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Bring your Product to Market by Running a Kickstarter Campaign

“How hard could it be?” we asked ourselves. After three years with Philips Electronics, our office was being relocated, and we opted to stay in Charleston to do our own thing. Now freelance designers with a number of product-idea itches that needed to be scratched, we united on a mission to create the products that were too niche for a large corporation to touch. “If an international multi-million dollar corporation can make Apple accessories, what can’t the three of us?” we laughed – then rolled up our sleeves.

Completely self-funded and fueled only by our determination, like many start-ups we turned to the popular crowd-funding platform Kickstarter to raise the capital needed for a small production run of our first product: a minimalist iPhone dock called Snooze. That first campaign earned us $50,000 – just beyond our goal needed to meet our minimum order quantity (or MOQ). This was the start our new company needed: Not only was it enough to fulfill our Kickstarter pledges, but it also gave us enough inventory to open up our own webstore.

Why use Kickstarter? Because it's an amazing community of early-adopters looking for the newest of the new – and for the most part, they're engaged. Meaning, they appreciate the story you have to tell, which is wonderful since we were craving feedback – and validation – as designers striking out on our own. Just look how much support came from within Kickstarter on our Wally campaign:


This was our second campaign, an even quicker success since we started with a list of backers to speak directly to, along with the credibility of delivering our first Kickstarter product successfully. Here we are three years later, four successful Kickstarters and one less designer (Adam accepted a can’t-say-no gig with Philips up north). Thanks to the momentum that our Kickstarters have afforded us, the two of us need no longer rely on freelance work to pay the bills; in fact, Distil Union has been able to launch two products without crowd-funding!

As we look to explore a new and more expensive product platform, we’re excited to dust off our “Hi, Kickstarter” scripts and reach out once again to the community for their support. It’s such a thrilling ride, and every campaign is different – but there are a few things you can count on. Here are our tips and tricks and strong suggestions if you’re considering a product launch on a crowd-funding website – namely Kickstarter since that’s our experience, though color us curious about Indiegogo…

PHASE ONE: Product Development for Crowd-Funding

Think you’ve got a great product idea? Let the online community decide! Gone are the days when you had to pony up a boatload of cash for an entire production run of a product to see if it’s a good seller. What an expensive risk! Fortunately with crowd-funding, you’re pitching your idea directly to shoppers who support your idea by making a “pledge” for a "reward" – for products, this is basically a pre-order. Instead of the risk of investing in a bunch of already-made products (too late to change the mold that cost you $10,000!), it’s only your pride on the line. And your word. Crowd-funding Backers feel like the risk-takers here, putting up their cash as their vote of confidence not only in your product idea, but also in your ability to follow through and do what you say you’re going to do. You don’t want to let these people down, and if you do, be ready for them to let you and the rest of the world know it. The key word here is: Integrity.

PRO TIP: Do thorough market research: Is there something similar already available? Is there something similar on Kickstarter?? If there is, be ready to tell in a hot minute WHY and HOW your product is better. Be clear, be concise, and be honest. Then if everything's in order, hopefully you have a catchy product name – see if it's already in use and consider registering a trademark if you haven't already. 

KNOW YOUR COSTS – aka Make Friends with Spreadsheets
A good COGS (cost of goods sold) spreadsheet will save you from major headaches... and bankruptcy. All of the costs associated with landing the goods and then shipping them out to customers should be considered. Here is an open version we created, feel free to download and tinker. Carefully analyzing these costs will let you know what your break-even is – and if the project is even worth running. Nate tends to do a lot of math in his head and guestimating; if we'd only done that for these Kickstarters, we would've been in a lot of trouble. You want to accurately account for things like: product costs, packaging costs, shipping via air or sea from your supplier, insurance, taxes and duties (look up the HTS codes to estimate), outbound shipping supplies and postage, warehouse expenses, and pick and pack expenses (the "handling" part of "shipping & handing").

Knowing your MOQ (minimum order quantity) and total development costs is essential for that first order, and ultimately determining your Kickstarter goal. You might pay $5 to a manufacturer for a product – but by the time it gets to your customer, those costs can mysteriously and easily double to $10! Be prepared for this by building out a rock-solid spreadsheet so there are fewer surprises. You will rarely run a project that comes in under budget. 

PRICING TO WIN – Early Bird Specials and Retail-Price Testing 
After our first Kickstarter launch with Snooze, we noticed that as soon as we hit our goal, the pledges started to pick up! It seemed that more folks were willing to back us when the project had actually achieved its goal. People love a winner. The next time we ran a campaign, our early-bird pricing strategy was adjusted accordingly. When we ran the Snooze project, we were really scared to drop the price too low because we didn't want to just give away products! Here's how we looked at it the second time around... As soon as we reach our goal, our campaign seems to generate 
more momentum. We asked, "What is our minimum order quantity (MOQ)?" – or, what is the cost to get those finished goods in our hands? OK, that's our break-even number on our first order; that's the number we need to make this project happen. 

Cost of Goods for Minimum Order Quantity = Break Even
 
(Break Even) x 1.2* = Goal Amount = Early-Bird(s)Amount Total
*1.2 - Why the 1.2? You're going to need to pad your goal amount to help account for unknown expenses or delays. Adding 20% will keep you from going bankrupt. Nobody wants that. And did your COGS account for fulfillment costs once the campaign is over?...

Example:
If your Break Even = $10,000
Then your Goal Amount = $12,000
and your Early-Bird Totals = $12,000

An irresistible 50% OFF retail price for your widget is $24, and you need to sell 500 at that price to hit your goal –500 x $24 = $12,000 – so limit your number of Early-Bird Specials to 500; or break it down between an irresistible Early-Bird Reward Level, and introduce a second Early-Bird Reward that's still a great deal. You get the idea. The Early-Birds help you get your worm! Then, your remaining Reward levels should be closer to your price at retail so it's a good test of your expected retail price.

So to quickly talk you through the formula: If your first production run and development costs are going to total $10,000, add 20% to pad and find your Goal Amount. Offer enough product at a significant discount to hit that $12,000 – and hit it fast by offering those as Early-Bird Specials
 limited to a certain number based on how many it'll take to reach your Goal. This way your Goal is reached when all your Early-Bird rewards are pledged for, and you're in business because your first production run is PAID FOR! 

Meanwhile, you have weeks left in a funded campaign that people are now excited to get behind because it's successful! Now it's time to test a price point closer to what you'll need for retail or on your website once the Kickstarter is fulfilled. You can still give your backers a discount because it is Kickstarter (remember, they're taking a risk on you), but set the price closer to what your retail price will have to be. This is a very important test for the future viability of your product in the market. 

"Can I afford to sell at retail once I'm done with Kickstarter?"
Your COGS sheet is great for answering this question, and it is always good to consider retail channels to help move more product and get the word out about your brand. Internet sales or your own retail store will always net you better margins, but retail is still important to getting your product into customers' hands – and you may need to price accordingly. 

A key consideration for selling into retail is that retailers need margin, or points. Running a brick-and-mortar store is expensive and they'll generally ask from 40% to 70% margin. Depending on your cost of goods, that can put you in a very tight spot. In the earlier example where a product may have cost $5 to make but $5 more to get to your warehouse, you might need a minimum retail of $40. In this case, if a retailer requires 50% margin, you can sell your item to them for $20. If they require 70% margin, you would have to sell your item to them for $12, leaving you with just $2. Not a deal breaker, but there's not a lot of room for error. Plus, you have to sell a lot of products at this price to make it worth your effort and to pay for your overhead. So, arm yourself with at least enough room to provide at least 50% margin to retailers and still maintain profitability.  

KNOW YOUR SUPPLIERS – aka Designer Beware 
We were lucky to have established relationships with most of our manufacturers before launching our projects. If there's one thing that is true about manufacturing any new product, it is that something is going to go wrong. You need to be able to trust your suppliers to make it right. While it is good to have a manufacturing contract, those really only serve as a document of reference for what was agreed upon. Trying to enforce the terms in court can be very time consuming and expensive. The best situation is to work with a true partner who has your back. 

We had trouble with the first batch of cases we produced for our Wally Case Kickstarter project. It was suggested by our supplier that because the polycarbonate had a gloss finish, we should protect it with a UV coating. This UV coating added a very thin but hard layer to the plastic that resisted scratching – but [unbeknownst to us] the process made the plastic very brittle! Consequently, many of our Backers reported their cases were breaking!Luckily our supplier took responsibility and shipped us new cases. We definitely wanted to do the right by our Backers, and sent them each a new case that wouldn't break. We had to scrap a lot of product, but we were very thankful to have a supplier who stood behind their products. 

If at all possible, physically meet your supplier before they manufacture your products. If you have to fly halfway around the world, do it. In our experience, the best way to get good quality product is to be there for the prototyping, material selection and the pilot run. So many questions can be answered and problems solved quickly, and you will strengthen your relationship with your supplier.

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PHASE TWO: Build Your Campaign

So you know what your goal needs to be in order to meet the MOQ of your first production run. You have a pledge strategy to get you to your goal and validate your retail price. Great! Now answer me this: Do you have a working prototype? It used to be that only computerized renderings were acceptable, but now Kickstarter protects itself and its Backer Community by requiring Creators to show a working prototype; have you noticed, there are no longer campaigns featuring only product renderings. If conceptual is the stage you’re at, prepare for your campaign to be rejected. Then push yourself or your suppliers to create a working model – which you'll want to have for when you make a video.

SHOOT THE VIDEO
We've all seen videos that we just had to share – which is great because it helps get the word out about your campaign! But did you and your friends actually back the campaign? Was the product not relevant to you, or the rest of the campaign confusing? If you're marketing to the wrong audience, or your Kickstarter page isn't in order, even the slickest video cannot save you.

Your video's objective is simply: Show your product (or prototype) and tell folks how it's going to make their lives better – and it doesn't hurt to show a little personality. Now, you can spend thousands of dollars on your video, or you can spend two afternoons. We've filmed all of ours with an iPhone camera and edited it ourselves. Mind you, we had to watch a few tutorials on iMovie, but we learned enough to get it done and make a video we were proud to share at the time ;) Which brings me to...

TELL YOUR STORY! 
Have plenty of photos or other documentation of each phase of your product development. How do we know that these are more than just "nice to have" for a page? Kickstarter rejected one of our early project submissions because we didn’t have enough content about our product’s journey. Really? The stuff we weren't accustomed to sharing at our corporate job – and we welcomed the invitation to over-share! As designers, it’s a pleasure and a privilege to have a platform where design stories are not only encouraged, they’re required! And really, what better way to get people on board with your product idea than to take them back to the beginning with you? Then having them right there with you, cheering you along to the finish line – it doesn’t get any better. Give them something to cheer about, and a story they'll feel good to support and want to share with their friends...

PLAN YOUR REWARDS
Pledges. Rewards. Whatever you want to call them, with a product design campaign, you're basically taking pre-orders. Do you have different versions of the product that make sense to set up as different levels? Or does it make more sense to collect product preferences in the survey after the Kickstarter wraps? Look at your product and give it some serious thought – the last thing you want to do is overwhelm and confuse potential backers with unclear, complicated, or too many Reward Levels!

Set up your Rewards wisely because once someone pledges for one, you cannot edit or remove that Reward from the campaign. Can you afford to offer free shipping? How much will it cost you to package and ship your product Internationally? And most importantly, do you know the estimated DATE for shipping? Kickstarter wants to see your timeline when you submit your campaign for approval, and so do your Backers. 

If you'd like to offer a Reward that's fun and unrelated (well, maybe brand or product-benefit related) like a t-shirt, be sure it's not going to distract you from the task at hand: bringing your product to market. Lindsay happens to be a screen-printer, so we offered t-shirts at the sweet-spot pledge level around $20 because she likes printing and can do them at cost. If you're not a t-shirt designer, skip 'em. 


PRO TIP: Under promise. Over deliver. This has become our mantra for just about everything. And it’s the secret to happy Backers. For example, are you pretty sure you can hit a delivery date of May? Go ahead and allow some wiggle room in the schedule and nudge it out to June. This will allow time for surprises – either there will be surprises (there will be surprises) or you'll be surprised that everything runs 100% smoothly and you're actually on time – which now appears to be "ahead" of schedule! You’ll be happier, and so will your Backers. It’s a win win. Be realistic, and add a cushion. 

Stretch Goals?
Stretch Goals are rewards or product versions that will not be made available until certain dollar levels are met. Know in advance exactly what you’re willing and able to offer. They are a great way to incentivize your Backers to share the project so that the goal they want will be “unlocked,” thus helping you reach a wider audience. They’re also a great way to confuse the heck out of your audience – so communicate them clearly, and skip them altogether if they don’t make sense. Most of all, don’t panic mid-campaign and introduce Stretch Goals in hopes of getting attention and increasing pledges. Keep it simple, there’s plenty going on already (for you and for your Backers).

UPDATES 
Wait, updates before we're even live? Yes! Use Updates to build confidence by sharing that things are going smoothly. On the flip-side, if there are surprises (there will be surprises), use Updates to build trust with your Backers by being transparent about it and sharing how you’re handing them.

You can plan a few Updates in advance 
Are you developing packaging and expect to have some mockups to share? Perhaps you’re deciding between two finishes and would love some feedback. One a week is sufficient to keep the public informed and engaged, but you can post more frequently if you have interesting and relevant news worth sharing – just be sensitive to inbox fatigue if you're opting to notify Backers of the Update. Once you post an Update, it's nice to post a quick note and link on your Comments dashboard; then be sure to moderate any comments over on the Update page. 

PRO TIP: Updates are also a brilliant way to share rich content without making your campaign page grow even longer – instead, post an informative Update and simply add a link to it on your campaign page and in the Comments feed!

Try it out on your close friends and family
Kickstarter gives you the opportunity to share your campaign before launching. Is your product pitch compelling? Are the Reward Levels clear – would a graphic help? Do your graphics help?? Does anyone have questions about the product or about Kickstarter? And check that all your links work!


TELL THE WORLD! 
Know your audience and how you’re going to reach them. Perhaps you already have plenty of followers on Social Media. Reach out to them and to your contacts – friends, family and members of the press – using a service like Mailchimp or Emma. Generate buzz with some save-the-date teasers, and be sure to give your insiders a special heads-up if you’re offering a limited-time Early Bird Reward.

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Phase Three: Running Your Kickstarter!


Pick a time of year that makes sense for your product
If you’re raising funds for your line of swimsuits, do it during peak swimsuit-buying season! Who cares that they won’t ship for a few months, hit the market with your message when they’re open to hearing it. Would you buy a swimsuit in the winter?


Once the campaign goes live, you'll be able to add FAQs 
You can have these prepared ahead of time to answer the usual suspects – like shipping, how to pledge for more than one item, how they'll pick which style they want, etc. There’s a good chance you’ll address these questions elsewhere in your campaign, but boy oh boy, people will still ask! And don’t assume they know what Kickstarter is and how it works – for instance, that the project will only be funded (and their cards charged) if you reach your goal. You can refer them to Kickstarter's own FAQ for a great introduction.


Create simple click-to-share buttons 
Once it's live, right-click to copy the Facebook and Twitter links below your video and put the links along the end of the campaign page – this way folks can easily share with just a click. Don’t forget to promote across your other outlets, like Instagram, Pinterest and your mailing list.

Any press you receive can be used to build credibility, feel free to capture their logos and quotes to use on your campaign page (always cite your source). 

You’re likely going to experience some mid-campaign lag. That’s okay, because you’ve planned in advance some exciting updates, remember! Keep the word out there, and keep it fresh! For example, when you add a great new Update with product video demonstration, create a quick Vine or animated gif to alert folks to the new content. And oh boy, if the Kickstarter Staff features your project, grab a screenshot and share the word! 


Your comment board is an open forum so be prepared to hear feedback of all kinds. Questions, comments, suggestions, constructive criticism – it’s all part of the community. It’s a great way to see if your product resonates with the target audience you’re hoping to market to, or if you’re capturing a wider/narrow audience, or if it falls flat – good to know you’ve got more work to do on your idea before going into full-on production!


SUCCESS! Are You Ready to be Frozen?
At the moment the campaign ends, you'll be frozen out of making any content changes to your campaign page. Before that happens, be sure you’ve updated any graphics. More importantly, be sure there are working links to your own website so your campaign page is a standing redirect. Luckily now Kickstarter gives you control to the header of your page, including updated photography and a button to link wherever you like; this way your page keeps working for you long after your campaign has wrapped. 

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Phase Four: Life after the Campaign

Wrap It Up
You’ll be sending out a survey to Backers to collect their pledge information, such as item color, shipping address, etc. If you’re not shipping until next year, it’s too soon to collect mailing addresses. But if you didn’t set up your Reward levels based on product variations, you probably want to send out a survey to gather that info before going into production.

This is where a service like BackerKit can be used for more advanced data-collecting capabilities following the campaign. While we haven’t used a Creator service yet, I’d love to have the hours back that we spent lost in piles of spreadsheets of exported Kickstarter data… If you have thousands of Backers, complex product options or staggered delivery schedules, consider making things a bit easier on yourself!


Keep the Updates Coming
You thought your Kickstarter was over? No way! NOW you’re in business and accountable to your Backers! Is production on schedule? Is the product looking how you expected? What are some surprises, and how are you addressing them? Updates can be as informative as you want them to be, and it’s wise to be honest with your Backers about any set-backs that are going to affect the delivery schedule. Keep the community informed of new target dates you’re trying to hit – Backers might not be thrilled that you’re running late, but typically the transparency is appreciated and met with understanding, especially if it means a better product. Sure you’ll get bonus points for fulfilling a Kickstarter on time, but a rushed product that’s unfinished or defective will certainly leave a longer-lasting bad taste in their mouths.    


Step Up and Set Boundaries
Own up to your mistakes, and propose a solution or compensation.

SHIP!
Whether you're shipping product from your kitchen or a warehouse, we can't recommend ShipStation enough! 

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HELPFUL RESOURCES:
Thomasnet - US manufacturing directory
MakersRow - US manufacturing directory
BackerKit - Manage pledges and backers post-campaign
Shopify - Sell after Kickstarter
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