January 1, 2015
Written by Master Student at Lund University
Introduction
When creating a new venture, a successful establishment of the brand is a crucial activity in customer acquisition process and order to create a favourable reputation (Bresciani & Eppler, 2010). Small enterprises generate economic growth and create working opportunities to the society. However, banks are often reluctant to take risks and venture capital firms looking for bigger companies and require quick results. This denotes difficulties for new ventures to obtain financing through traditional approaches and to even get started with the business idea (CrowdCube, 2013). Moreover, with today’s noise in the market sphere, it is extremely important for the new venture to stand out and build a brand in order to survive. There are several channels where entrepreneurs can promote and communicate their brand. As the new media landscape opens up for opportunities it also raises challenges, such as building establish a brand in a short time and send a consistent message regarding the brand value (Winer, 2009).
A relatively new path to get funding and market validation in an early stage is through crowdfunding. In this short paper, I will examine the topic of crowdfunding as a tool to build brand awareness through social media channels. In order to observe this further, I aim to define the area of crowdfunding, start-up branding and the essence of word-of-mouth in an online setting. Additionally, I will base the discussion trough thoughts from an entrepreneur that started a venture through a crowdfunding campaign.
The basics of crowdfunding
Crowdfunding platforms occur over several sectors from non-profit purposes to consumer products to music and film production. Commonly, these platforms consist of three actors; the receiver seeking financing, the public financing platform and the individuals that provides with financial support. The crowd platform acts as a link between the project and the financers (Ordanini et al., 2011). Crowdfunding can take various forms such a donation, reward or pre-emption or capital model through equity or loans (Hemer, 2011). Belleflamme, Lambert and Schwienbacher (2007, s.7) defines the topic as ”Crowdfunding involves an open call, essentially through the Internet, for the provision of financial resources either in form of donations (without rewards) or in ex-change for some form of reward and/or voting rights in order to support initiatives for specific purposes". Belleflamme, Lambert and Schwienbacher (2011) indicates that there are three main reasons why people engage and support crowdfunding; following the process of a new product that never been launched, a pre-order of a certain product before it reaches the mass-market and identify themselves as privileged financers that partake in a community.
Brand your start-up
According to Rode and Vallaster (2005) studies of branding is a very unique phenomenon in the context of start-ups and claim that further researches in this area is necessary. This is further discussed by Bresciani and Eppler (2010), claim the field of branding on new ventures to be an under-explored area and its marketing strategies cannot be directly copied of established firms for success. For example, start-up branding distinguishes from established firms in terms of no rooted identity, spread reputation and lack of organizational structures (Bresciani & Eppler, 2010). Additionally, the limited resources such as capital, knowhow and time are also typical issues for new ventures.
Since the entrepreneur is responsible for many areas of the business, Barbu et al. (2009) findings were showing that the marketing strategies mainly surrounded sales. This research declared that the branding strategies were hard to overcome due to lack of managerial competence. Moreover, almost all start-ups are focusing on one product or service. In the context of small ventures, Resnick and Cheng (2011) claim the firm’s branding cannot be separated from the owner’s personal brand. As product and entrepreneur cannot be distinguished from the each other, the branding could be seen as one.
Social Media Branding
The web is a unique social environment with the ability to link a piece of content to another, which creates content webs that contain value (Akar & Topsu, 2013). Social media is applicable in various fields from customer management, market intelligence and research to public relations and promotions. Social media is today a vital tool for marketers from both small and large firms to spread their message to customers. An advantage of social media branding is the possibility to gain effective and relatively cheap customer insights such as feedback, attitudes and analyse customer movements (Barwise & Meehn, 2010).
From the consumers’ perspective, social media provides the ability to generate and share information about firms and products, influence buying behaviour and a vast effect on brand reputation. When a firm is present on social media communities, it’s possible for the customer to interact around the clock. From the firm’s perspective it is, according to Barwise & Meehan (2010), essential but hard to sacrifice control of the brand’s channel. Word-of-mouth regarding customer opinions are perceived to be more trustful in comparison to the firms marketing efforts (Akar & Topsu, 2013). Thus, social media has a great (positive or negative) impact on the firms sales and as claimed by Kietzmann et. al (2011), ultimately the impact on the firms continued existence. Moreover, Singh and Sonnenburg (2012) examine the essence of co-creation storytelling, which implies that the customer can actively affect the content and distribution of the message. This active participation forms a feeling of belonging to a community. The firms should consequently focus on generate connection among its followers, rather than promote its brand and commercials.
The Crowdfunder Discussion
Due to the time frame for this project I concluded that a convenience sampling would be most suitable. This sampling process is a non-probability sampling process that entails my accessibility to the respondent, thus I highlight the lack of generalizability (Bryman & Bell, 2011, p. 190).
An interview was held with an entrepreneur of a new consumer product that crowdfunded during ten weeks in 2013. The entrepreneur recalls the starting phase to take a long time, since the idea needed to be clearly conceptualized before the crowdfunding campaign. The campaign was the first representation of the product, “Since we’re aiming at the ‘ordinary people’ we wanted to see if the backers (people that found in an idea) liked it first” the entrepreneur said. When I ask about their branding strategies, my respondent is hesitating a bit before saying, “We got our concept, however crowdfunding will help supporters to create the brand and we will to some extent adapt accordingly”.
My interpretation after this discussion is supported by (Bresciani & Eppler, 2010) in the sense of lacking organizational structure and a rooted identity. The entrepreneur continues, “The invisible presence in social media before the crowdfunding launch was an active choice”. Social media accounts for the start-up was created just before the launch, “We wanted to come from nowhere and ride on the wave”.
The advantage of a crowdfunding campaign is the ability to get natural spread. “Our campaign becomes very intimate, since the viewers can grasp our passion about our project. If we did a more traditional commercial, it could be harder to portray or vision”. The entrepreneur is thinking in the same terms as Singh and Sonnenburg (2012) regarding the focus on the content story and not the brand itself. The entrepreneur continues with the importance of gaining trust and let the customers’ out from a passive role, “Our campaign is not an advertisement, or we can pass the “filter” being perceived as one because we simply ask for cooperation and engagement”.
Learning and conclusion
Crowdfunding has indeed redesigned the innovation sphere. Small venture should interact as a personal friendship during the brand building process, which is a strategy that is impossible apply by big firms. That would enable the entrepreneurs to not fear the loose of control, since the customers feel that the venture is theirs. Crowdfunding is a great tool for start-ups to get market validation at an early stage and engage personally through social media channels. Furthermore, I believe that crowdfunding opens up for the entrepreneur to faster form their brand identity. Additionally, crowdfunding has the possibility to build brands before the start-up is created, potential customers help with feedback, money and engagement to build the final product. Thus, the main drawback is the possibility of unique product to be copied. Social media has the ability to facilitate the creation of meaning and highlight the uniqueness of each brand only if start-up finds the formula to consumers’ heart. The challenge remains to target the individual consumer and at the same time please the collective mass. A crowdfunding campaign is made locally and convey a personal feeling, that can be spread and engage globally. To conclude, social media enable start-ups to build personal networks based on small communities around the brand and through crowdfunding the chance of spreading faster increases- This text demonstrate that social media presents the start-up firm the opportunity to tap into the enormous collective intelligence available on the web to build the brand further.
References
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http://blog.crowdcube.se/vad-ar-crowdfunding/ [Accessed 10 feb 2013]
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