Is crowdfunding changing the way we donate?

April 9, 2015 402446ta Leave a comment

It is a recurring sight, collectors that ask for donations for one of the many charities in the streets or at your home. This traditional collecting technique has worked for many years and has proven itself as an effective strategy. However, small charities that are focussed on a niche have often trouble gathering sufficient funds. Their campaigns are also focussed on one of the many problems in the world, but don’t get the attention that they deserve.

The up rise of crowdfunding has created new possibilities for these charities, donating your money directly to a project off your choices has never been easier than with the many available crowdfunding platforms. Kickstarter and Indiegogo already had successful donation based crowdfunding campaigns such as “The Ocean CleanUp”, but more often than not, these platforms offer reward based campaigns that give you a varying reward for your pledge (1).

The success on these platforms created a whole new category of crowdfunding platforms that is solely based on the principle of donating your money to a project of your choice. One of these platforms is Razoo, which offers you the possibility to make a difference (2). The platform brings together charities or organizations that need funds for their projects (these projects can be focussed on Human Aid, Animals, Sport, Education, Etc.) and the donators.

Basically this means it is a two sided market, the difference however is that the donators are not motivated by money or rewards, they are often driven by philanthropic reasoning (3; 5). The CEO Lesley Mansford said that: “Razoo wanted to empower everyday philanthropists to show they care and provide tools to … help anybody who needs it, regardless of the cause – because not all needs are tied to a charitable organization.” The aim of these platforms is to provide peer-to peer benevolence for non-profit fundraising and become a significant category of giving in the future,” (4)

Since the beginning in 2007, the platform received a total of 870,000 donations which supported over 31.000 causes (4). This all leads to the fact that one crowdfunding platform was able to raise over $270 million for charity proves that they are becoming a significant player in donations (2). From this we can concluded that donation based crowdfunding is changing the way we donate, it has become easier to find projects or goals and support them compared to the tradition channels. However, from all the money that is donated a large amount stays within such a platform. For example: the website Razoo charges 4.9% of donations for non-profit causes and 7.9% of donations on personal fundraiser (6). This backs the question if using such a platform really favours the charity projects in the long-run or that these kind of platforms are a temporary trend for all involved.

Reference:

1: http://www.theoceancleanup.com/

2: http://www.razoo.com/

3: Tsekouras, D. (2015) Consumer-Centric Digitial Commerce, “Why Funders do this”, slides session 4 (8-04-15)

4: http://venturebeat.com/2014/02/07/razoos-gamified-approach-to-fundraising-has-generated-200m-for-charity/

5: Eisenmann, T., Parker, G., & M. W. Van Alstyne (2006). Strategies for two-sided markets. Harvard Business School Publishing Corporation.

6: http://www.razoo.com/p/faqs_individuals

Business Case, News

Create positive WOM through post-consumption e-mails

April 9, 2015 356319sl Leave a comment

“Selling a car to someone is not hard, getting them to come back years from now and buy a second one is the challenge.”
– Employee at Bluekens, Roosendaal.

This is a quote I’ve heard a few times when I went along with my parents when they were getting a new car throughout the past fifteen years. Over the last years I learnt that the man who told me this taught me a very important marketing rule: once you’ve got the sale, your work has only just begun.

Colin Shaw (2013) noted that it costs a company, on average, six to seven times more to acquire a new customer than to retain an existing one. Therefore, companies can save a lot of money by creating an experience that makes customers want to come back and tell others about your company. The post-purchase period is an important point in the customer’s journey and is just as important, if not more important, than the actual sale. As an illustration, Marketing Metrics found that the probability of selling a product to an existing client lies between sixty to seventy percent, whereas the probability of selling a product to a new client lies between five to twenty percent.

As there are many methods of post purchase engagement, I will take a look at post-purchase e-mails in this post. When used correctly, these e-mails will create a better consumer experience, resulting in a stronger customer loyalty. This will lead to a positive word of mouth which may refer new clients to you. Furthermore, it may lead to more repeated purchases and, most importantly, establish a strong connection between customers and your brand. So, what would these e-mails require in terms of content?

1. Order confirmation, tracking and support.
First of all, it is important to give your customer the security that the order was successfully processed. An example of such an e-mail can be seen in the picture below. When Bed, Bath and Beyond receives an order through their website, the e-mail that is sent contains a simple statement regarding the confirmation of your order and the tracking information.

2. Discount offers to incentivize future purchases.
Other than experiencing a good post-consumption process, consumers may need an extra incentive to make a future purchase. By sending discount offers days after someone made a purchase, you might trigger a new purchase. Take for example Pottery Barn. About a week after making a purchase at Pottery Barn, customers receive a mail with a code to get free shipping on a future purchase. As consumers have enjoyed a good experience, this discount is the icing on the cake to let them make another purchase.

3. Thank your customers
Make your customers feel appreciated. A thank you page after an order is not enough, as they may feel everyone can see this. When dedicated in a mail, consumers may feel more personally engaged, which will increase their post-purchase experience.

I believe these companies show great examples of ensuring consumers enjoy a positive post-purchase experience. Although each of these suggestions contain only small things, I do believe they have a huge impact on how a consumer experiences a purchase. Remember, the purchase of a product is not the end of a relationship with a customer, it is merely the beginning.

Sources:
http://www.brimagency.com/blog/how-to-retain-more-customers-through-post-purchase-engagement/

http://blog.klaviyo.com/2014/10/16/8-essential-practices-for-a-winning-post-purchase-email/

https://www.linkedin.com/pulse/20130604134550-284615-15-statistics-that-should-change-the-business-world-but-haven-t

Articles

The Contrasting Effects of Negative Word of Mouth in the Post-Consumption Stage

April 9, 2015 356319sl Leave a comment

Have you ever had bad experiences with a product or service? Nowadays it becomes easier to spread your experiences through word of mouth, as there are many forums and web pages to talk about them. In this article, the effects of negative word of mouth (NWOM) is explored in the post-consumption stage (i.e. after experiencing it).

Think of the following scenario:
You are a post office to send an important letter. You expect it to only take a few minutes. There are a number of people ahead of you and the service is very slow. Furthermore, you notice that only three out of eight counters are open. You end up waiting thirty minutes before you are finally served.

Chan et al. demonstrate that, although you have gone through this bad experience, NWOM can have a negative (aggravating) effect on dissatisfied customers, but NWOM can also have a positive (alleviating) effect. For example, when you talk about your experience and your friend tells you “Again? Last time there were only two counters open and the clerks were extremely slow” we speak of an attribute-based NWOM condition. As two dissatisfied consumers exchange information, the dissatisfaction will increase.

However, imagine your friend responds with “Well, if you think that is bad, the last time I was there I had to wait for over an hour and I missed my soccer training because of that.” Here we speak of an experience-based NWOM condition. When this happens, you compare yourself to your friend and his situation, realizing that your situation could have been worse. This in turn leads to a decreased level of satisfaction on your behalf.

The difference between the situation is the context in which it is described. In the first situation, you talk about the actual service delivery of the company, whereas in the second situation you talk about experiences you’ve had with this service delivery. Furthermore, the authors found that dissatisfaction increases when consumers are in highly comparable situations.

It is important to realize what effects word of mouth can have on purchasing behavior. When told about negative experiences, consumers in the pre-purchase stage may be discouraged to finalize their purchase. But those that are dissatisfied in a post-consumption state, might be alleviated when finding out other consumers had worse experiences. This in turn may increase their repurchase intent.

The authors conclude that in a post-consumption state, a social-comparative process, rather than a product-evaluative process may be predominate in determining the repurchase intentions of dissatisfied consumers, by either aggregating or alleviating the past experiences. There is a growing consensus that WOM can be used as a marketing tool. There are studies on how to manage online forums and referral programs. Therefore, firms can learn from these experiences to know where they have to improve.

I personally don’t fully agree with the findings of the authors. They state that repurchase intent may increase after hearing other consumers have had it worse. However, when I would experience bad quality of service (or a bad product) and I hear I am not the only one, and my situation is not even the worst, I would definitely not repurchase anything at the firm.

Chan, H., Cui, S. (2011) The contrasting effects of negative word of mouth in the post-consumption stage, Journal of Consumer Psychology, Vol. 21, pp. 324-337.