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Five Ways Crowdfunding Makes Market Research Obsolete

Arguably more powerful than the capability to raise capital or generate early orders is crowdfunding’s ability to accomplish five things.

Crowdfunding is booming—its overall market size is anticipated to reach $500 million by the end of 2012, with growth fueled by the JOBS Act taking force in January 2013. This legislation will expand campaign “perks” received in exchange for individual donations to include equity ownership in startup businesses. Extreme crowdfunding success stories like Pebble—which exceeded its funding goal to raise $10.3 million in wristwatch pre-sales on Kickstarter—have stoked the hope of entrepreneurs and has democratized the funding of ideas.


But even more powerful than the ability to raise massive capital in a flash or generate a surge of early orders is crowdfunding’s ability to:

1) Accurately assess demand

2) Generate engagement prior to launch

3) Create brand advocates who assist ongoing development

4) Invite strategic partnership and acquisition opportunities

5) Lower costs and, in turn, mitigate risk

Why spend thousands of dollars on custom surveys to gauge purchase interest when you can do the same at virtually no cost? In the future, crowdfunding will likely be seen as a viable solution not only for creative projects, causes and aspiring entrepreneurs, but also for established small-to-medium-sized companies seeking an alternative to traditional market research.

The U.S. market research services industry includes 4,800 companies with combined annual revenue of about $17 billion. I have spent over a decade working in this sector, first on the vendor side conducting focus groups and quantitative studies for a variety of technology, consumer packaged goods, retail, and automotive companies. I then managed research at Vivendi Universal Games, Activision, and Yahoo! before going back to graduate school for an MBA is sustainable management.

Now, as a first-time entrepreneur of a tech startup called AMP—a collaborative bookmarking site and file exchange for sustainability champions—launching a crowdfunding campaign on Indiegogo to kickstart our efforts was the obvious choice. In addition to the five reasons mentioned above, crowdfunding is a way for us to entice developer talent and gain leverage to secure additional investment and resources needed to scale growth.

Large companies will likely continue spending huge sums of money on traditional market research and product development, but crowdfunding offers a compelling alternative for small-to-medium-sized businesses with budgetary constraints. Beyond the up-front investment needed to identify what will be tested, and the development of supporting campaign materials (AMP’s video cost about $5,000), crowdfunding is virtually free. It reduces risk by allowing consumers to determine the viability of proposed products and services before development. The influx of small-to-medium sized business investment received directly from consumers, whether they’re new or existing companies, will stimulate the economy and create needed jobs by helping businesses with strong ideas grow and flourish.

Staying engaged with those who helped develop your product or service, and thus creating brand advocates, is a marketer’s dream come true. Not to mention the benefits of having quantitative data to inform accurate sales forecasts. In some ways, this approach isn’t new, as iTunes, Amazon, and video game publishers, to name a few, have been using a pre-sale strategy for years. Instead this would simply move the purchase decision up in the development cycle, further decreasing risk.

Established companies could also use crowdfunding platforms to identify acquisition opportunities, following the money to identify business ideas generating the most enthusiasm. Granted, some policing will be required to ensure established businesses don’t monopolize or misuse a crowdfunding platform, but it strikes me as an obvious evolution in market research methodologies, aimed at accurate demand assessment, customer relationship management and brand loyalty generation.

What do you think? Do you see other opportunities and risks for crowdfunding moving forward?

Photo via Flickr (cc) user JMR Photography.

Articles

The healthcare systems in the United States and the United Kingdom couldn't be more different.

The UK's National Health Service is the largest government-run healthcare system in the world and the US's is largest private sector system.

Almost all essential health services in the UK are free, whereas in America cost can vary wildly based on insurance, co pays and what the hospitals and physicians choose to charge.

A medical bill in the US

One of the largest differences is cost. The average person in the UK spends £2,989 ($3915) per year on healthcare (most of which is collected through taxes), whereas the average American spends around $10,739 a year.

So Americans should obviously be getting better care, right? Well, the average life expectancy in the UK is higher and infant mortality rate is lower than that in the US.

RELATED: The World Health Organization declares war on the out of control price of insulin

Plus, in the U.S., only 84% of people are covered by private insurance, Medicare or Medicaid. Sixteen percent of the population are forced to pay out of pocket.

In the UK, everyone is covered unless they are visiting the country or an undocumented resident.

Prescription drugs can cost Americans an arm and a leg, but in the UK, prescriptions or either free or capped at £8.60 ($11.27).

via Wikimedia Commons

The one drawback to the NHS system is responsiveness. In the UK people tend to wait longer for inessential surgeries, doctor's appointments, and in emergency rooms. Whereas, the US is ranked as the most responsive country in the world.

RELATED: Alarmingly high insulin prices are forcing Americans to flock to Canada to buy the drug

The New York Times printed a fair evaluation of the UK's system:

The service is known for its simplicity: It is free at the point of use to anyone who needs it. Paperwork is minimal, and most patients never see a bill. … No one needs to delay medical treatment until he or she can afford it, and virtually everyone is covered. …

According to data from the Organization for Economic Cooperation and Development, the United States spent 17.2 percent of its economic output on health care in 2016, compared with 9.7 percent in Britain. Yet Britain has a higher life expectancy at birth and lower infant mortality.

Citizens in each country have an interesting perspective on each other's healthcare systems. UK citizens think it's inhumane for Americans have to pay through the nose when they're sick or injured. While Americans are skeptical of socialist medicine.

A reporter from Politics Joe hit the streets of London and asked everyday people what they think Americans pay for healthcare and they were completely shocked.

Health

Bans on plastic bags and straws can only go so far. Using disposable products, like grabbing a plastic fork when you're on the go, can be incredibly convenient. But these items also contribute to our growing plastic problem.

Fortunately, you can cut down on the amount of waste you produce by cutting down on disposable products. And even more fortunately, there are sustainable (and cute) replacements that won't damage the environment.

Coconut bowls


Cocostation

Who says sustainable can't also be stylish? These cute coconut bowls were handmade using reclaimed coconuts, making each piece one of a kind. Not only are they organic and biodegradable, but they're also durable, in case your dinner parties tend to get out of hand. The matching ebony wood spoons were polished with the same coconut oil as the bowls.

Cocostation Set of 2 Vietnamese Coconut Bowls and Spoons, $14.99; at Amazon

Solar powered phone charger

Dizaul

Why spend time looking around for an outlet when you can just harness the power of the sun? This solar powered phone charger will make sure your phone never dies as long as you can bask in the sun's rays. As an added bonus, this charger was made using eco-friendly silicone rubber. It's win-win all around.

Dizaul Solar Charger, 5000mAh Portable Solar Power Bank, $19.95; at Amazon, $19.95; at Amazon

Herb garden kit

Planter Pro

Put some green in your life with this herb planter. The kit comes with everything you need to get a garden growing, including a moisture meter that helps you determine if your herbs are getting the right amount of food to flourish. All the seeds included are certified to be non-GMO and non-hybrids, meaning you can have fresh, organic herbs right at your fingertips.

Planter Pro's Herb Garden Cedar Planter, $39.00; at Amazonedar Planter, $39.00; at Amazon

Reusable Keurig cups

K & J

Keurig cups are convenient, but they also create a ton of plastic waste. These Keurig-compatible plastic cups are an easy way to cut down on the amount of trash you create without cutting down on your caffeine. Additionally, you won't have to keep on buying K Cups, which means you'll be saving money and the environment.

K&J Reusable Filter Cups, $8.95 for a set of 4,; at Amazon

Low-flow shower head

Speakman

Low-flow water fixtures can cut down your water consumption, which saves you money while also saving one of the Earth's resources. This shower head was designed with a lighter flow in mind, which means you'll be able to cut down on water usage without feeling like you're cutting down on your shower.

Speakman Low Flow Shower Head, $14.58; at Amazon

Bamboo safety razor

Zomchi

Instead of throwing away a disposable razor every time you shave, invest in an eco-friendly, reusable one. This unisex shaver isn't just sustainable, it's also sharp-looking, which means it would make a great gift for the holidays.

Zomchi Safety Razor, $16.99; at Amazon

The Planet
Instagram / Leonardo DiCaprio

This August, the world watched as the Amazon burned. There were 30,901 individual fires that lapped at the largest rainforest in the world. While fires can occur in the dry season due to natural factors, like lightning strikes, it is believed that the widespread fires were started by loggers and farmers to clear land. Brazil's president, Jair Bolsonaro, cites a different cause: the actor Leonardo DiCaprio.

DiCaprio wasn't accused of hanging out in the rainforest with a box of matches, however President Bolsonaro did accuse the actor of funding nonprofit organizations that allegedly set fires to raise donations.

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The Planet