This Isn’t Even my Final Form: Evolution of Crowdfunding Goes Corporate
By Dr. Dan Marom & Koby Meshi
Crowdfunding began as a social phenomenon that threatened to disrupt the pillars of our corporate economy. How then has this revolutionary mechanism become a tool in the hands of leading companies to leverage their business?
In light of the meteoric and consistent rise of the alternative finance market, some have gone so far as to declare it the modern successor of traditional finance institutions, such as banks and venture capital firms. However, recently an opposite trend is occurring. Crowdfunding, which is based on principles of decentralized consumerism, is being used by multinational corporations and global brands to leverage and empower their business activities.
Competition for consumer attention is at an all-time high
Many companies are discovering that it is harder to penetrate the sphere of awareness of many customers and potential customers. In the ear of smart platforms and the internet of things, people are constantly being bombarded by unprecedented amounts of information and messages and the competition for consumers’ fleeting attention is greater than ever. The average consumer nowadays filters, whether virtually or mentally, almost anything they deem to be corporate marketing. Crowdfunding, besides it financial component, supplies a number of added benefits, primarily a strong engagement factor between client and corporation, massive public awareness and an emotional investment in the company and its product. This is why many companies are now searching for new and creative ways to leverage this crowd-driven mechanism.
Crowdfunding as a marketing tool
When Coca Cola came under criticism in Mexico for their unchecked use of the country’s natural water supply, they turned to a crowdfunding campaign to fund the digging of new water holes in many villages. The fact Coca Cola used crowdfunding was not an indication of any lack of financial means on their part, rather it was done in order to harness the crowd and public opinion in their favor. D.C. Comics made similar use of crowdfunding methods when they launched their “We Can Be Heroes” campaign. This crowdfunding campaign made use of the company’s intellectual property – their various superheroes – for a charitable cause.
Other companies are using crowdfunding to increase demand on their products, like Microsoft did when partnering with global crowdfunding platform RocketHub. Microsoft’s main goal by this move was to increase the popularity of their search engine, bing.com, and to increase sales of their software products among small businesses. In contrast, the Leggo toy company and the Dodge automotive brand made direct use of crowdfunding when they launched their own respective crowdfunding platforms for the marketing and sale of their products.
Dodge may not have succeeded in selling more than a few dozen of its cars in this way, but the originality and creativity of their marketing method managed to get a whole lot of attention and online media impressions. Another car manufacturer that made use of crowdfunding is Honda, which launched an Indiegogo campaign to save the tradition of the drive-in movie theater.
An endless fount of ideas
One of the greatest advantages in having access to a large crowd of people is access to the collective knowledge and experiences of the crowd. This approach can supply companies, who rely on their ability to maintain a competitive edge in innovation, a nearly limitless supply of ideas and inventions. Two such companies – Johnson & Johnson and General Electric – have partnered with crowdfunding platforms in an effort to maintain a steady flow of new ideas for their products. Huggies, manufacturer of baby products, has made a similar move with the launch of their Mom Inspired campaign. And, in contrast to these uses of external mechanisms, IBM launched an internal campaign to fund innovative ideas for improvement by its employees.
Crowdfunding is more than just a means of raising money. The crowd asset offers many advantages, not only to entrepreneurs and startups, but also to some of the world’s leading brands and corporations in leveraging their other assets and fostering a stronger connection with their customers. This trend of established companies using alternative finance solutions is growing with each passing year and is likely to keep on growing. It is no coincidence that experts project the crowdfunding market will reach $93 billion by 2025, a number which increases to over $300 billion when factoring in the institutional players. Crowdfunding, it seems, is the future, for seasoned companies as well as new ones.
