Crowdfunding can provide entrepreneurial startups with finance opportunities as well as links to potential customers.
Studies show consumers prefer crowdfunded products over products funded with bank loans, venture capital or self-funding. An experiment of 1,512 consumers found participants were willing to pay 21% more for a product when described as crowdfunded instead of when no funding source was present.
Consumers often consider crowdfunded products to be of higher quality as they believe that the product “must be good” if many people invest in it. Consumers also thought purchasing crowdfunding products would reduce market inequality.
But this trust has limits; high-risk products like medical or safety equipment are viewed with scepticism. The typical consumer perception is that a “crowd of amateur investors lacks the required abilities to adequately assess the product’s quality.” Brands should consider these factors before developing any crowdfunded product.
[4 minute read]