- Image by superphoebe via Flickr
SETTING the perfect price remains a hard problem in any market. What to charge in order to reap the greatest return at the highest volume for the producer or provider? Consumers and businesses may possess an unknown price sensitivity that results in a small change dramatically improving or worsening sales. Some insights into this sensitivity are afforded by micropatronage (which we explain in “Putting your money where your mouse is”).
Kickstarter leads the way in connecting creative projects that need funding with an audience willing to lend its micropatronage dollars. The company released an analysis of the distribution of dollars by contribution size for successfully funded projects over its first $15m or so taken in. It requires that a dollar goal be set for a project, which may contributing to a journalist’s trip to Afghanistan, completing an album in a studio, or funding stages of a documentary film. If the dollar goal isn’t met, the project’s funds aren’t collected and dispersed.
Where it gets interesting is how contributions are made. Project creators, often in consultation with Kickstarter, pick specific set price points at which rewards are offered, a bit like American public radio fundraiser premiums. Give $5 and have your name in a list of acknowledgements in a book; give $1,000, and the author takes you out to dinner and spends hours with you.
Because prices can be set across a range, price sensitivity can be explored. But crowd-funding patrons are creatures of the market here as everywhere. Provide too many options, and the potential contributor faces too much choice, and may leave without posting a contribution. Craig Mod, a writer, book designer and publisher, wanted to avoid this fate as he was planning to funding the republication of a sold-out book, Art Space Tokyo, which he had created in collaboration with Ashley Rawlings. As he wrote on his blog a few weeks ago, his efforts to tease out lenders’ price sensitivity from previous Kickstarter projects showed that a $50 contribution was the most popular amount. It also proved the largest dollar component for the highest-grossing Kickstarter projects.
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