non-profit | Consumer Value Creation

There are many crowdfunding platforms available on which companies and individuals can attempt to raise money for their cause. I would like to share my thoughts on chuffed.org, an Australian based platform that is one of only a handful of platforms available (one other example is youcaring) that charge no fees to the organisation running the campaign. I personally think their story is inspiring and hope they will be able to survive despite of their current business model. We will look at the way the platform operates from the supplier and customer sides before assessing the business model.

Supplier-side operation

For suppliers of projects, chuffed is a relatively easy to use platform to start hosting funding campaigns. Chuffed has listed a five-step plan to help charities and individuals get underway in starting their first campaign, including best-practices about perks and promoting the campaign on social media. Obviously, chuffed benefits from well-run campaigns so making this as easy to understand as possible is in their favour, and they seem to understand this very well. The biggest reason for causes to use chuffed is probably that they charge no fees on the donations made through the platform. End users must pay the credit card fees on top of the donation amount but this is paid to their PSP: stripe.

Customer-side operation

Chuffed is accessible on a responsive website. End users can browse through the different projects with relative ease. I can understand the choice to save money by not building native apps, but it is still a shame that the site is not very mobile-friendly, especially on lower internet speeds.

On a more positive note, the site attracts consumers from all over the globe. In an interesting blog post containing statistics from 2016, chuffed notes “We’ve only run campaigns in 20 countries, yet donors have come from 152.”.

Business model

Chuffed.org is a social enterprise, so survival is their prime concern. They ask end users for a small donation to sustain chuffed on top of the donation to the specific campaign.

This intuitively seems like a good option to sustain the platform, but chuffed does not disclose numbers on how many donations they receive through this channel so it is hard to assess whether they do a good job of sustaining themselves.

Another interesting survival strategy is discussed in a blog post posted by the CEO. Chuffed received their second round of funding in March 2016 through Blackbird, a venture capitalist. The CEO notes that even though they were rejected for 86 times by various VC’s and other investment parties he persisted in this strategy and that it eventually paid off.

Conclusion

I greatly admire the persistence of chuffed to charge no fees on the supplier side of the business and it appears like they have found a couple of ways to sustain their own platform.

In order to attract more funding from customers, my opinion is that they should invest more in the mobile-friendliness of the platform through native apps.

Sources

https://chuffed.org/blog/seed-funding-blackbird-investment

https://chuffed.org/blog/what-weve-learnt-from-over-100000-donations-on-chuffedorg

https://chuffed.org/how-it-works-crowdfunding/before-you-start

https://www.youcaring.com

In my last blog post, I already wrote about a new application that smartly makes use of crowdsourcing to benefit all participating users creating a win-win situation combined with a nice touch of gamification. Nevertheless, in that previously described model, the main motivation for users is to convert spare time they have into cash – thus, the motivation behind using the app is clearly extrinsic.

Several scholars have investigated the different kinds of motivation behind participating in crowdsourcing communities. Rogstadius et al. (2011) find that increasing extrinsic motivation such as pay leads to a higher speed of responding and willingness to respond but not to a higher quality of the output while increasing the intrinsic motivation of doing a task (e.g. by framing it as a task where you can help others) can succeed in improving the response quality. Similarly, Pilz and Gewald (2013) compare motivating factors to join for-profit or non-profit (for-fun) crowdsourcing communities and find that extrinsic motivations are much more important to incentivize the contribution to for-profit communities.

One particularly recent example of a new business model that – in my opinion – masters the art of framing to intrinsically motivate users as well as the art of combining different crowdsourcing mechanisms to fully exploit the potential of the crowd to help, design, fix codes and fund an idea, is BeMyEyes.

BeMyEyes is a Copenhagen-based, non-profit start-up and the respective mobile application has just been launched on 15^th January 2015. The idea is simple, yet powerful and simply described by the slogan: “Lend your eyes to the blind” (1). More specifically, on the two-sided platform, there are blind or visually impaired people on the one hand who need help to cope with small everyday tasks, and people who can see on the other hand who want to help.

The situation of use for the application is any everyday situation where the remaining four senses that are left to blind people are not enough to master small challenges. Popular examples are reading the expiry date on grocery items, baking a cake, or choosing the right item in the store when the form of the packages is identical. Whenever a blind person faces such a challenge where “a pair of eyes” would come in handy (2), he/ she can easily request help through the application and is connected with one of the over 200,000 helpers registered (1). The technology used is simple as well – the two users described are connected via normal video chat where the blind person directs his/ her camera towards the item in question so that the helper can describe what he/ she sees. That this idea works can be seen in a lot of praise as well as a prize the founding team has won for the most innovative idea (3,4).

What I find particularly interesting about this business model – except that it purely aims to motivate people intrinsically, which seems to work as there are considerably more helpers registered than help-seeking people at the moment (5) – is that it seems to be a toolbox of crowdsourcing mechanisms, leaving me with the impression that the founder of BeMyEyes must have taken this course (Customer-Centric Digital Commerce) at RSM before.

First of all, crowdsourcing is not only used to actually fulfill the business need of helping blind people. Instead, two other instances can be found where crowdsourcing is used at BeMyEyes: (a) the application is based on open source code and programmers around the world are kindly asked to help fixing bugs and improving the code, and (b) the app aims at helping blind people globally, thus it is possible for volunteering people around the world to help translating the app to other languages (2).

Second, looking at the initial funding of the application, we see another aspect of using the crowd – next to official funding by the Velux Foundation and the Blind Foundation in Denmark, BeMyEyes obtained additional funding through crowdfunding on IndiGoGo. As mentioned by Argawal et al. (2013), similar to crowdsourcing as explained above, funders in crowdfunding are motivated by a community feeling and by supporting ideas that they think are good and have a potential to help others. Thus, BeMyEyes not only manages to intrinsically motivate people to use the platform but also to fund it so that the idea could be transformed into a working and helping application.

Since the money of the initial funding will only last until September 2015 (2), BeMyEyes is currently thinking about a future business/ revenue model that will help to sustain the application. Currently, options under discussion are to implement a subscription-based model or to base the app on donations, which would essentially make BeMyEyes an implementer of Pay-What-You-Want (Schröder, Lüer and Sadrieh, 2015).

A final aspect that I found striking because it seems like it has been taken out of a university textbook is how BeMyEyes has also implemented a point system, where users get points for using the platform and helping others to gain reputation. Additional points can be obtained by sharing the application on different media (2), thus creating electronic Word-of-Mouth, which has the potential to reach a high number of people and thus can help the application to grow (King, Racherla and Bush, 2014).

All in all, I really like this business idea because it is exclusively non-profit and has the candid intention to help people and to make their lives easier on a daily basis. For helpers, this application offers the opportunity to help and feel useful without needing to invest a lot of effort. This way, a win-win situation is created without the need to pay anyone for it. What do you think about this business model? Would you like to be a part of this community and help others or if not, why not?

Academic References:

Agrawal, A.K., Catalini, C., & Goldfarb, A. (2013). Some simple economics of crowdfunding (No. w19133). National Bureau of Economic Research.

King, R.A., Racherla, P., & Bush, V.D. (2014). What We Know and Don’t Know About Online Word-of-Mouth: A Review and Synthesis of the Literature. Journal of Interactive Marketing, 28(3), 167-183.

Pilz, D., & Gewald, H. (2013). Does Money Matter? Motivational Factors for Participation in Paid-and Non-Profit-Crowdsourcing Communities. In Wirtschaftsinformatik (p. 37).

Rogstadius, J., Kostakos, V., Kittur, A., Smus, B., Laredo, J., & Vukovic, M. (2011). An Assessment of Intrinsic and Extrinsic Motivation on Task Performance in Crowdsourcing Markets. In ICWSM.

Schröder, M., Lüer, A., & Sadrieh, A. (2015). Pay-what-you-want or mark-off-your-own-price–A framing effect in customer-selected pricing. Journal of Behavioral and Experimental Economics.

Online References:

Featured Image:

Screenshot from http://bemyeyes.org/