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Entrepreneurial Online Marketing through Crowdfunding: The Role of
Invested Consumer Empowerment
Abstract: Crowdfunding, facilitated by online platforms, combines consumer empowerment, engagement and co-creation, which are theoretically rooted in experiential and relationship marketing. Social Media technologies enable the creation of trust-based communities where Invested Consumers leverage personal networks and social capital to maximise the viral spread of marketing messages. This in turn represents a source of competitive advantage for entrepreneurs as individual cultural producers, granting access to global markets that would have previously been outside their reach. By fostering engagement and co-creation through crowdfunding it emerges that entrepreneurs are able to seize a competitive advantage disproportional to their market share and financial resources.
INTRODUCTION
As the exchange paradigm which has dominated marketing science since the 1970s
has been gradually replaced by relational network theories (Achrol & Kotler, 2011),
we have seen a steady increase in consumer empowerment. The traditional exchange
dyad is no longer an appropriate framework within which to study the altruistic,
intrinsic motivations, which nowadays impel people to participate in communities and
build their identity around products, services and ideas. Consumption provides a
space in which a sense of self is constructed (Kozinets, 2002) and purchasing
decisions reflect individuals’ values and beliefs (Dickinson & Hollander, 1991) with
“an increasing body of consumers seeking to use their purchase or non-purchase in
the marketplace as a legitimate form of empowerment” (Shaw, Newholm, &
Dickinson, 2006;1052).
This notable trend towards consumer empowerment has been extensively observed
and documented, alongside the rise of the “prosumer” (Toffler, 1980) and the
enrichment of the purchasing experience as an emotional and social investment. This
is reflected in the Service-Dominant Logic (Payne, Storbacka, & Frow, 2007; Vargo
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& Lusch, 2004) which sees consumers as co-creators of value and innovation (Schau,
Jr and Arnould, 2009) and the goal of business as mobilizing and enabling customers
to achieve this ( Norman and Ramírez, 1993). The concept of “Lead User” as a means
of reducing risks involved in new product development garnered much managerial
attention in the 1970s and 1980s (Berthon, Pitt, McCarthy, & Kates, 2007). However,
with the advent of the Internet allowing connections between consumers and
dissemination of their ideas and an overall cultural shift towards customization and
individualization (Peppers & Rogers, 1995) the “creative consumer phenomenon”
has been given much more attention in recent years.
This review of research literature will focus on the aforementioned evolution from the
perceived passivity of mass consumer markets which emerged in the 1960s towards
an increasingly global and segmented marketplace where customization, relationship
building within communities, and personal networks become vastly more significant
(Constantinides, 2006:411), culminating in online practices such as viral marketing
and word of mouth (WOM) which are significantly enabled and amplified by the
pervasiveness of social media. Marketing messages, it is important to note, are no
longer unidirectional (Kozinets, Valck, Wojnicki, & Wilner, 2010) as social media
“affords managers the opportunity to shift relationships with consumers from dialogue
to trialogue – in which consumers engage in meaningful relationships with one
another and with the firms” (C. E. Porter, Donthu, MacElroy, & Wydra, 2011:80).
The focus has therefore shifted towards building communities around brands rather
than determining success by the measurement of individual transactions.
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Nowadays the consumer is not simply looking for information, but also creates
content: news, posts, images, videos, status changes, etc. This means that the user is
both a consumer and producer of the information and companies and brands in turn
are actively called upon to create different social communities and groups (Ilarionova,
2011:264). Engagement – which is characterised by a high-energy and positive state
of commitment - is a powerful currency in delivering effective online marketing
messages to audiences that are increasingly desensitized to traditional stimuli and
promotional brand cues. It refers to actions towards a firm that go beyond
transactions, and are motivated by both cognitive and emotional forces (C. E. Porter,
Donthu, MacElroy, & Wydra, 2011:83).
Such existential motivation for consumer involvement can be achieved in the creation
of experiential value through building and participating in communities of interest.
However, building this sense of value co-production and meaning in firm-sponsored
virtual communities remains a challenge. The importance of collaborating with
customers in the development of innovative products and services has been
recognised for many years (Greer & Lei, 2012) and firm-hosted online brand
communities have been considered as predictors of product success (Gruner,
Homburg, & Lukas, 2013) yet that relationship is a complex one, where the creativity
of that input and the level of satisfaction from consumers is dependent on psychic
benefits such as enjoyment, accomplishment, self-confidence and control (Bendapudi
& Leone, 2003).
The consumer experience is strictly personal and implies involvement at various
rational, emotional, sensorial, physical and spiritual levels (Pullman & Gross, 2004)
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(Schembri, 2009). In this context, “the firm’s role is to deliver a value proposition
rather than to deliver value, which is co-created” (Lemke, Clark, & Wilson,
2010;846). Some studies, while focusing on crowdfunding as a fundraising tool, also
recognise its use for marketing purposes, creating interest in new projects in the early
stages of development and offering a potential set of resources that go beyond capital.
Mollick (2014;3), for example, notes that “The crowdfunding success of Ouya, a
videogame console, led other developers to write applications for it, helping build
competitive advantage even before the projects were released to the public”.
The emerging phenomenon of Crowdfunding is therefore uniquely placed within the
online marketing ecosystem to leverage this sense of heightened engagement through
co-creation. By instigating an enhanced sense of ownership and personal investment,
successful crowdfunding campaigns thrive in empowering the global brand
communities that emerge around projects. These engaged communities, whose reach
is enabled and amplified by viral marketing and social media, form the core of the
concept of crowdfunding as an online marketing tool, which is the focus of this
investigation.
Conceptual Framework
This study approaches the concept of crowdfunding from within the broader
framework of Online Marketing theory, with a specific focus on how customer
empowerment can determine the success of crowdfunding campaigns. It begins with
an exploration of how the mass-market targeting and perceived customer passivity
exemplified by the Functional School of thought (Barksdale & Darden, 1971) has
evolved towards dialogue-led approaches such as Lead User Theory (Von Hippel,
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1986). This evolution has in turn culminated in an environment where the emphasis
lies in creating communities based on shared consumption experiences (Belleflamme
et al., 2010; Holbrook, 2000) and nurturing enduring long-term relationships (
Kozinets et al., 2010) with empowered consumers ( Payne et al., 2007) who are also
value co-creators (Muñiz Jr. & Schau, 2005; Norman & Ramírez, 1993).
Online marketing within the above parameters represents a broad framework where
emerging hybrid and dynamic phenomena such as crowdfunding are placed.
However, considering crowdfunding’s exponential growth in recent years, relatively
little research has been done on the subject, and no comprehensive studies explicitly
address it as a tool for marketing rather than merely fundraising. The present
investigation aims to address this gap in the current literature by examining which
factors contribute to the success of crowdfunding campaigns from an online
marketing perspective, and what dynamics are at play between supporters of such
campaign, the wider communities that form online around crowdfunding projects,
and, crucially, how the concept of customer empowerment has developed in this
environment.
The pervasiveness of the Internet and mobile has rendered those channels a standard
part of the marketing mix (McEleny, 2010), making the concept of ‘Online
Marketing’ almost redundant, since it is difficult to imagine a form of contemporary
marketing which does not incorporate online elements to some degree nowadays.
However, a significant gap in the scholarly literature has been identified in addressing
the specific ways that the emerging practice of crowdfunding utilises those channels
to engage and empower customers, thus maximising the impact of such marketing
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strategies. Engaging ‘always connected’ customers online, via email and social
networks has become the norm rather than an exception in this environment, yet the
factors that influence such engagement, community building, and connectivity in
crowdfunding campaigns have so far not been extensively explored within Marketing
Studies.
(Djelassi & Decoopman, 2013), in their analysis of creative crowdsourcing in the
context of developing and supplying consumer goods, acknowledge crowdfunding as
an important emerging phenomenon where “the consumer becomes a real shareholder
and investor.” We have, accordingly, experienced a dramatic rise in crowdfunding as
an enabler of customer engagement and value co-creation, as a result of this new
marketing landscape dominated by empowered and dynamic customer communities.
The use of crowdfunding to market projects requires much higher levels of
commitment and personal investiture on the part of the consumer towards ideas and
brands, and is the next step in the aforementioned evolution from targeting towards
empowerment and co-authorship.
The success of this approach is evident in the propagation and exponential growth of
sites such as Kiva, Kickstarter, and Indiegogo, which in the past years have come to
create a market worth billions of dollars (Bradford, 2012). $2.7 billion was invested
globally in over a million crowdfunding campaigns in 2012, with this number
predicted to rise 89% to $5.1 billion in 2013 (“Industry Report | Massolution,”
accessed 04/02/2014) and Kickstarter recently surpassed $1B in pledges (“Kickstarter
passes $1B in pledges 5 years in - Tech City News,” n.d. accessed 07/03/2014).
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The sheer economic importance of crowdfunding as a fundraising tool is undeniable,
and many studies have accordingly focused on that aspect of the practice
(Belleflamme et al., 2010) (Dew, Read, Sarasvathy, & Wiltbank, 2009) (Ordanini &
Maglio, 2009). Although the present research takes this aspect into account, however,
its main focus lies in the investigation of the underexplored marketing theoretical and
practical context, studying the ways in which non-financial benefits such as customer
engagement and community building through empowerment can be successfully
facilitated.
The following literature review therefore lays the foundation for this work by
outlining the ways in which crowdfunding enables and leverages customer
empowerment within an online marketing context. The key findings from the
literature form the basis of the pilot study which collected and analysed data from a
sample of crowdfunding campaign managers. An overview is provided of the
methodology employed in the research design, and a set of success factors is proposed
that emerge from the experience of campaign managers in the real-life context of
crowdfunding campaigns. The study concludes by outlining the limitations and
lessons learned from the pilot study, suggesting modifications to future research
design in order to address these and expand the scope of the initial study.
DEFINITIONS
Marketing
The concept of marketing itself is of course incredibly varied and wide-reaching; The
Chartered Institute of Marketing’s official definition, for example, tells us that
“Marketing is the management process responsible for identifying, anticipating and
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satisfying customer requirements profitably.” The American Marketing Association,
on the other hand, broadens this to mean “the activity, set of institutions, and
processes for creating, communicating, delivering, and exchanging offerings that have
value for customers, clients, partners, and society at large.” It is important, therefore
to outline what the term is taken to mean in the context of this study and particularly
in relation to the concept of empowerment and the emerging phenomenon of
crowdfunding.
We therefore offer the following adapted definition of Marketing for the purpose of
the present study:
The activities and management processes responsible for creating engagement and a
sense of enhanced empowerment in individual consumers.
These empowered consumers are, in turn, more likely to create, join, and contribute to
communities of interest based around offerings, and to feel a greater sense of
ownership and willingness to engage in viral marketing activities around
crowdfunding projects.
Crowdfunding
In light of the previously outlined framework, it is felt that current definitions of
crowdfunding do not fully and adequately address the scope of this research, as they
tend to predominantly focus on the fundraising aspect of the practice.
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Dew et al., for example, define crowdfunding as “using a web-based business
enterprise to seek and obtain incremental venture funds from the public” (2009:881)
while Ordanini & Maglio (2009) deem it as “a collective effort by people who
network and pool their money together, usually via the Internet, in order to invest in
and support efforts initiated by other people or organizations”.
Similarly, Belleflamme, Lambert, & Schwienbacher (2010:2) stipulate that the
purpose of crowdfunding is “to obtain funds from a large audience (the “crowd”),
where each individual will provide a very small amount. This can take the form of
equity purchase, loan, donation or pre-ordering of the product to be produced.”
Although the above definitions are accurate in describing crowdfunding as an enabler
for collating financial contributions from various people towards a project, they fail to
address the promotional and (viral) marketing value created by such campaigns
through empowered customer communities.
For the purposes of this study, a new definition of crowdfunding is therefore
proposed, shifting the focus away from this conceptualisation of the practice as a
straightforward pooling of financial resources. Instead, the suggested description
centres upon the promotional and marketing value associated with reaching and
engaging a broad global audience. In particular, it focuses on the value of having an
audience that is personally invested in a particular concept, product, or service and
feels a strong sense of empowerment, ownership and agency towards it. It therefore
follows that:
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Crowdfunding is an online marketing practice - often enabled by social media and
other digital technologies - that facilitates the realisation of projects through the
creation of campaigns, attracting the support of an empowered community of
unrelated individuals hereby defined as ‘Invested Consumers’.
Invested Consumers
It is also important to define the concept of “consumer” within the specific context of
crowdfunding, as this is central to the idea of engagement underpinning much of the
present research.
Crowdfunding customers have been variously defined as ‘crowdfunders’ (Paul
Belleflamme, Lambert, & Schwienbacher, 2013) ‘supporters’ ” (Allison, Davis, Short,
& Webb, 2014) ‘investors’ (Djelassi & Decoopman, 2013), ‘funders’ (Gerber, Hui, &
Kuo, 2009) ‘participants’ (Patel, Clawson, Voida, & Lyons, 2009) and ‘sponsors’
(Zheng, Li, Wu, & Xu, 2014). These terms, however, fail to accurately capture the
essence of what that particular role entails in an online ‘reward-based’ crowdfunding
environment, and the type of relationships that consumers engage in with campaign
owners/managers and other members of the crowdfunding community.
In crowdfunding, consumers are also investors insofar as they directly contribute to
the financing of a project. This investment can involve the purchase of equity or stake
in a project, yet the benefits on offer vary greatly and are often intangible. Although
previous studies (Ordanini, Miceli, Pizzetti, & Zeithami, Valarie, A., Parasuraman,
A., Malhotra, 2011) (Armin Schwienbacher & Benjamin Larralde, 2010) (Agrawal,
Catalini, & Goldfarb, 2011) (Ward & Ramachandran, 2010) often refer to “investors”
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for the reasons outlined above, we deem the role of crowdfunding supporters within a
marketing context to be an inherently hybrid one which is not adequately captured by
this definition.
Traditional marketing has categorised relationships based on rules of reward and
motivation; ‘exchange relationships’ as defined by Clark dependent on reciprocity and
self-interest, and are characterised by neither party wanting to contribute more than
the other. Communal relations, on the other hand, incorporate a degree of intimacy
and exhibit altruistic characteristics. Value in the latter case is not embedded in a
product at the moment of exchange, but obtained through use processes (Tynan,
McKechnie, & Chhuon, 2010). This concept of communal relations underpins the
emotional investment exhibited by crowdfunding consumers.
Following from this rationale, the term Invested Consumer is hereby proposed to
illustrate the key differentiating factor between consumers in a crowdfunding
marketing context and those engaging with firms in more traditional frameworks, both
online and offline. He/she is therefore defined as:
An individual who feels a sense of agency and ownership towards a crowdfunding
project, and identifies with the communities of interest that form around campaigns in
which they hold a stake - of variable monetary and reputational value - and for which
they can expect a “reward”, which can be tangible or intangible in nature.
An Invested Consumer is therefore one that is empowered to feel a sense of
ownership towards the crowdfunded project and has an emotional stake in its
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outcome. It is also worth noting that the choice of ‘consumer’ over ‘customer’ is
deliberate as the former has connotations of on-going relationship and access to goods
and services which might well be intangible in nature, whereas the latter implies set
and finite transaction patterns.
Within the scope of this definition, the meaning of the term Invested could of course
be taken literally, since crowdfunding necessarily entails some form of financial
contribution. However, in the current investigation of crowdfunding as a marketing
tool driven by online community interaction, this investment is better measured in
terms of social capital than monetary value. This study will therefore look at how
social capital is leveraged by invested consumers in order to support projects within
crowdfunding communities.
LITERATURE REVIEW
Targeting to Empowerment: Evolution of Consumer Studies
For decades, the “4Ps” have been regarded as something of a marketing ‘Rosetta
Stone’ (Lauterborn, 1990) in the sense that traditional marketing research and
practice tended to adopt various interpretations of the marketing mix model of
Product, Price, Place and Promotion ( Tariq & Wahid, 2011). “Personalisation,” for
example, is proposed as an element of such a revisited model by Flynn and Goldsmith
(1999).
Yet the core elements of this theory have suffered fundamental alterations brought on
by the Internet, which has given consumers much more control in accessing
information (Y. Lim, Yap, & Lau, 2011) and driven down the price of many products
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and services toward zero (Pauwels & Weiss, 2008). Furthermore, marketplace trends
such as globalisation, magnified competition, increasingly demanding customers,
technological advances, and similarity of product and service offering brought on an
increased emphasis on relationship marketing (Myhal, Kang, & Murphy, 2008).
Within the context of established firms the emphasis has thus shifted towards building
effective relationships with customers (Daniel, Hugh, & Malcolm, 2002) and
Customer Relationship Management (CRM) is leveraged as a key driver of value in
strategically creating and managing customer experiences (Shannahan, Shannahan, &
Alexandrov, 2010). This is not a new phenomenon, since scholars as early as 1994
were already asserting that “In services marketing and industrial marketing the
paradigm shift from marketing mix management to relationship marketing has already
taken place in large parts of the world” (Gronroos, 1994).
Relationship Marketing constitutes of a cross-functional process for achieving a on-
going dialogue with customers (Day & Bens, 2005) to continuously strengthen the
network for the mutual benefit of both parties, through interactive, individualized and
value-added contracts over a long period of time (Anbuoli & Raj, 2012). By
leveraging such personalised treatment, firms have learned that they can greatly
increase both customer retention and the effectiveness of marketing initiatives (Plaza,
2010). Modern marketing therefore requires a focus on innovation and the building of
brand relationships (Harris & Rae, 2010) with clear links between ethics, long-term
relationship building and performance (Amine, Chakor, & Alaoui, 2012).
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The economically derived marketing logic which viewed firms and customers as
being inherently separate, and placed the customer in a passive role in relation to the
firm’s value-creation efforts (Deshpande, 1983) has therefore been replaced by
relationship-based and experience-based marketing offers. Consumers nowadays
create much of the meaning (Bernoff & Li, 2008) and power is transferred from
institutions to individuals and communities (Rose & Wood, 2005). This is a
“continually evolving process that requires a shift in attitude away from the traditional
business model of focusing internally” (Maleki & Anand, 2008:69). We have
consequently seen a greater level of consumer involvement and commitment in
brands, exemplified by phenomena such as Wikinomics (Tapscott, 2006) brand
communities (Fournier & Lee, 2009), and consumer tribes (Cova et al., 2007) with
increasing importance being placed on the role of consumer networks, groups, and
communities (Cova & Cova, 2002) (Novak & Hoffman, 1996).
This shift in mainstream marketing practices towards relationship and experiential
marketing has paved the way for more disruptive forms of consumer involvement, co-
production, and empowerment, leading to the current widespread growth of
crowdfunding. As outlined above, relationship marketing involves building a long-
term rapport with customers based on empowerment, trust, and value co-creation. In
the emerging framework of crowdfunding, these characteristics overlap with
experiential marketing features, where taking part in contemporary events and
projects, and sharing those experiences within a dedicated community based around
specific interests, constitute the main motivation for participation.
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Sharing in particular is a key concept in the emerging crowdfunding framework;
Kickstarter itself stipulates on its website that in order to qualify for crowdfunding,
"Projects must create something to share with others." Customers may experience
delight when participating in such brand communities, because participation leads to a
greater sense of control over the service process and the final outcome (Schneider &
Bowen, 1995). Leveraging this empowerment, on both an individual and collective
level, is a powerful mechanism through which crowdfunding increases consumers’
emotional stake in a project, allowing for the emergence of the ‘Invested Consumer’
as previously outlined.
“Once upon a time the primary agents of socialization were institutions like the
family, school, church, etc. but now consumption is a prime socialization agent
whereby people are taught how and learn to be consumers” (Shankar, Cherrier, &
Canniford, 2006;1017). The role of power in creating social practices and discourses
in modern society relies largely upon the transformative functions of technology, yet
while the Internet enables companies to build online communities that afford the
integration of consumers in the process of product development from an early stage
(Fuchs & Schreier, 2011), crowdfunding takes this empowerment further in allowing
consumer involvement from project inception. This ever-greater empowerment of the
consumer is enabled by the development and exponential growth of effective
crowdfunding platforms and tools, which provide online environments that effectively
connect Invested Consumers and allow them to leverage their influence more widely.
Crowdfunding Platforms as Enablers of Invested Communities
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Platforms such as Indiegogo and Kickstarter intermediate the consumer empowerment
process by creating a two-sided market between entrepreneurs and potential
supporters, yet scholarly understanding of the role of such platforms is still limited
(Belleflamme et al., 2013). These Web 2.0 technologies, which allow users to
contribute content and connect with one another, act not only as integrators of third-
party social networks but also as independent communities (Zheng et al., 2014). As
such, they provide Invested Consumers with a heightened sense of agency and co-
ownership.
As early as 2012, we have seen individual projects raising over one million dollars
through platforms such as Kickstarter – ‘Elevation Dock”, an iPhone accessory, being
the first to break this threshold. However, entrepreneurs themselves assert that the
greatest advantage of these platforms does not lie in fundraising, but in providing
proof that a market for your product exists and in promoting your brand, company, or
idea. A dramatic illustration of this occurred recently, when Oculus - another
company formed through a Kickstarter campaign - was acquired by Facebook for
$2bn. Yancey Strickler, Kickstarter’s founder, asserts that the motivation to promote,
share and support ideas, enabling something that would otherwise be unlikely to
materialise, was the motivation that led him and his co-founders to build the platform;
"there are no ulterior motives other than genuinely sharing things we enjoy."
(“Kickstarter: the crowdfunder taking your cash to create something cool |
Technology | The Observer,” n.d.)
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Within this framework, the Internet, and more specifically, crowdfunding platforms,
are defined as what Illich (1973) termed ‘convivial tools’. These tools give users the
greatest opportunity to enrich their environment (physical or virtual) with their own
vision and influence, maximising communications amongst members and making the
most of their energy, creativity and imagination. Consumers utilising these tools
therefore become producers and contributors, creating what Bennett, Segerberg &
Walker defined, in their study of crowd-enabled movements, as ‘dynamic integration’
(2014). They achieve this by producing, monitoring, curating, endorsing and
amplifying relevant, useful and desirable content in various networked curation
processes.
Crowd mobilization is characterised by ‘the logic of connective action’ in which
participants engage with issues largely on individual terms by finding common
ground in easy-to-personalize action frames that allow for diverse understandings of
common problems to be shared broadly through digital media networks (Bennett et
al., 2014). Within this context communication technologies and practices serve as
stitching mechanisms that connect different networks into coherent organization. This
can be seen in the mechanisms employed by the most popular crowdfunding
platforms, where full and seamless integration with various third-party social
networks such as Facebook, Twitter, YouTube and others is enabled and heavily
encouraged.
Rapp et al. (2013) use the concept of contagion theory to illustrate how ideas spread
across social media channels, suggesting that individuals or firms engage in
behaviours because of their interactions with other individual or firms engaged in
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similar behaviours. There is evidence that consumers approach technology as a social
actor (Ping Wang, 2007) so that effectively managing relationships and technology
simultaneously can significantly influence performance in an environment that is
“changing so dramatically that that traditional marketing methods are not enough.
Collaborative communication is critical (Rapp, Beitelspacher, Grewal, & Hughes,
2013;563)
Various claims exist of the Internet as a tool to empower consumers (Bush, 2004)
(Wind & Rangaswamy, 2001) (Rha & Widdows, 2002) and informants in a study by
Joy et al. (2009) expressed how the Internet instilled a sense of “empowerment due to
boundless knowledge” and being able to relate their lower-order needs of being
connected, informed and wealthy with higher-order goals of being in control, having
self-esteem, and attaining happiness. The consumerist model focuses on individual
choice and increasing control and a feeling of responsibility, taking greater ownership
of choices made (Mattila and Cranage, 2005). However, as outlined in the previous
section, empowerment holds varying meanings in a range of contexts underpinned by
differing assumptions and ideologies.
Empowerment is thus a particularly important concept in the context of crowdfunding
platforms and the way they enable community-building. Here we observe a shift in
dynamics where feelings of agency and ownership replace the traditional exchange
value, as consumers are more likely to view the success of the project as a direct
result of their participation. The emotional and psychological investment that
consumers experience towards crowdfunding projects could derive from the fact that
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as ‘co-owners’ they experience a sense of ‘endowment’ (Shu & Peck, 2011). The
endowment effect stipulates that a consumers’ valuation of an object increases once
they have taken ownership of it (Kahneman, Knetsch, & Thaler, 1990) (Knetsch &
Sinden, 1984).
Even though the offering of extrinsic or material incentives often forms a part of
crowdfunding campaign strategy, the value of such ‘rewards’ tends to be tokenistic
rather than purely transactional. As such, the ‘reward-based’ crowdfunding model
which this study focuses upon is inherently different from the equity and microfinance
forms of crowdfunding, where campaign success is associated with a cut-throat
attitude of competitiveness and aggressiveness (Moss, Neubaum, & Meyskens, 2014).
Within the framework of the current research, the term ‘investment’ is taken to mean
an emotional and psychological stake consumers have in a crowdfunding project,
where the positive outcome of a campaign is perceived as a reward in and of itself,
due to the sense of empowerment and ownership that Invested Consumers feel in
participating. It is important to note, however, that it is possible for this emotional
investment and high community engagement to backfire, as Invested Consumers can
feel betrayed if they perceive decisions to be made which go against the ethos adopted
by the community.
When Oculus was sold to Facebook, for example, in spite of the company having
fulfilled its promises as far as providing the rewards (such as hardware prototypes) to
individual backers, there was strong reaction against it. Many community members
who had previously championed the product demanded their donations back and
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vented their frustration against the company on social media. Austin Walker, a
researcher at the University of Western Ontario investigating ways in which
technology can be mishandled, explains that many campaigns “deploy the rhetoric of
an art project to ensure an emotional buy-in that will then lead to a financial buy-in.
And that emotional buy-in is part of the reason why people get upset." (“Kickstarter:
the crowdfunder taking your cash to create something cool | Technology | The
Observer,” n.d.)
In his analysis of the sharing economy as a new business paradigm, Belk advances the
concept of collaborative consumption as a key shift to the way consumers approach
ownership. The idea that “you are what you own” has been gradually replaced by
“you are what you have access to” or, alternatively, “you are what you share” (Belk,
2013). This proposition that in the “post ownership economy” the new,
technologically-mediated ways of accessing possessions without actual ownership
may influence consumers’ sense of self is extremely relevant to crowdfunding, as
Invested Consumers experience ownership in much the same non-exclusive,
collaborative way which leads to higher emotional involvement. The process of
“sharing in” (Ingold, 1985) is an inclusive act that makes the recipient part of a
“pseudo-family and our aggregate extended self”. Campbell (2004) chimes with this
view, suggesting that personal ontology relies on acts of consuming, and that we
discover ourselves through consumption.
Füller et al. argue that virtual co-creation such as that afforded by participation in
crowdfunding communities can be interpreted as an enabling activity that strenghtens
a person’s experience of self-determination and self-efficacy. “Active investment
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provides crowdfunding sponsors with opportunities to not only invest money but also
constantly interact with entrepreneurs” (Zheng, Li, Wu, & Xu, 2014;489). The key for
campaign managers wanting to leverage this empowerment to attract Invested
Consumers is, therefore, to impart a sense that they are autonomously contributing to
a collaborative network, and that their input will be seriously considered.
“Consumers feel empowered when they are able to enjoy the consumption process”
(Wright, Newman, & Dennis, 2006;925). However, given the fact that most
successful projects will need to attract and involve a large number of Invested
Consumers, it may not be practical to afford all power to all consumers. Neither is this
strictly necessary, as “the experience of participation itself engenders a sense of self-
efficacy and enjoyment regardless of actual strength of influence on product policy.
Therefore, consumers’ perceived empowerment during co-creation may be considered
as symbolic and thought of as a ritualized and quasi-religious act” (Füller,
Mühlbacher, Matzler, & Jawecki, 2009;95).
The growth of crowdfunding platforms enable managers to market their products and
ideas within an “open source marketing” model, where control over the production
and distribution of content is to a large extent relinquished to communities of interest.
In this context, marketing is increasingly seen as an integral part of the entire
production lifecycle, and as a way of maintaining an active and multi-directional
conversation with stakeholders. In other words, every phase of a crowdfunding
project - from conception through to strategic planning, execution, promotion and
delivery - must be designed with the consumer/investor in mind and allow for
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mechanisms that empower that consumer to generate value for the project, thus
creating a sense that the project is effectively “owned” by the community.
It is arguably more difficult for larger corporations to confidently achieve the levels of
personal interaction and responsiveness that such strategies demand, however, and
this is an area where small and medium enterprises (SMEs) have the opportunity to
seize considerable competitive advantage through leveraging crowdfunding.
Castronovo & Huang (2012) argue that such firms already possess an enhanced ability
to cultivate meaningful relationships with their customers and routinely leverage the
web’s ability to make product personalisation easier and more transparent to users
(Sheth & Sharma, 2005:619). “The Internet has been the great equaliser, giving SMEs
that couldn't hope to fund production of a 30- second spot, much less the airtime to
show it, the potential to gain both worldwide visibility and highly targeted hits”
(Bowman, 2008:46). Utilising crowdfunding technology to build closer relationships
with customers can, therefore, provide enterprises with a unique competitive
advantage (Carson et al., 1995; O’Dwyer, Gilmore, & Carson, 2009; Zontanos &
Anderson, 2004).
This necessarily requires empowerment through allowing the consumer a more active
role ( Schreier, Fuchs, & Dahl, 2012) and leveraging their loyalty and advocacy
through building and maintaining brand-community relationships (Algesheimer,
Dholakia, & Herrmann, 2005; Fournier, 1998). As decision and transaction
customisation are associated with overall satisfaction (Thirumalai & Sinha, 2011), a
firm can thus gain a competitive advantage through empowerment which would not
have been achievable through traditional marketing activities such as advertising.
23
Crowdfunding would therefore appear to be an ideal platform for enabling small
enterprises and independent creative producers to reach global audiences and rally
them around their projects, products and services, without the need to draw upon pre-
existing resources.
Before social media channels enabled the global and pervasive reach of WOM
communications, independent producers and entrepreneurs - who now largely make
up the rich and diverse crowdfunding ecosystem - might have been marginalised from
the production and marketing process altogether. However, because of online WOM,
these entrepreneurs can now compete within the marketing landscape. Where
previously the costs of blanket reach advertising and the large budgets associated with
them would have excluded them completely, the emphasis on the viral spread of
marketing messages represents a powerful equalising force.
Social Capital, Co-production and Trust in the Crowdfunding Context
The theme that emerges so far is that the importance of peer effects, community and
trust cannot be underestimated when considering what factors might influence the
success of crowdfunding campaigns, as they are likely to have a direct impact on the
level of online viral marketing and WOM sharing that occurs around a given project.
Furthermore, empowerment of users in joint value creation (Voss, 2012), through
shared consumption experiences rather than exchange (Rovini & Gentile, 2007)
(Vargo & Lusch, 2004) is key due to crowdfunding’s strong emphasis on the social
meaning attached to consumption (Miller, Fabian, & Lin, 2009:305).
24
There are many types of online communities based around rating, experience-sharing,
and exchange of cultural goods (Curien & Moreau, 2005) yet their unifying feature is
that they instil a sense of belonging and mutuality in their participants (Bender, 1978).
Crowdfunding communities, however, tend to actively engage their members in co-
production activities, meaning that Invested Consumers actively take part in shaping
the direction and outcomes of the campaign and its resulting outputs. Consumer
motivation for engaging in co-production as a dynamic process reflect diverse values
(Etgar, 2007). They may decide to participate in order to satisfy their need for self
expression and uniqueness (Tian, Bearden, & Hunter, 2001), fostering choices and a
sense of freedom and autonomy (Knee & Zuckerman, 1996) or exercising
capabilities, skills and fantasies which they are not able to use in their daily routines
(M. B. Holbrook & Hirschman, 1982).
Gerber, Hui & Kuo address the motivations that lead people to engage in
crowdfunding through computer mediated platforms such as Kickstarter, RocketHub
and Indiegogo. They find that in addition to anticipated extrinsic motivators such as
consuming products and experiences, “funders participate in crowdfunding to engage
in a community” (Gerber, Hui, & Kuo, 2009;6-7) and that people are motivated to
participate because of social interactions realized through crowdfunding platforms,
such as strengthening feelings of connectedness to a community with similar interests
and ideals.
“Project sponsors are motivated to support those individuals who have similar
interests and expertise and are like-minded. They are also motivated to become a
member of the crowdfunding community where they can learn and share their
25
knowledge” (Zheng, Li, Wu, & Xu, 2014;488). (Belleflamme et al., 2013) stress the
sense of ‘additional utility’ generated by community-based experiences and benefits
that crowdfunding consumers experience over ‘regular’ consumers. Additional
benefits are derived from the feeling of belonging to a community of ‘special’ or
‘privileged’ individuals and having contributed to the realisation of a project.
This relationship and cultivation of the crowdfunding community is long-term rather
than lasting only for the duration of the project itself. Eric Migicovsky, the manager
of a crowdfunding campaign on Kickstarter to build a smart watch, asserts that the
support of the community is the reason behind the continued success of his venture.
"The overwhelming support we got from the community was incredible. We were
completely blown away and definitely wouldn't be here today without them." Austin
Walker, from the University of Western Ontario, points to the rewarding feeling that
supporters achieve by bringing things into the world that otherwise wouldn't exist;
"The consumption you do on Kickstarter is really great! It feels like supporting a local
business or band, and it's rewarding to give your money to something that feels like a
long shot.” (“Kickstarter: the crowdfunder taking your cash to create something cool |
Technology | The Observer,” n.d.)
This social capital, defined as the goodwill available to an individual from the
structure and content of their social relations (Adler & Kwon, 2002) is deemed crucial
to the success of crowdfunding campaigns. In fact, it is held by some that
“crowdfunding is the quantification of one’s social capital” (Hui, Greenberg, &
Gerber, 2014;72) and that “in a framework with information asymmetry individual
social capital (ISC) is positively and significantly correlated with the probability of
26
success of a crowdfunding project” (Guerini, Giudici, & Rossi-Lamastra, 2014;2).
“Projects generally succeed by small margins, or fail by large ones. Social capital and
preparedness are associated with an increased chance of project success” (Mollick,
2014;13).
Increasingly, consumers tend to largely rely on the advice of others when making
purchase decisions, especially when purchases are financially or psychologically risky
(Gershoff & Johar, 2006). It is often impossible to disentangle trust invested in
specific people from that placed in institutions (Knights, Noble, Vurdubakis, &
Willmott, 2001). When a product is complex and difficult to evaluate and when risk is
involved in the decision to buy it (as is often the case with crowdfunded products and
services) consumers often look to others for advice (Anbuoli & Raj, 2012).
(Mollick, 2014) provides a useful quantitative overview of over 48 thousand
crowdfunding projects published by Kickstarter, offering a description of the
underlying dynamics of success and failure among crowdfunded ventures. Their
results likewise suggest that personal networks are closely associated with the success
of crowdfunding efforts. The thriving communities that sustain, promote and co-
create crowdfunding projects would certainly not have been enabled without the
pervasive and widespread adoption of social media on a global scale. The success of
crowdfunding as an online marketing phenomenon is therefore closely interlinked
with the continued boom in the social media sphere. These channels have added new
dimensions that allow companies to engage with individuals while also making it
possible for consumers to interact with each other and create communities around
their products (Mangold & Faulds, 2009).
27
PILOT STUDY
The initial phase of this research involved conducting an exploratory pilot study that
would test the viability of this primary data collection endeavour. Quantitative
methodologies were considered, yet ruled out at this stage due to practical and logistic
factors, as the breadth and diversity of the crowdfunding ecosystem precludes the
gathering of a quantitative data sample large enough to be robustly generalizable
without the direct collaboration of crowdfunding platforms. This collaboration could
entail sharing of user contact details, which, as a rule is not possible due to privacy
and commercial considerations. It is important to note, however, that engagement
with platforms such as Indiegogo has provided an additional source of qualitative data
from their employees, which supplemented the interview data gathered from
crowdfunding campaigners.
Qualitative methodologies were therefore deemed best placed to provide initial insight
into the behaviours and mechanisms that influence the success or failure of a
crowdfunding campaign. The exploratory pilot study was designed under the premise
that by delving deeply into qualitative samples, it is possible to empirically support
hypotheses concerning the “why” and “how” of phenomena and decision-making
within crowdfunding communities.
28
Since the small size of the sample and the varied and complex nature of crowdfunding
ventures precludes generalisation, the study focuses on attaining informed
propositions regarding how campaign actions empower invested consumers, and how
these individuals and the communities which form around crowdfunding projects
influence the reach of marketing messaging, particularly through viral social media
channels. The goal of this initial exploratory study is ultimately to shed light into the
complex and emerging practices that emerge surrounding the use of crowdfunding as
a marketing tool, and to establish promising areas for development of additional
research that will further this understanding.
The prospective sample for this pilot study was drawn from a population of interest
consisting of cultural entrepreneurs who hosted campaigns on the crowdfunding
platform Indiegogo under the ‘Film’ category. Indiegogo is currently the largest
crowdfunding platform of its type on the Internet, and the category above showcased
a broad range of popular projects
A grounded theory approach was employed in conducting semi-structured interviews
utilising a matrix of questions with the aim of providing a flexible open structure to
gather reflexive experiences from campaign managers who had expressed an interest
in taking part in the research. Managers were asked to convey their customer
interaction strategies and experiences. In formulating interview questions the
following key factors and theoretical propositions which emerged from the literature
review were considered:
29
1. Crowdfunding as a marketing tool: Is crowdfunding perceived by campaign
managers as a useful online marketing tool rather than simply a means to
gather funds to finance their projects?
2. Crowdfunding as source of competitive advantage for SMEs: The
literature suggests that crowdfunding allows independent
producers/entrepreneurs and SMEs greater access to markets and communities
through social media and the viral spread of their campaign messages.
Managers in this pilot sample belong to this category, and therefore might
offer insight on whether this reflects their experience.
3. Customer Empowerment: Does granting customers greater power over the
outcome of crowdfunding campaigns lead to a heightened sense of project
ownership and increased volume of viral and WOM interactions?
4. Networks and Tie Strength: Castronovo & Huang (2012) suggest that tie
strength is one of the most important factors that influence the spread of word-
of-mouth communication, yet is this reflected in the experiential evidence of
campaign managers engaging with those networks?
5. Social Media leveraging: By asking participants about which platforms they
employed to engage users, and how their interactions differed across channels,
we hoped to gain insight into the types of engagement required to create
positive community dynamics around crowdfunding campaigns.
The research thus engaged with crowdfunding campaign managers in prompting them
to relate their experiences of instigating customer engagement and fostering
communities of interest based on their campaigns. The decision not to approach this
exploratory research from the point of view of customers themselves stems in part
30
from the complexity and scale that this would add to the research design and the
demand it would put on limited research resources, which would potentially
jeopardise its integrity and prevent its completion within the proposed timeframe.
Additionally, the considerable experience and insight offered by campaign managers,
when coupled with their privileged access to analytics social media data on customer
interactions, represents a fruitful and valid avenue for enquiry that provided useful
insight for the pilot study phase. However, the benefits of adding first-hand customer
perspectives to the research are acknowledged and will be incorporated in the design
for further research, which will involve the development of an in-depth case study, in
which customer experience will constitute an unit of analysis.
Key Findings
The pilot study has highlighted some preliminary key findings relating to the
identification of success factors in crowdfunding and the role of social media in the
effectiveness of such campaigns:
1. Gathering momentum in the early phase of a project emerges as an important
factor in creating “buzz” within crowdfunding communities and supporting
successful campaigns. This chimes with the findings on peer effects and the
social context of consumption and decision-making as outlined in the literature
review and is echoed by campaign managers and a social media manager
working at Indiegogo. The latter has in fact stated “The number one key to a
great campaign is raising the first 30% in the first few days so that the crowd
31
sees the early momentum and wants to join in what it perceives as a successful
initiative.”
2. Creating a sense of empowerment and experience-sharing amongst the
crowdfunding community can lead to increased community engagement. As
the literature review highlighted, customers are more likely to feel this if
offered an exclusive and unique experience, and a campaign manager recounts
how this was achieved by using limited edition donation tiers, “encouraging
fans to feel like they are getting something unique and that they have a hand in
building the video from the ground up”.
3. The type of network that crowdfunding investors/supporters belong to is just
as crucial to campaign success as their size. Howe (2006) alluded to this in
saying that the most efficient networks were those with the broadest range of
information, knowledge, and experience. Campaign managers also pointed to
the importance of engaging people who belong to different social network
spheres in order to maximise message spread.
4. Campaign managers recognise the usefulness of crowdfunding as a marketing
and promotional tool. This is reflected by the fact that even campaigns which
failed to reach their financial targets were deemed successful by other criteria:
“although we fell short of the final amount I have raised the profile of what
I’m attempting to do tenfold. I’ve also made connections with groups of
people that I never thought that I’d get to work with. Once the reward costs are
deducted (plus the Indiegogo shortfall fees) we’ll be left with about half the
film’s budget but I do feel that I’ve somehow elevated our company’s status
and potential”.
32
DISCUSSION AND FURTHER RESEARCH
As outlined above, the pilot study findings offer interesting insights into some key
success factors in managing crowdfunding campaigns and fostering customer
engagement through social media. However, the study does present limitations which
will be addressed in subsequent research.
One concern which emerges from this process is that some of the necessary fluidity of
the interview process (Rubin & Rubin, 1995) might perhaps be lost in the reflective
interview format adopted in the pilot study. An example of such a hybrid approach is
found in Elsbach (2009) which draws upon Kvale’s (1996) framework might yield
more insightful results. The pilot study engaged with participants mostly via email
and telephone, and it would be beneficial to engage in more in-depth interaction in
order to ascertain further nuances in experience which might not be immediately
apparent.
Secondly, as highlighted above, it was not possible to engage directly with
crowdfunding Invested Consumers in the course of the pilot study. It would be
beneficial in a future, more comprehensive case study, to offer a holistic view
comparing and contrasting the experiences of both managers and consumers.
Since the crowdfunding ecosystem is so broad and varied in the way it operates, the
types of initiatives it enables, and the communities that build up around it, it is
important to find a consistent unit of analysis around which we can develop a more
in-depth case study. However, it is also important to have an awareness of how social
33
and cultural characteristics might influence these processes and act as mediators in the
online crowdfunding communities which are the subject of this study. As these might
very well account for variations within samples, they should be taken into account
when gathering and analysing data and refining the research design.
It is proposed that this pilot study will subsequently inform the design of the expanded
research, which forms the second phase of the study. Through the insights provided,
possible improvements emerge into which questions are most relevant, what data
should be collected in order to maximise the effectiveness and impact of the
investigation, and what are the most efficient ways of approaching participants,
building a sample, and collecting/processing data.
A further planned modification to the research design has emerged from peer
feedback, which highlighted that the study would likely benefit from interviewing
crowdfunding customers directly. This will be addressed in the next steps of further
research design, where as a result of the trust relationship which has been developed
with one of the campaign managers interviewed, he has expressed a willingness to
participate in an in-depth case study which would follow the development of a second
crowdfunding campaign designed to raise funds for further development of the film
and to promote it to a wider community of interest. This approach presents several
potential advantages:
1. Privileged access to various metrics and analytics relating to consumer
engagement, across the crowdfunding platform itself as well as various social
media channels employed.
34
2. Directly relatable units of analysis will be made available, where it will be
possible to compare results between the two campaigns.
3. The ability to test the hypotheses outlined in the previous section as these
potential identified success factors are incorporated into the strategic planning
for the campaign.
4. Access to community members mediated by the campaign manager, who has
agreed to approach the community to gather willing participants who will be
interviewed in order to provide insights from a customer perspective for
triangulation with data from campaign manager and Indiegogo facilitators.
The aim of this exploratory study has been to take the first steps in providing fresh
theory that bridges from rich qualitative evidence to mainstream deductive research
(Eisenhardt & Graebner, 2007). With “continuous interaction between the theoretical
issues being studied and the data being collected” (Yin, 2009:68). It is hoped that
fruitful avenues for developing those theories will continue to emerge as this process
evolves into the next phase of research.
CONCLUSION
We have approached the study of the crowdfunding phenomenon from the perspective
of Marketing Studies, as it was asserted that this emerging, hybrid, and inherently
online practice is uniquely placed within the online marketing ecosystem to offer
customers this enhanced sense of empowerment. By fostering engagement and co-
creation through crowdfunding it emerges that entrepreneurs are able to seize a
competitive advantage disproportional to their market share and financial resources.
35
This resulting vibrant and open ecosystem which allows small firms to reach wide
global audiences is experiencing exponential growth, and the communities that
support this growth thrive in a landscape increasingly mediated by social media. The
convergence of these factors has so far presented interesting research findings, which
provide fruitful avenues and possibilities for further investigation.
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