How to Structure Your Crowdfunding Rewards Program

Some people have the preconceived notion that reward-based crowdfunding equals “free online money”, which is very far from the truth. In this blog we’ll work to set the record straight and emphasize how crucial a solid rewards program is to a successful campaign. Besides the fact that a rewards campaign is an unparalleled opportunity to develop ideas, test products, build on branding and secure market validation, it is also an opportunity to engage and build lasting relationships with fans, customers, advocates and potential future investors. This said, planning for the delivery of a product or experience to your backers that is meaningful, unique and memorable with real value will be a top priority prior to campaign launch.
 
DO YOUR RESEARCH
One of the best things to do before framing your rewards program is to do your research. Just like before creating your Crowdfunding Pitch Video, collect 10-15 campaigns, or more, that have funded within your niche, channel or focus. The easiest way to do this is to setup an excel sheet and specifically look at:
 

- average number of rewards offered

- wording used to describe rewards

- presentation of the rewards

- most popular funding tiers by dollars

 
Below is an example of what this might look like. Across the 15 successful campaigns I chose there were 12 different reward tiers ranging from $10 to $5,000. With this information on paper I was able to find what tiers across these campaigns were most lucrative which could then help me in framing my levels of funding.
 
In the example chart below see that the $25 tier received 1,000 backers. Statistically across crowdfunding platforms the $25 tier is the level most contributed to, and is a level that allows interested parties to get involved with a low-risk commitment. At this tier particularly, think of a reward that reaches beyond your target demographic.
 
*This data presents an example of how you might strategically tier reward offerings and did not come from real campaigns.
 
TIERQUATION:
Part 1: (Tier Amount)(# of Pledges)= Total $
Part 2: Total $ of Tier / Overall Total $= Total %
 
The 6 tiers highlighted in blue were the most profitable tiers across all 15 campaigns. We recommend starting your campaign with 6-8 quality tiers to attract different levels of funding. Sometimes you’ll see project creators start their campaigns with upwards of 15 rewards, and though their intentions are to give their backers options, this strategy usually ends up backfiring. Make each reward tier creative and unique but also simple to understand. You want your backers to be able to differentiate the value in each item or experience you are offering.
 
STRUCTURING TIERS & PLANNING FOR FULLFILLMENT
When structuring your rewards keep in mind your campaign’s bottom line. Don’t put yourself in a position where you’re left with only funds to cover the costs of the rewards themselves or worse you’re coming out of pocket. We can’t stress enough the importance of setting yourself up with a budget and timeline that you can stick to. In this you’ll want to address all monetary and time costs you anticipate to incur from production to shipping and definitely give yourself a buffer for unforeseen costs.
 
Whether you’re handling fulfillment yourself or have key sourcing and fulfillment vendors lined up, take off some of the stress of fulfillment by solidifying relationships before your campaign starts. Have these relationships with suppliers and/or fulfillment services lined up in advance and work pricing of those services into your budget. The last thing you want is to encounter surprises following what you thought was going to be a successful campaign. When you have these questions answered and budgeted you’re then able to communicate from Day 1 an “Estimated Deliver Date” with your backers.
 
Let’s say you are crowdfunding to produce a product. What’s going to happen if you get traction, funding ramps up and certain tiers are all claimed? Have a plan in place in advanced where you’ll be able to fulfill demand and the expectations you set for delivery, without losing on quality. With costs mapped out for each reward tier you’ll be able to have a clear idea of the expected margins to make on each tier. You can then confirm or adjust your campaign funding goals accordingly.
 
PRICING
Price your rewards fairly, the same as retail cost or at a discounted rate. In addition to raising funds, your goal is to increase social capital, so engage and communicate often with your supporters. If you’re providing a unique experience which would usually fall into some of the higher tier rewards, you have more leeway to assign price based on your audience’s perception of value.
 
RECIPROCITY
When determining what to offer for incentives, ask yourself, “would this appeal to me if I were the consumer?” I think a good rule is; if you aren’t thoroughly excited about the reward you are offering, don’t include it. If you are a little bit unsure take this challenge. Ask your friends, “If you left your wallet out in your car would this reward make you want to get up and go outside to get it?” Is a $30 branded sticker going to do that or get people motivated? Probably not. Furthermore, for each reward tier try to create something that when a backer receives it in the mail, they are able to recall the emotion they had when funding. Give your backers the feeling that they are important to you and the growth of your idea, brand and business.
 
SCARCITY
Try to encapsulate a feeling of exclusivity in your rewards by offering limited edition or for a limited time only. This works particularly well with higher tier rewards. If you limit availability of your higher tier rewards to just a few, you create greater demand. You can also create greater demand by treating your campaign like a pop-up store and offer certain rewards for a limited time only. Depending on how you present these tiers, you then create opportunity to market one-time rewards by themselves through their own mini-marketing campaigns.
 
EXAMPLES

1. Thank you & Credit- There are many different ways to thank and give your backers credit and at different levels, publicly through social media and in the product itself. Go the extra mile to share outtakes, tips, photos, and updates with your backers. Show them you care, create a community around your backers and the results will be positive.

 

2. Merchandise & Accessories- This speaks more along the lines of brand promotion with items like stickers, hats, t-shirts and more. This works well if merchandise is specific to the project itself or the company/organization that are fundraising. Who wouldn’t love an original Apple t-shirt today? 

 

3. Tangible Product- A first run of the product or service you are raising funds to produce, also known as pre-orders. Offer for a discount or a limited time only to increase awareness and spark demand.

 

4. Early Access- Whether it is a product, service or experience, grant access to backers to be your first time users and owners. This obviously does not include access to securities, revenue sharing or other financial incentives.

 

5. Product Enhancements- Enhance the product or experience so that it is personal or unique and specific to the backer. This could mean providing options for custom engraving, color choice, etc.

 

6. Subscriptions & Memberships- For businesses with subscription models it’s advantageous to tier subscriptions based on value.

 

7. Incentive Bundles- A higher tiered Incentive can offer bundles which combines all of the previous rewards offered up to that point into one bundle.

 

8. Talk Shop- This is more along the lines of a personal “Meet & Greet”. Grant exclusive access to you and team or related notables.

 

9. Participation- Make your backers a part of your product. That may mean taking on the persona of a character in a game, naming a flavor of ice cream after them, invitation to be an extra in your film or even meeting invitations.

 

10. Collaboration- If you are pitching in one of our 8 channels or on different niche crowdfunding platforms it’s likely a certain percent of your backers have involvement themselves in that focus. What an awesome opportunity to invite experienced professionals to collaborate with you and help determine your ventures’ long term outcome.

 

11. Parties & Events- The possibilities are endless:

- An invitation to your launch party

- Backstage passes to your concert

- Invite backer to participate in a show or exhibition you’re hosting

- Hold a party in the backers’ name

- Offer an exclusive gathering with your team and the backers’ friends

- Offer personal demos and behind the scenes tours

- Invitation to have dinner with your team. The list goes on…

 
PRESENTATION
Show backers what they will be receiving. In many ways your crowdfunding campaign can be treated as a pop-up store and like in retail, presentation is key to stopping potential customers in their tracks and converting them to make the purchase.
 
For example, if you present attractive pictures of your rewards in creative ways you’re likely to capture the attention of potential supporters. You may not only lockdown a contribution but that backer then may share your nicely presented photo with their networks.
 
CLOSING
When campaigning, sometimes people are afraid they’ll become a burden to the people they’re pitching, but if you have an excitingly creative and well thought out rewards program which is delivering real value, that will not be the case. If you’ve done it right, your backers will be just as excited as you are when they receive their reward in the mail or claim their experience. Start to vision your rewards campaign as micro-seed capital and you can start to understand the massive potential and weight your campaign can have to the future of your success.