Consumer Electronics · Crowdfunding

What are the guidelines for ROI on a pre-sales/ crowdfunding campaign?

Arnab Raychaudhuri Founder & CEO, HeadsUP!

December 14th, 2014

We are trying to figure out our marketing budget (videos, PR, photos etc.) for our pre-sales campaign based on data and suggestions. Anyone have a guideline for ROI, such as for every $2k on marketing, expect $10k returns. Also, any suggestions on how much,and where to spend based on experience?

I realize that part of the ROI depends on the product and its demand.

Kyle Fowers Founder at Gear Backer

December 14th, 2014

What are you looking to crowdfund? I might be able to help promote. If you don't want to post it here send me a message. 

Carolyn Goodman President/Creative Director at Goodman Marketing Partners

December 14th, 2014

Budgets are often determined by starting with cost-per-closed-sale, then we work backwards to determine the sales funnel: % leads that convert to sale, % response by channel, # of targets exposed to the message. Net-net, you'll be able to determine return on investment.

Since each marketing channel will deliver a different response and conversion rate at a different cost, you can only determine a final blended ROI after you've done this planning work.

We build a lot of predictive models that look at many different response scenarios in order to identify a optimum media plan that will deliver your desired cost-per-sale. I'm more than happy to help walk you through a model if you send me a private message.

Cameron Quin Entrepreneur Development Manager at The Entourage

December 14th, 2014

Hey Arnab. 
I believe this is directly affected by the price, profit margin and market of your product. I like to always keep around the 10% mark for our companies for CPA or cost per acquisition. Also, is your product a subscription or retainer based service. If so, what is the lifetime value of the client and what sort of referrals will they bring to the business?

For example, let's say the average sale per customer was $1000 and the retention was three years. That's $3000 lifetime value. What would you be prepared to pay for that customer? $100 - $300? I would be looking around the $200 mark. Then you have to understand conversion rates... Let's say you have a PPC (pay-per-click) campaign that cost $1,000 that reaches 1000 qualified people and you get a 20% click through rate with a 3% conversion rate into customers. You would get 6 new customers. 

When you divide 6 by the $1000 spent you get a $166 Cost Per Acquisition. 

So when you are talking about understanding the returns, you could then argue that when you spend $1000 on marketing, you will get $6000 in the first year which is a 600% ROI and then further on you can argue the lifetime ROI is $18,000 from a $1000 spend.

All in all, the best way is to test marketing mediums, headlines, video VS text... then measure what the results are.... In other words, test and measure....

I hope that makes sense.

Matt PE Co-Founder at The Next Co.

December 18th, 2014

To provide more detail (I'm Arnab's partner), we are building a hardware device intended to compete in a unique market space, with only data we can draw from slightly overlapping markets. Even then, trying to procure industry data is difficult since most of it seems to lie in reports are expensive (several $1,000) and we are still boot-strapping.  

For our product, price point is about $400. Keep in mind it's hardware, so there are no real sales until we have completed the long, arduous development process.

Does anyone know what some companies/startups that hit big numbers ($100k's) spend on pre-sales campaigns?  We were thinking in the $30-40k range, as we've heard this from two independent companies that hit $800k or more in pre-sales.  Does this seem accurate? or overkill in spending?

Does anyone know of any success stories of companies spending $10k on a campaign yielding sales of $200k or more?

Did I miss any other questions?

Thanks in advance!

Walter Jr. Creative Director, Visual Storyteller, Video Editor, Post Supervisor, Documentarian

December 30th, 2014

While I can't add any more information on the ROI aspect, I CAN chime in that most people leave woefully small amounts of money available to marketing, particularly the video aspect of marketing.   The days of the old "$X per minute" are over and everything is pretty much done custom.  

Most folks understand the photography aspect of a video but very few understand the importance of pre-production and finishing.  Planning, Writing, Editorial, sound, graphics, color grading and mastering.  Depending on how the video is to be presenting, oftentimes the sound design is the most important aspect of the video project to make a full impact.    We often have folks skimping on both the front and back end of a video project and then regretting it later when they see the finished product.    I try to remind them you get one chance to make a great first impression and skimping on time and resources always comes back to bite folks.

Just keep that in mind when planning your marketing / video rollout and be sure to vet whomever you decide to have produce your videos.  Some incredible work being produced out there and some awful work being produced.  The caliber of equipment doesn't matter, it's the artists operating the tools that matter, along with their ability to deliver on time and on budget.   Good luck!

Marshall MSCS Planning, Strategy Operating/Business Model Analysis IT Process Definition, Design, Software Programming, Management

December 14th, 2014

Crowd equity ,loan , or gift? There may be better choices such as private equity if you have the value. The ROI on crowd gets good at a million. There are limits to crowd an crowd can become private equity anyway. The ROI is about 50% for crowd under 100 k and like all funding has a sliding scale on

Jennifer Fortney 20+ years’ experience in PR & marketing comms; Founder of Cascade PR, Chicago firm for small business & startups.

December 29th, 2014

Traditionally, PR has been measured by sales which can convert into ROI. The challenge is that this is not true for all businesses.  I've seen product-based companies become million dollar businesses in under two years using PR solely.  Since this isn't a true result that every company can expect, the value needs to be seen not so much in sales earned as in eyeballs and click throughs. While we pros can generate a lot of press, the truth is that our job is to drive them to you, generate awareness, but it's the website, store, products, experience and customer service that will convert into sales.  If these are not up to snuff, then our efforts are for not.  It must all come together to create the results you're looking for.  

This has been a long, ongoing conversation in the marketing world - one that is changing quickly.  

Please feel free to contact me if I can answer any further questions.