Is Crowdfunding a good way to test Product-Market Fit for Startups?

Ramya Bharathi
Sep 14, 2017 · 4 min read

Crowdfunding concept gives an idea about how many are willing to pay for the solution you are going to provide, even before the actual product/service launch.

The success depends on how well you can articulate or present your idea to customers that you are doing something to address their pain points/issues.Here the main advantage is that you can promote your idea as well as attempt to understand the customer and his expectations about how to proceed with your product simultaneously.

Once someone is convinced for trying your product, you already got customers for your product/service and now your challenge lies in retaining the customers who believed in your idea. If you fail to keep your promise, your effort in acquiring customers is in vain and the customers are lost for ever.So, one should be extra cautious once the customer is directly involved.

The question to be answered here is: Can all Startups try Crowdfunding to test their product/service?

The main behind using crowdfunding is to find your customers first and then deliver your product in the way they want it.In a way, crowdfunding can be tried as one of the phases of product development. Market readiness for the product/service can be tested,customers are directly involved in the development process, their feedback can be used to make improvements to your product and most importantly, you have already sold your product and the customer is eagerly waiting to receive your product/service.

Let us look into how Crowdfunding can be used to test a new product i.e advantages of using crowdfunding…

  1. Test the market readiness for your new product

Crowdfunding is an effective tool for measuring market demand. This can be used to check the market’s readiness for your ideas or to introduce the product prototype while raising funds. If you get backers who are ready to shell out some money out of their pockets for your idea/product or an appreciation for your product indicates the market readiness for the new product.

2. Involves customers in the Product Design and Development Process

Allowing customers to participate in the creative process is a powerful way of empowering them and also getting precious feedback on what the market really wants. Crowdfunding helps you attract people who are interested in the success of your product. Involving them in the design and development process will help enrich the product in a whole new way. In a way it reduces your effort in product design phase. You will be producing products in a way that customers want unlike designing a product with your own perceptions and then forcing customers to like your product or thinking of creative ways to make customers like your product.

3. Make use of Customer Feedback to design your product

With crowdfunding, most of the people who back your fundraising project are already your product’s users or company’s advocates. When they receive the prototype or first-bulk production of your product (as a token for supporting your online fundraising) you can expect to get some very essential feedback on what they really think about your product.

Traditionally, customer feedback can be used to improve the product after the launch of the product. But using crowdfunding, you have have an idea of the success of your product/idea, make necessary changes to your product design plan according to the expectations of customers.In short, you will be able to produce a product that customer wants.

4. Use Customer Complaints Effectively

Most products are launched as an improvement of their previous model. Crowdfunding is an effective way to gather reports of customer complaints and get them to provide you with appropriate solutions. When the concept of the improved product is launched via crowdfunding, invite your fans to help in the development process. Since they have invested their time and money on your project, they will give you solutions and advocate the product to the naysayers when the new model hits the market. This is a win-win solution as you turn fans into investors and non-fans into delighted customers once again.

5. Product Promotion

You can also use crowdfunding as a research tool to benchmark and promote your final product. Since the concept of achieving product-market fit is an abstract idea, you never really know when you have achieved it for sure. The long process of market testing and research can be short circuited by launching your final product via crowdfunding. You gain free marketing as the crowdfunding platform promotes your project and increases visibility of your product. This reduces your advertising expenses.So, cost saving is achieved via crowdfunding. Using digital platforms for the same is an effective and economical way to make your product viral in the present day scenario.

6. An effective way to engage your customer

Crowdfunding campaign lets you introduce your idea/product to a large audience. Your network increases, you get to interact with many customers in this process.Your current product may not be attractive to them, but you can keep them engaged via continuous communication via emails about your product improvements/new products.So, you have your future customers in your hand.There are chances that these customers can refer/introduce your product/idea to their friends and acquaintances even though they are not ready to use it.

In this way, crowdfunding can be used to test your product/concept effectively and economically.The process takes less time than the traditional market research process followed by Test Marketing. As the overall cycle time reduces, you can fail quickly, test many number of products quickly, which leads you to a successful product finally.


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