Before crowdfunding, developing a new product for sale was a tedious task fraught with financial risk.
Why? The classic model of product development has a workflow of generating a new product like this:
1) Develop idea for new product. This could be observation of market-driven consumer demand for a product or service that doesn’t exist. Perhaps a much needed improvement for an existing product or service would fill a secondary need that is there but being met.
2) Develop initial prototype of product or service. Before rolling out large-scale production it was (and indeed still is) important to develop some prototypes and samples that the public can get their hands on and test. Even on a small scale, initial production of new product samples can be very expensive. Why is this step necessary? It segues nicely to the next step…
3) Market research and focus groups zeroing in on consumer interest. Trying to gauge consumer interest in any given product or service is like trying to hit a moving target traveling at warp speed after gambling a fair amount of money product development. The best chance of success in conventional product research is to put samples of the products in the hands of a test group of consumers and gauge reaction. Market research groups recruit armies of consumers to test new products ranging from cat litter to air fresheners to sexual lubricants. Initial consumer response to these samples tells the marketing department that continuing product development with full-throttle manufacturing is the right thing to do as opposed to pulling the plug and canceling the entire project.
Crowdfunding promotion eliminates all of these expensive, time-wasting activities.
The crowdfunding product development model works as follows:
1) Inventor/software developer/film producer/etc. gets an idea.
2) The idea is floated via a crowdfunding campaign to gauge public reaction.
3) Crowdfunding project response is measured.
Three essential product development steps are all achieved in a single stroke with promoting a crowdfunding campaign:
Market Research, Market Validation and Proof of Concept.
A cautionary tale for crowdfunders: If after promoting a crowdfunding project far and wide and building awareness for your crowdfunding campaign there is little to no response then the odds are your idea is not viable.
If Coca Cola had access to the power of crowdfunding back in the 1980s the biggest product development mistake in modern history could’ve been avoided; New Coke.