dependent variable FUND is the “percent goal achieved.”
the independent variables are
GUAP (guilt appeal)
SBAP (self-benefit appeal)
OBAP (others-benefit appeal)
NGAP (nostalgia appeal)
PRD (product type)
EMF (emotional message frame)
RMF (rational message frame)
LV (length of video)
LP (length of textual pitch)
PROF (professionalism)
IMGP (image valence positive)
IMGN (image valence negative)
REW (reward tiers).
There are two terms for interaction of product type with rational and emotional message frame; and two control variables—FG (funding goal) and FPD (funding period). β0 is the intercept, while β1, β2,…, β17 are the respective regression coefficients.
RESULTS
First, Variance Inflation Factors (VIFs) were calculated for the main effects model to check for multicollinearity. None of the VIFs were above 5, and, thus, multicollinearity was ruled out. Next, the researchers ran a multiple regression with interaction effects.
At the outset, they had specified three categories of independent variables to see which specific variable in each of the categories had the most impact. The results showed that among the appeal modes, guilt appeal had a significant and the maximum impact on funding, addressing the first research question:
RQ1: What is the effect of appeal modes on donation levels?
Self-benefit, others-benefit, and nostalgic appeals did not have a significant impact. In the product-type and message-frame categories, product-type and emotional-message frames had a significant impact.
Specific to the second research questions …
RQ2a: What is the effect of product type on donation levels?
… utilitarian products more likely would receive funding than hedonic products and …
RQ2b: What is the effect of message frames on donation levels?
… emotional message frames were more effective.
Among the presentation characteristics variables, most of the proposed variables did not have a significant impact, addressing:
RQ3a: What is the effect of video and textual pitch lengths on donation levels?
RQ3b: What is the effect of professionalism on donation levels?
RQ3c: What is the effect of image valence on donation levels?
RQ3d: What is the effect of the number of reward tiers on donation levels?
Nonsignificant impact variables included length of video, length of text, professional image, and valence of image—both positive and negative. However, reward tiers had a significant impact on funding. Specifically,
a smaller number of reward categories was preferable.
Looking at the interaction terms, however, provides a more nuanced picture. For utilitarian products,
emotional message frames increased the donation levels, whereas rational message frames had no effect.
On the other hand, for hedonic products,
both emotional and rational message frames worked well.
A variety of independent variables were considered based on existing literature, and even though many variables were insignificant, the overall variance explained (R2) was a rather impressive 35 percent (See Table 3).
Two factors made this especially remarkable:
The dependent variable was not a perceptual measure.
Judges coded most of the independent variables, whereas the dependent variable was strictly an objective measure and obtained directly from Kickstarter and, as such, the study did not have shared method variance.
DISCUSSION AND RECOMMENDATIONS
Crowdfunding allows donors to engage in the early development of a business venture. Donors may feel like they are part of the bigger picture and may encourage others to participate through word-of-mouth and online sharing. Consequently, some entrepreneurs are using crowdfunding platforms as a marketing tool to raise venture capital and generate consumer awareness of their products beyond the crowdfunding arena.
The current authors believe their research addresses the gap in research on crowdfunding by using “real-world” data from Kickstarter.
Specifically, this study presented a theoretical framework that
conceptualizes crowdfunding appeals as a bundle of attributes;
explains the impact of these attributes relative to donations to the various crowdfunding projects.
The study demonstrated that campaigns more likely would be funded if they:
use guilt appeals;
have an emotional message frame;
deploy few meaningful reward categories.
At the onset of a crowdfunding campaign, entrepreneurs face many choices. The results of the study provide a guideline for entrepreneurs to construct crowdfunding campaigns that will resonate with donors and serve as an effective marketing tool to elicit donor engagement. On the basis of the results, entrepreneurs may want to consider the use of guilt appeals, emotional messages, and offer a select number of reward categories to successfully develop and promote products on crowdfunding platforms. If the product is utilitarian in nature (e.g., a tool), then the entrepreneur may consider deploying an emotional message frame (e.g., achievement of a positive state of being) in the campaign's pitch.
Guilt Appeals Effectiveness
Guilt appeals, which the authors described as highlighting feelings of responsibility, were the most effective appeal means of generating donations.
This finding supports past research on the effectiveness of guilt appeals in traditional advertising contexts (Hibbert et al., 2007). Thus, it may be fruitful for fund-raisers to highlight empathy or self-efficacy in their crowdfunding pitches because these are antecedents to guilt (Basil et al., 2008).
Among examples of guilt appeals from the current study's Kickstarter data, fund-raisers appealed to environmental and social responsibility, financial hardships, achieving a childhood dream, or asking donors to “put yourselves in my shoes.” (See Table 4 for the more detailed messages.)
On the other hand, the researchers did not find much support that self-directed/others-directed/nostalgia appeals were related to donation levels. These appeal modes may seem intuitive and have been linked to donation intent (Chandy et al., 2001; Ford and Merchant, 2010), but the current study did not find evidence for their effectiveness.
It would not be completely accurate to say that the use of these appeal modes are ineffective in all cases; many successfully funded Kickstarter campaigns implemented self-directed, others-directed, and nostalgia appeals. But if a fund-raiser had to select one appeal mode for its campaign pitch, then choosing a guilt appeal may be the best choice, according to the authors, as opposed to an appeal that communicated
product benefits to donors,
helping others, or
utilizing idealized images from the past.
Product-Type, Message-Frame, and Reward-Tier Effectiveness
In the product-type, message-frame, and reward-tier effectiveness categories, the current study demonstrated that
utilitarian (functional) products positively influenced donation levels more so than hedonic (aesthetic, experiential, and enjoyment) products did. This was an interesting finding given Kickstarter's mission as a funding house for creative, hedonic projects.
emotional-message frames had a significant positive relationship with donations. It also had the strongest impact in the “product characteristics” category of variables.
fewer categories of rewards levels made the donations more likely. Kickstarter data as of September 2015 indicated an average level of reward tiers of 11, with a median of nine. The authors of the current paper, however, conducted a subgroup analysis and found campaigns with six levels of rewards—relative to any other number—had the highest average percentage of their funding goals pledged.
Variables with Weak Impact
The professionalism with which campaigns were created did not seem to have an impact—presumably because most campaigns were well produced, with a relatively high mean of 3.69 on a 5-point scale.
Results also showed that video length and pitch length were not significantly related to donation levels. This suggests, according to the authors, that fund-raisers have the flexibility to create videos and pitches as short, or as long, as they desire—and as creatively as they need to stand out. This may seem counter-intuitive, but it is also a useful finding of the study.
Each Kickstarter campaign, for example, has its own landing page, and potential donors can return to the web page to continue reading lengthy pitches. Alternately, donors could pause a lengthy video and watch it at a later time. In this way, Kickstarter videos have an advantage over traditional advertisements that need to be short to better capture consumers' attention through random exposure.
Additionally, in the study it also did not seem to matter if the campaign used positive or negative imagery. At the surface level, negative imagery might seem like it would negatively influence donations. Yet, many Kickstarter campaigns are films, music albums, and photography projects that have dramatic, somber, and violent content. Thus, the use of negative imagery in these campaigns may be congruent and appropriate to the nature of the projects.
In conclusion, the authors believe their study provides valuable insights into the emerging, high-growth crowdfunding arena. The results identify parameters of success for entrepreneurs who seek promotion of their products via crowdfunding platforms. Ryan Grepper, the creator of the Coolest Cooler, for example, used Kickstarter as a strategic marketing tool to generate intense word of mouth for the eventual retail launch of the Coolest Cooler.12 The Coolest Cooler is a multifunctional cooler, which includes Bluetooth speakers, a USB charger, and an integrated bottle opener, and it raised $13.28 million against a $50,000 goal.
Specifically, the current study demonstrated that crowdsourcing campaigns—which use guilt appeals and emotional messages, and fewer reward tiers—maximize donations. The authors believe their use of real-world data has alleviated the concerns of previous studies done in laboratory settings, which may not have translated into what really works in crowdfunding.
LIMITATIONS AND FUTURE RESEARCH
Several limitations in this study could be addressed in future research, specifically:
Social-Media Marketing Factors
The authors were not able to observe the level of social-media marketing that fund-raisers used to promote their Kickstarter campaigns. Internet-marketing thought leaders have suggested that the strategic management of social media in the prelaunch period could influence the performance of crowdfunding campaigns. Silicon Valley tech guru Guy Kawasaki has recommended a 9- to 12-month period to build up followers before the launch of a campaign; the curating and sharing on social media of content relevant to the campaign; and to repeat posts every 8 hours to ensure that content reaches the audience.13 Thus, the intersection of crowdfunding and social media could be an interesting topic for a standalone research project.
Project Creators' Credibility
It would be interesting to evaluate the impact of the factors that are related to the project creators. Variables such as experience and past successes with Kickstarter likely could have an impact on the success of the current campaign if the creators were to voluntarily share that information. (Kickstarter does not require sharing this information.)
For the same reason, though, this kind of research would have to be done in an (artificial) laboratory kind of setting. Otherwise, the projects that share this information could create a significantly skewed sample as a result of self-selection. This setting also would be useful for investigating the impact of, say, type and reward tiers on the contributions—data that is not accessible by just examining the Kickstarter campaigns.
Message-Frame Impact on Consumers
Future research could extend key findings from this study. For instance, the findings suggest that emotional message frames may be more effective for utilitarian products. Future research can test the moderating effect of different message frames on consumer affect, behavior, and cognition through controlled experiments.
Crowdfunding's Expanding Role
Crowdfunding's continuing expansion creates further need for meaningful research to evaluate its effectiveness and viability.
Customers or supporters fund mass-media messages that they are willing to stand behind, in essence creating a paradigm shift from the one directional, marketer controlled, communication. As an example, experiment.com is a specialized crowdfunding site “for scientists, by scientists” to find a cure for cancer (https://experiment.com/faq). Similarly, Adbacker Crowdvertising (a compound term for crowd and advertising) is using the crowdfunding concept for advertising (http://www.adbacker.com/about.php). Other areas being explored include its use for consumer insights and creating platforms for innovative crowdsourcing ideas.
Fungibility of Crowdfunding
Future researchers could replicate the study to determine whether the findings in this study are still valid. Crowdfunding is a relatively new phenomenon, and the data from this study may not be relevant in subsequent years. Yet, the current authors posit that the results will hold as long as Kickstarter does not significantly change the way it works or alter its user interface.
More research is needed in this relatively young field. By examining various factors that contribute to donation levels in crowdfunding campaigns, the current authors believe their study offers significant contributions to both theory and practice. The authors hope their work will stimulate future research on crowdfunding and advertisement-appeal modes.
ABOUT THE AUTHORS
Steven Chen is associate professor of marketing at Mihaylo College of Business and Economics, California State University, Fullerton. Chen's research interests include new-product development, technology adoption, and East Asian cultural products. His work has been published in the Journal of Marketing Management, Journal of Business Research, and International Marketing Review.
Sunil Thomas is professor of marketing at Mihaylo College of Business and Economics, California State University, Fullerton. Thomas specializes in branding, marketing analytics, and marketing strategy. His research can be found in the Journal of Advertising Research, Journal of Business Research, and Business Horizons, among other journals.
Chiranjeev Kohli is professor of marketing at California State University, Fullerton, and a brand consultant. Kohli's research interests include creating and evaluating brand image, product and corporate identity, and pricing. His work has been published in Business Horizons, Journal of Academy of Marketing Science, Journal of Advertising Research, and Journal of Business Research, among other publications.
Footnotes
1 “The Crowdfunding Caveat: Most Campaigns Fail.” PCWorld, September 26, 2013. Accessed September 28, 2015, at http://www.pcworld.com/article/2049399/the-crowdfunding-caveat-most-campaigns-fail.html
2 “A Group of Amateur Programmers Just Took Over an Abandoned NASA Satellite.” The Wire, May 31, 2014. Accessed on June 1, 2014, at http://www.thewire.com/technology/2014/05/a-group-of-amateurs-programmers-just-took-over-an-abandoned-nasa-satellite/371923/
3 “Crowdfunding Campaign.” Star Citizen. Accessed September 15, 2015 at http://starcitizen.wikia.com/wiki/crowdfunding_campaign
4 “Top 10 Crowdfunding Sites.” www.crowdfunding.com. Accessed January 5, 2016, at http://www.crowdfunding.com
5 “Could Crowdfunding Replace Traditional Marketing?” Forbes. Accessed October 21, 2015, at http://www.forbes.com/sites/cherylsnappconner/2013/10/20/could-crowdfunding-replace-traditional-marketing/
6 “Crowdfunding.” Wordspy. Accessed September 15, 2015, at http://wordspy.com/index.php?word=crowdfunding
7 “Pebble's $10M Crowdfunding Secret: Keep It Simple.” Entrepreneur, October 24, 2013. Accessed September 14, 2015, at http://www.entrepreneur.com/article/229427
8 “Kicking Ass & Taking Donations: 9 Tips on Funding Your Kickstarter Project.” 99U. Accessed January 5, 2016, at http://99u.com/articles/7143/kicking-ass-taking-donations-9-tips-on-funding-your-kickstarter-project
9 “18-Kickstarter Tips You Won't Find Anywhere Else.” Nextshark. Accessed December 8, 2014, at http://nextshark.com/18-kickstarter-tips-you-wont-find-anywhere-else/
10 “Shortening the Maximum Project Length.” Kickstarter Blog. Accessed January 5, 2016, at https://www.kickstarter.com/blog/shortening-the-maximum-project-length
11 “Stats.” Kickstarter. Accessed January 5, 2016, at https://www.kickstarter.com/help/stats?ref=footer
12 “A New King of Kickstarter to be Crowned.” www.cnbc.com. Accessed October 21, 2015, at http://www.cnbc.com/2014/08/26/a-new-king-of-kickstarter-about-to-be-crowned.html
13 “9 Kickstarter Social Media Marketing Tips From Guy Kawasaki.” CrowdCrux. Accessed September 15, 2015, at http://www.crowdcrux.com/kickstarter-social-media-marketing-tips-from-guy-kawasaki/
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