As Nalin was standing in line for a coffee one day, someone asked her the following question: “Is it easier to raise crowdfunding money/funds for a product with a high price point or a low price point?” It was such a good question that she has dedicated an entire episode to answering it.
In this podcast, we will answer that question by going in-depth on the importance of defining your main unit number and educating your potential backers. We will also discuss both the benefits and potential weaknesses of both pricing methods.
Keep scrolling for a further breakdown of the podcast and helpful links.
[0:39]: The Big Question
Is it easier to raise money for a product with a high price point or a low price point? Which one is better or does better on crowdfunding?
[1:39]: The Importance Behind the Number
The amount of money you raise during crowdfunding is made up of two things: the first is the number of units actually sold. To find out the price at which you should set your product you must think about the number of products you want to produce.
[2:22]: The Initial Difference Between a Low Price Point and a High Price Point
This main difference between a low or high price point boils down to the number of units that you are going to need to produce. A higher price point means fewer backers. A lower price point means many backers.
[3:05]: Importance of Building your Community
You can set your price at whatever you want, but you must take into consideration how many people are going to need to back you at that particular price point. It is of the utmost importance to calculate how many backers you are going to need and start building that community.
[3:21]: Example of a Low Price Point
With a goal of $100,000 at $10 per unit – you will need 10,000 backers.
[4:17]: Example of a High Price Point
With a goal of $100,000 at $500 per unit – you will need 200 backers.
[4:50]: Comparing the Two Pricing Options
Low price product means spending more time and effort to get people into your community (because you need a lot more of them). However, they may convert quicker because the cost doesn’t set them back too much. Whereas, high price product means you don’t have to get as many backers but you may have to work harder because that initial investment is pretty substantial.
No matter what price point you’re at – you need to show the value of your product and clearly explain why people should want to back you.
[7:42]: Importance of Educating Your Audience
The second thing that affects the amount of money you raise on crowdfunding is educating your audience and building that community. This plays a part in explaining the value your product can have on people’s lives and is crucial in getting their money to back you.
[8:03]: The Answer to the Question
I’d tell you but then where’s the fun in that?! Listen to the podcast and find out!
Visit the Crush Crowdfunding Website: https://crushcrowdfunding.com/
Connect with Nalin: https://crushcrowdfunding.com/contact/
How To Crowdfund For Different Price Points
low price point, price, product, crowdfunding, launch, backers, spend, point, raise, goal, community, crush, crowdfunding project, higher price point, prepare, average price, indiegogo, smaller, legwork, podcast
This is the crush crowdfunding podcast, the number one place for people who want to launch on Kickstarter and Indiegogo. My name is Nalin and I invite you to join me for tips, hacks and insights to get you launched and fully funded.
Welcome to another session of The Crush Crowdfunding Podcast. I'm really excited to have you here today to talk to you about crowdfunding and how you can absolutely crush your goals on Kickstarter and Indiegogo.
Today, I wanted to talk about something really important that someone just asked me the other day. I ran into this person at a coffee shop and they asked me - “Hey, is it easier or better to raise money/ funds for a product with a high price point or a product that has a lower price point? $1,000 or $10; what's easier? What is better to do on crowdfunding?” I wanted to touch a little bit on that because I think that's a really great question that I'm sure a lot of people also have.
In order to frame the conversation I want to get you to think about exactly what makes up the amount raised that you see on different campaigns. By saying “amount raised” I mean- that bar that keeps going up - the green bar on Kickstarter or the pink bar on Indiegogo. What comprises that? To answer the question: it's dollars. The dollars that are raised.
The amount you raised on crowdfunding actually is made up of two things. First, it’s made up of the number of units that are actually sold. The actual number of the thing itself. Did you sell me 10, 15, 20, 30, 40, 50, or 100? That number multiplied by the price of the reward that you're listing. So again, the number of units multiplied by the price of their reward is exactly the amount you raise.
Therefore, let's kind of think about it in this way- If you're trying to raise $100,000 on crowdfunding you can either go one of two ways - have a high price point product or a low price point product. You can sell many units at a low price point. For example, to hit $100,000 you have to sell 10,000 units at the $10 price point. 10,000 units at the $10 price point to get to that $100,000 raise. On the other hand, if you're selling something at a high price point you only have to sell 200 units at $500 in order to get to that same $100,000 raise. Again, 200 people versus 10,000 people - that's a very big difference between a low price point and a high price point.
When it comes back to the question of “what's easier or better?” there's really no way to tell.
It really depends on the product and the community that you built around it. When you're really thinking of breaking it down to your goal you know how much you actually need to raise and how many people actually have to buy your product. This kind of puts it in perspective, right?
If you're looking to raise $100,000 and your product is at $10 you're going to need a much bigger community before you even launch so that you can get close to or attain that 10,000 people community. Let's talk about that. I want to make sure that you guys understand this concept. If you're looking to raise $100,000 and your product is at $10 you're going to need 10,000 backers. So in your pre-launch phase you're going to have to invest all the time or money in order to convince those 10,000 people that they want this product at the $10 price point. It may even be easier because it's a lower price point. It's more of an impulse buy for people because there's less consideration that has to be done before taking the plunge to back the product. It's not that big of a deal, right? It's not a huge expense. In some places, it's less than the price of their lunch. Again, 10,000 people.
[$10 per product x 10,000 backers = $100,000 raised]
On the other hand, if you're looking at raising $100,000, and your product is at the $500 price point, you're going to need a much smaller community to get that done. You're only going to need 200 people to back your project at the $500 price point to hit that same $100,000 goal.
[$500 per product x 200 backers = $100,000 raised]
So my question for you is- what is your price point? Is it closer to $500? Is it closer to $10? Which end of the spectrum is your product? Is it a high price point product or a low price point product?
It’s important to recognize because when you're at a low price point product, you're going to have to spend a lot more time and effort in order to get people into your community before the crowdfunding campaign. This is so that you can funnel them into your page and convert them into backers and, in turn, generate real dollars for your crowdfunding project. When you're at the $500 price point the community that you actually have to foster and nurture before your crowdfunding campaign is a little smaller. But, again, it might take a lot more effort to convince people and to educate people to make them trust you enough to spend at your price point of $500. Like everything, there are pros and cons to each option. It's easier to convince people at the $10 price point to back on a whim. Whereas, it's much more difficult at the $500 price point. But then again, you need less people to be convinced at the $500 price point versus the $10 price point.
So, when you're thinking about your crowdfunding project and your goal, think about it in terms of what the price point your product is going to be listed at and plan your community building efforts accordingly. If you're looking at a community of 10,000 people before you launch your campaign, it's probably going to be a little bit more legwork and grit up front. A little more boots to the ground, hacking, working, or tactical implementation from you when needing those 200 people for your project at the higher price. However, one of the things to keep in mind for a higher price point is that the average price point for crowdfunding projects is actually about $100 per reward. That's the reward amount $100 or below. That's the reward amount that most people spend money on. It's not too much of a commitment but it's enough that you know that you've made an impact or a difference. It’s also enough to make you feel that you’ll get this in the long-run because you and a lot of other people are spending a lot of money to make this happen. That's something to think about too.
Most people who do come on crowdfunding don't actually back projects at the $500 price point. I'm not saying it's impossible but the average price point is about $100 or below. On the other hand, to play devil's advocate, your crowd is going to be ready to back you at whatever price point that you are introducing if you're able to - (1) find the right people and (2) educate them of the reasons why your product is at that price point it’s at. Most of the time, the way people are convinced about your product and it’s price point is by showing them that you're adding value; so much value that the $500 price point is nothing compared to the value they receive. On the other hand, sure the average price point might be $100 or below but if you're crowded, your audience is going to be ready to spend that much for your project already because they’ve chosen to know this.
The second thing is that you, as an entrepreneur and founder, are spending time to really educate people about the value of your product. Through educating people about what you're offering, you are informing them why $500 is just a measly amount to spend in comparison to the value that people can actually receive with the product that you're launching when they do actually receive it,
The question was- “Is it easier or better to launch a product that is at a higher price point or lower price point?”
To be frank, it's not better or worse.You just have to think about what you want to crowdfund and decide on the number that you want to hit. Write the amount you want to hit for crowdfunding and break it down into basic pieces. For example: come up with the number of units you have to get at that price point to meet your goal. Those are the two things that if you figure out you'll be able to adequately prepare for your campaign and prepare for your launch. Again, if you are looking at something that's a really low price point and you're trying to get $100,000, you're going to need a bigger community; you're might have to spend more time or spend more money up front in order to get that really big community for your launch for your lower price point product.
On the other hand, if you have a product that's a really high price point you might need to spend that much money or as much money and time beforehand to convince a tiny sliver of the community to actually want your product. Think about exactly what you want to raise as that final goal then work backwards.
So, nothing is better or worse, per se. It's just being prepared for whatever scenario that you have for your own project. Whether it is preparing to get a big group of people together during the pre launch or, being prepared to get a really small, tight-knit niche group together before you launch. It really just depends on those two things- the number of units that you need to sell to hit your goal and the price point that you're going to be offering.
So I hope that helped you think through exactly how you're going to be setting and attaining that goal and dollar amount for your crowdfunding campaign. As well as, assisted in helping you figure out how to answer the questions of - “Do I have to spend a lot more time building this community? Do I have to get a giant or small community to get a medium sized window for my launch?” Remember, 90% of the work comes before the launch so to prepare yourself to hit that crowdfunding goal you have to do that legwork beforehand.
Thank you for being with me here today. If you need a crowdfunding expert, feel free to get in touch. You can get started by heading to crushcrowdfunding.com. Lastly, I would be really grateful if you could leave a review for the podcast because it will really help others who want to learn about crowdfunding find out about the podcast easier. Thank you so much for being here with me, and for subscribing to the podcast and for continuing to listen and just being here with me to go on this journey to crowdfund your product and your idea. I will see you guys in the next session.
Thanks for listening to the crush crowdfunding podcasts at crush crowdfunding.com. Tune in at the same time next week for more Ways to crush your launch.
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