Research Indicates that Rewards Crowdfunding Campaigns Should NOT Claim to be Both Novel & Useful

Research has recently been published that includes an interesting perspective on the rewards or pre-sale crowdfunding space. The report cautions campaign creators on what they should, or should not claim, in launching a project. According to the research, Kickstarter campaign creators must take note: pre-sale crowdfunding takes a 26% hit when a product is framed as both novel and useful.

While the total amount pledged is said to be boosted when a product is said to be useful (or alternatively, novel), claiming that it is both reduces the total amount pledged by 26%. Go figure.

The report was lead by researchers from the Singapore Management University, HEC Paris, the University of Technology Sydney and INSEAD.  The research was said to be driven by big-data analysis of 50,310 Kickstarter projects.

“Prior research has shown that products that are novel and useful typically succeed in the marketplace,” said study co-author Amitava Chattopadhyay, Professor of Marketing and the GlaxoSmithKline Chaired Professor of Corporate Innovation at INSEAD. “But when projects make both claims, backers either assume a product’s benefits are inflated, that it carries a high risk of failure or that it divides the crowd between believers and sceptics, making it hard for backers to pick a side.”

Cathy Yang, Assistant Professor of Marketing at HEC Paris explains that backers steer clear of projects with “more extreme innovations.”

“This is deeply disappointing as the premise of crowdfunding is to support creativity and innovation”, says Anirban Mukherjee, Assistant Professor of Marketing at Singapore Management University.

Chattopadhyay and his co-authors accessed a dataset comprising all the projects listed on Kickstarter since its launch in 2009. To focus on the crowd’s appetite for innovation, they eliminated arts-related projects. They then kept all the U.S-based projects that fell in the nine largest remaining Kickstarter product categories.

The final dataset was said to include a total of 50,310 projects. The research then incorporated “state-of-the-art machine-learning tools” to extract a list of descriptors from the text, lead image and video of each project. The number of occurrences of the word “novel” and its synonyms served as a proxy for novelty claims. Conversely, the sum of occurrences of the word “useful” and its synonyms became the measure for claimed usefulness. These numbers were then compared with the individual projects’ funding results.

So creators can use either Novelty or Usefulness individually. Just don’t use them together. Asingle claim of novelty was said to increase project funding by about 200% – a meaningful increase. A single claim of usefulness leads to an increase of about 1200% – even better.

“As opposed to the regular marketplace, where buyers feel protected by consumer laws, crowdfunding backers may face a very high level of uncertainty”, adds Chattopadhyay. “After all, the developers may fail to come up with the final product, or they may need to change specifications along the way. It’s been shown that consumers prefer more traditional products when their perception of risk is high. Inventors that claim that their product is very innovative, i.e. both highly useful and novel, may find it more difficult to get funded because of a higher risk perception by the crowd.”

The report may be downloaded here.

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