Why Are Established Brands Using Kickstarter?

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Kickstarter and crowdfunding platforms like it have generally been thought of as a place for startups to gain enough capital to bring projects to life. While it’s never been explicitly stated by Kickstarter, most people believe that the platform is for businesses or ideas that are just starting out. Recently, however, I’ve noticed several well-established smart tech companies using the platform to launch products. All of these companies—notably Eufy, Aqara and Switchbot—already have a library of traditionally launched, successful projects, a healthy customer base and name recognition. It led me to wonder the cause of this trend and if it has implications for the brands or consumers. 

Crowdfunding platforms usually present equal risks for companies and consumers

Campaigns on Kickstarter follow a certain formula: a well-produced video pitch, fancy graphics, and perks. In the case of consumer goods, the perks are the product. Companies set a goal for their funding, and if backers meet the goal, the project moves forward. If it fails, everyone gets their money back. There are risks for everyone—obviously, the company may not hit the goal, and even if they do, they now have to fulfill the perks. Producing one concept gadget is different from making 5,000 gadgets and very different from 500,000. For the backer, there’s a chance they don’t get the product at all—the company may never be able to get the concept product to full production. The product could also be vastly different from what was promised in the campaign, could take longer to arrive, or just not live up to expectations. There’s no consumer protection—if you back a project, the creator is only expected to bring things to a "satisfying conclusion," which may not include fulfillment. The platform claims to be proactive about fraud, but the only possible repercussion for the creator not fulfilling the campaign is suspension from the platform—Kickstarter does not offer refunds. There have been plenty of cases in the past where backers didn’t get products they backed or refunds—just sad explanations about how companies got in over their head. 

For established companies, there are fewer risks and more upside

The stakes are different for established companies—they already have a user base, they already have capital, and because of that, they have more liability and exposure. They know how to build, produce, launch and support a product. What’s the upside of Kickstarter for them? According to Switchbot and Eufy, using Kickstarter creates a long period of direct consumer feedback. Kickstarter users, whether or not they become backers, can view the campaign materials, and respond either in the comments, to the company directly or out in the public domain— and all the while, the company is listening and adjusting. According to Switchbot’s marketing manager, Anna Huang, “We love to receive feedback from users at the very early stage for such a niche product, which is primarily why Kickstarter is a good platform for us to reach our target users as early as possible.”  Eric Villines, Head of Global Communications for Eufy’s parent company, Anker, says that working with the crowdfunding platforms is about honoring the voice of the consumer. “It allows us to innovate jointly with the customer—we're getting real-time feedback. We've had products that we've launched and looking at comments, what we thought was cool isn't coming across, so in real time we're able to adapt the marketing." 

These backers are the first to experience the new product, which has benefits and risks—they can’t help but be a test market. Villines admits the hardware or software itself may be modified before going retail, based on backer response. “By the time we get to the end customer, we have a product that’s been thought through a little better; we've been able to fix from the original batch of backers."

For an established company, a success on Kickstarter isn’t an anxiety-inducing race to figure out how to scale; companies like Eufy and Aqara already have those systems in place. In fact, in most cases the “concept” in the campaign is already quite close to production-ready, and supply chains have already been established. Crowdfunding campaigns are less of a risk than a traditional launch or a startup campaign, since now they simply need to produce based on demand and have raised the capital to do so. Kickstarter can actually be a cost saver— Villines elaborates that these campaigns “eliminate the risk building in supply chain issues, reduces cost and time. Ultimately we're not producing more than we need. If you look at how companies innovate, it's a slow process. Crowdfunding allows us to more quickly bring our biggest and craziest ideas to the table in a way that if we were to fail, we fail fast and move on. "

Crowdfunding also appeals to companies because of the patrons themselves. “Compared to regular consumers on a larger scale, the native users of Kickstarter consist of a great amount of geeks," Huang says. "They are relatively more open to technology discovery with more willingness to give feedback and conduct discussions on a technical level, which helps us greatly to cultivate our products so that the products could be more than ready for regular consumers.” 

Backers face less (but not no) risk with established brands

An established company that has produced products before is vastly more likely to get a final product shipped. That reduces risks to the backer overall. But these pools of early adopters are still getting the first version of the product, which will be improved based on their experiences. The tradeoff here is that they’re getting it at a lower price than the eventual retail price (usually). Still, waiting for a retail version might mean getting a product with less glitches. 

Unlike most other Kickstarter campaigns, ones from companies like Eufy, Aqara and Switchbot already have established customer service channels to support the product, including the possibility of returning it. You don’t have to worry about the company having the capital to support refunds. 

Crowdfunding is a marketing method that may have perks for consumers

Early adopters are going to be a test market regardless of how a product is launched, and for many, that’s part of the thrill. That companies are offering a more direct way to participate and offer feedback is likely a perk to consumers. For companies like Eufy, Aqara and Switchbot, crowdfunding isn’t about collecting capital to give life to a new idea, but a marketing method to support a product launch. Despite Switchbot and Eufy pointing out to me that they used crowdfunding for products in a new vertical, or those that are niche, both of them have already produced robot vacuums before, so the products they’re crowdfunding now aren’t new verticals. And none of these items could be considered "niche." Still, for consumers, compared to most Kickstarter campaigns, they could potentially get a less-expensive version of a product they've been coveting. They’re incredibly likely to get the product, and it will likely be close to what is in the marketing materials. And if they don’t, or if there’s a problem with the product, there’s an established company standing behind it.