Crowdfunding has fast become a popular way for entrepreneurs and cash-strapped startups to raise money, but increasingly crowdfunding platforms like Kickstarter are being used by big brands as marketing platforms.
Case in point: Clorox’s Soy Vay brand partnered with upstart Three Jerks Jerky and launched a Kickstarter for Veri Veri Teriyaki.
As detailed by AdAge, Clorox, with billions of dollars in annual sales, certainly didn’t need capital. But it turned to Kickstarter for the exposure.
“The Kickstarter thing just kind of naturally evolved, where we said it made sense as an awareness driver, as a way to build one-to-one connections with consumers in a way that’s very important to us and, frankly, as a way to cut against the grain of typical product launches in CPG,” said Adam Simons, who is head of emerging brands at Clorox.
Clorox’s emerging brands division, as the name suggests, seeks to develop emerging brands. It also helps some of Clorox’s existing brands innovate and revitalize themselves.
According to Simons, “one of the pillars of the [group’s] strategy was trying to align our emerging brand with others in the marketplace,” and that’s where the partnership with Three Jerks Jerky, which had previously been seen on the popular television show, Shark Tank, came about.
One of the companies that Clorox’s emerging brands group is helping is Soy Vay. It makes a teriyaki sauce that the founders of Three Jerks Jerky were particularly fond of, so when the opportunity to create a teriyaki-flavored beef jerky using Soy Vay’s product presented itself, the founders jumped.
If it doesn’t make dollars, it can still make sense for big brands
The Veri Veri Teriyaki Kickstarter closed last week, with 741 backers pledging $29,094, nearly triple the $10,000 goal of the project. That’s obviously chump change for Clorox, but the exercise of launching a product directly to the public and doing so in an “entrepreneurial and scrappy” fashion was where the CPG mega-brand saw value.
And it’s not the only major brand that has found value in crowdfunding platforms despite the fact that the funding part isn’t important.
- FirstBuild, a subsidiary of General Electric, raised nearly $2.8m on Indiegogo in 2015 to launch the Opal Nugget Ice Maker.
- Sony crowdfunded the launch of an e-paper watch on Makuake, a Japanese crowdfunding site.
- Queen Games, an established tabletop games publisher with hits already under its belt, turned to Kickstarter to promote its game Alhambra.
- And Grammy-winning R&B girl group TLC raised over $400,000 to fund their final album using Kickstarter.
Beyond the marketing value of launching a new product or business line using a crowdfunding platform, brands increasingly use crowdfunding platforms to get market feedback and validation. That can be particularly helpful, especially when launching a new product in a new category.
After all, it’s easy for big brands to make assumptions about consumers and markets, but crowdfunding campaigns allow them to test new ideas and products with consumers directly, and on a small, less costly scale.
In some cases, brands can even do this without the burdens of their brand names. Sony’s Makuake campaign is the perfect example of this. When the electronics giant created its e-paper watch campaign on Makuake, it didn’t initially reveal that it was associated with Sony.
There are risks, however
One of the biggest risks is that as established players increasingly use crowdfunding, they will negatively impact the way consumers view crowdfunding platforms. For many consumers, crowdfunding platforms are seen as hubs in which entrepreneurs and young companies can obtain the support they need, financial and otherwise, to make their dreams a reality. In many cases, they are the places to find the next big thing before it becomes big.
If entrepreneurs and startups are eventually drowned out by established companies using these platforms as proving grounds, particularly for already-developed products, it could diminish interest in crowdfunding, eventually reducing the value of these platforms.
Platforms like Kickstarter are aware of this threat. In fact, when world-famous director Spike Lee used Kickstarter to raise money, some complained that the campaign would hurt creators trying to make a name for themselves. Kickstarter responded, stating that it believed Lee’s campaign introduced many individuals to crowdfunding for the first time, likely expanding the pool of backers available to others. The company also reminded the world that the projects on its platform are “not charity.”
Nonetheless, brands should be thoughtful and selective in determining when and how to take advantage of crowdfunding, favoring experimental products and test partnerships like the Clorox-Three Jerks Jerky relationship over fully-baked products that they plan to launch and promote on a large scale anyway.