Make Them Pay! Understanding Consumer Participation in Crowdfunding

Abstract

Defined as “an open call over the Internet for financial resources in the form of a monetary donation, sometimes in exchange for a future product, service, or reward” (Gerber et al. 2012, p. 1), crowdfunding has become a larger source of income for organizations of any size. Its impact on the economy of creative and charitable sectors in particular is greatly increasing. However, the lack of academic research on this phenomenon stands in sharp contrast to practice. Providing a deep analysis of why and how crowdfunders participate is needed to better grasp a novel facet of the overarching trend of consumer empowerment and coproduction, and gain an understanding of the monetary role of consumers in NPD. Ordanini et al. (2011) replaced crowdfunding within the historical evolution of the role of consumers in the production/consumption dichotomy and posited it in the service-dominant logic (Vargo and Lusch 2004). The current paper is based on the same premises.

A qualitative approach that offers rich empirical evidence was an ideal method for exploring this issue. A grounded theoretical technique was used to collect and analyze data. An inductive research approach was used. Data were text derived from in-depth interviews with 26 crowdfunders. Data analysis led to identifying determinants of crowdfunding and to profiling three types of crowdfunders: the philanthropists, the kin and the fans. This categorization depended on their behavior including the amount of backed projects, backed project categories and amount of money pledged, as well as their attitude toward crowdfunding, participating in NPD and the offer of rewards, and finally their personal relationships and previous interest in the product category or brand.

The philanthropists are driven essentially by intrinsic motivations and perceive their empowerment as an opportunity to help entrepreneurs in need. Their behavior share great similitudes with charitable profile where intrinsic motivations play the greater part. Group identification and involvement into one or a few projects and project categories were found to be the common determinants of involving in a crowdfunding behavior for both the kin and the fans. The two groups differ in terms of distance of relationship with the entrepreneur, and thus with the role of rewards in their motivations to help and to pledge a certain amount of money. The kin personally know the entrepreneurs whereas the fans do not.

This study contributes to a better understanding of the role of consumers in NPD through their empowerment in offering for the first time a qualitative approach of the determinants for consumers’ decision to financially support entrepreneurs’ efforts to produce and launch a new product. It study lends support for taking into account backers’ identity in order to adapt entrepreneurs’ strategy in their projects’ presentation. Each profile displays distinguishable behavior and attitude towards the projects they choose to back and towards project categories and crowdfunding. These results emphasize the need for entrepreneurs to clearly define their targeting strategy in terms of types of perks and means to contact and attract new backers through both online and offline networks.