There’s a method to the madness of everything we teach at LaunchBoom, and pricing strategy is no exception. We use a few different pricing strategies here, but why do they work?
There’s a science behind what makes reward tiers so powerful, and it all lies in how it creates irresistible backer incentives. We’ll break down how exactly reward tiers work and how to implement them in your upcoming crowdfunding campaign to maximize success.
Contents
Key takeaways
- Significance of Reward Tiers: Reward tiers on crowdfunding platforms like Kickstarter play a crucial role in offering backers various incentives to pledge monetary amounts for specific rewards, aiding in maximizing campaign success.
- Strategies for Effective Reward Tiers: Implementing discounting, price anchoring, scarcity, urgency, simplicity, and value stacking in reward tiers can enhance backer engagement and increase conversion rates.
- Building Backer Community: Reward tiers and early-bird offers can foster a sense of community among backers, driving excitement and encouraging sharing of the campaign with like-minded individuals.
Tailoring reward tiers to fit both backer preferences and creator offerings, and employing strategies like discount stacking, no-brainer deals, and value stacking, can optimize incentives and maximize campaign revenue.
What are reward tiers?
Reward tiers are what you see on the right-hand side of the Kickstarter page and are basically the “buy” options for your Kickstarter project. You can use them to offer different tangible rewards (usually your product) that people can “back.” Those “backers” are then committing to pledge a specific monetary amount to claim that reward (essentially pre-ordering it) when your campaign ends.
As the name suggests, you can have many different “tiers” of rewards on your Kickstarter campaign. Because you can have different reward tiers, there are many different pricing strategies you can use on your Kickstarter campaign. But not all are created equal.
For example, offering too many rewards can be confusing to backers and lower conversion rates, while offering too few (or the wrong kinds of rewards) may not create enough incentive for people to want to back. The key is to create the right mix of backer incentives that make backing your campaign a no-brainer.
How to maximize backer incentives with your reward tiers
A well-executed reward tier strategy for your crowdfunding has many benefits and is instrumental in maximizing your final raise, which ultimately means you’ll be able to carry out successful product fulfillment. Here are some key concepts that come into play when utilizing Indiegogo and Kickstarter reward ideas:
- Discounting: People are naturally more inclined to buy something when they know they are getting it below market price. Discounting is very popular in crowdfunding pricing.
- Price anchoring: This is the cognitive bias that makes your discount more appealing by showing a higher price option next to it. For example, when someone sees something for $100, they are “anchored” by that price. When they see a similar option listed for $50, they now feel like they are getting a great deal.
- Scarcity: Scarce products mean that quantity is limited. Limited availability means that people have greater incentive to buy now.
- Urgency: This is closely related to scarcity, but instead of limited quantity it pertains to limited time.
- Paradox of choice: When people have too many choices, something happens where they can get stuck deciding between choices and end up not buying at all. With reward tiers, we aim to eliminate this choice paralysis by keeping the reward tiers simple.
- Value stacking: As reward tiers get higher in price, so does their value. We want to make sure we communicate this fact to backers to help them decide which package is best for them.
With these high-level concepts in mind, let’s dive deeper into how Indiegogo and Kickstarter reward tiers can benefit your next crowdfunding campaign.
Enhancing engagement with exclusive offers
Exclusive is a popular word in digital marketing — and for good reason. These types of offers make use of scarcity and urgency, and let potential backers know that the deal they’re getting will be limited to just them. They’re part of the small club that gets to purchase your product at the best price.
Exclusive offers can be very effective during your live Kickstarter campaign, but also can come in handy during the pre-launch. The reason is because you can advertise these deals before your campaign launches, and backers will feel inclined to join your reservation list. The main incentive for them to join your reservation list is some type of exclusive deal (like a bonus add-on or guaranteed discount on the main product).
We’ll touch more on setting up these reward tiers for initial backers, but we can’t stress enough how well this tactic can work. Joining your reservation will require a monetary deposit — typically $1 — which gives you, the creator, valuable information about who is most interested in your campaign. We’ve found that those that put down a $1 deposit in the pre-launch are 30 times more likely to back your campaign on average than someone who only gives their email address. That shows the power of creating a win-win incentive.
Building community through tiered rewards
Reward tiers and early-bird offers are effective at building a backer community, because the marketing is built right into the mechanics of the strategy. Something that is exclusive and requires certain steps to gain access can generate enough excitement in people that they share your campaign with people they know who have similar interests as them.
As an extension of joining your reservation list, we usually recommend that creators give access to exclusive VIP groups on the social media of their choice. Most commonly, creators will set up their VIP group using Facebook, but another popular option is Discord. Everyone on the list has similar interests and goals when it comes to your campaign, so it’s a good chance to give them a place to gather where you can foster your community. Just don’t forget to stay involved, answer questions and engage with members.
Tailoring rewards to backer preferences
Indiegogo and Kickstarter reward tiers can be tailored to fit both backer preferences and creator offerings. In the case of backer preferences, most of the crowdfunding audience is looking to get cool, new products at very reasonable prices, so it isn’t hard to land on a reward tier that hits those buttons. Occasionally, you will see traction in your VIP groups about interest in possible add-ons, in which case it’s smart to include something like that in your packages.
In regards to tailoring rewards to what you, the creator, can offer, there are a few options to try depending on what type of products you’re launching. Let’s look at how to set reward tiers that fit best with the campaign you might be running to make sure you can get the most out of your crowdfunding raise.
How to set reward tiers for your crowdfunding campaign
We’ve gone over various benefits and how the science of reward tiers can maximize backer incentives; now it’s time to explore how and what kind of rewards to set. We’ll start a popular reward tier strategy mainly in the Technology & Design categories on Kickstarter: early bird specials.
Early bird specials for initial backers
As the old saying goes: The early bird gets the worm. The same applies in many crowdfunding campaigns. Urgency to get the best price available is a powerful motivator, which is why it’s popular to see “early bird” rewards be available for a limited time and quantity in the first few days of a campaign.
We’ve seen over the course of thousands of product launches that people will show up on day one of your launch for this discount, which can lead to some pretty incredible outcomes. If you used “early bird” pricing as part of your reservation funnel offer, then the bulk of your pre-launch list will come for this reward on day one. This spike in funding will create momentum that can have a positive feedback loop for even more revenue.
High early raises means you can claim you were funded on the first day, which is a powerful form of social proof. Furthermore, the crowdfunding platform you’re using might feature your campaign page to other users who wouldn’t have known about your product otherwise. More exposure leads to more traffic, which leads to more people sharing your page, etc.
Behind-the-scenes access and experiences
Another perk of joining a VIP reservation list in the pre-launch, is that they can get access to things like behind-the-scenes looks and exclusive experiences. As I mentioned before, I typically recommend that creators set up a VIP Facebook group, Discord server, or any kind of VIP group on a social media or forum of their choice.
This tactic creates a closer connection with the audience and plants the seeds for long-term customer loyalty. Behind-the-scenes access can be something as simple as creator-made videos, or early access to surveys where the earlier backers can contribute ideas for additional add-ons and rewards.
Reward tiers ideas to maximize incentives
Now we’ll break down the best reward tier strategies available to you, and which one you should choose to fit your product and campaign. Let’s start with discount stacking, the most universally effective strategy in crowdfunding.
Reward tier strategy #1: Discount stacking
For creators who are (1) only launching one product in their crowdfunding campaign and (2) are NOT in the Games category, we recommend discount stacking. To clarify, one product means a stand-alone offering that doesn’t rely on secondary components and multiple options for add-ons. Here’s an example:
This is Desk Nest by Scott Salzman, the perfect cat bed for your desk. It was launched using discount stacking as the pricing strategy. We started by giving those on the reservation list the best discount on day one, while gradually reducing the discount for those on the list who would come later to the launch.
- VIP Special: $99 (41% off MSRP)
- Launch Special: $111 (34% off MSRP)
- Super Early Bird: $115 (32% off MSRP)
- Early Bird: $119 (30% off MSRP)
- Kickstarter Special: $139 (18% off MSRP)
The key to driving the discount strategy is to have the price anchor — in this case the Kickstarter Special — visible on the campaign page from the start. This lets potential backers know that they are getting a good deal on your product, no matter when they decide to pledge.
This was a very effective strategy for Desk Nest, which went on to raise over $292K on Kickstarter.
Reward tier strategy #2: No-brainer deal
When selling a product with add-ons that cost very little to make, it’s a great opportunity to include them in the pricing strategy to drive more campaign revenue. We call this method the “no-brainer deal.”
The no-brainer deal still requires an enticing discount and price anchor on the page to let people know they are getting savings on the base product. The advantage of having affordable, but useful, add-ons means we can stack them on top to add value.
Let’s say your product is something like a revolutionary new shaving razor. Can you think of something useful to add on that would definitely get people to spend more money? If you guessed additional razorblades, you’re correct!
For example, this is how it worked for baKblade 2.0’s Kickstarter campaign::
- Starter Pack: $24 including base product and two additional blades (30% off retail)
- Full Pack: $29 including base product and six additional blades (38% off retail)
When using this strategy, be sure to let people know how much they are saving off retail. In the example of baKblade 2.0, the second reward tier was more expensive, but it was nearly 40% off retail vs. 30%, which made it a no-brainer deal.
Reward tier strategy #3: Value stacking
If you’re planning to sell multiple stand-alone products or you’re in the Gaming category, then it’s recommended to use the “value stacking” strategy. In value stacking, the value goes up as the price increases. This works in contrast to discount stacking where the value goes down as the price increases since the discount lessens. Let’s look at a past campaign to illustrate this idea.
KELP, which raised €1,429,286 on Kickstarter, had the following products to offer:
- KELP Standard Edition
- KELP Deluxe Edition
- BRILLIANT BEHAVIOURS: Mini-Expansion
With such an array of products and complementary pieces available, they found it best to bundle them in a way that stacked the values of the various components. Here’s how:
KELP – Standard Edition: €45
- KELP Standard Edition
KELP – Deluxe Edition: €60
- KELP Deluxe Edition
KELP – Deluxe Bundle: €68
- KELP Deluxe Edition
- BRILLIANT BEHAVIOURS: Mini-Expansion
As you can see, each reward tier increased in price, but also increased in value. This gave backers more choice while still incentivizing them to choose higher reward tiers.
Final thoughts on using reward tiers
The LaunchBoom system is all about maximizing your product’s potential for a crowdfunding raise, but at the end of the day, it’s all about the backer. Reward tier pricing strategies synergize perfectly with the reservation funnel system we have developed because of the benefits it has for those who are interested in your product. When they feel like they are getting the best value, they are significantly more likely to back your campaign and help make your first product launch a possibility.
If you’re still unsure about which pricing strategy is best for your product and campaign, we understand. LaunchBoom is ready to help, and we’re just a click away from hopping on a call with you to discuss where you are in your crowdfunding journey.
The science of reward tiers: Frequently asked questions
How many reward tiers should I offer?
The answer generally depends on how many products your campaign will feature, as well as if you have plans to include add-ons and upsells. As a rule of thumb, though, you want to have a reward tier for your VIPs who put down a $1 reservation deposit, which they can redeem on the first day of your launch.
How to price reward tiers effectively?
There’s no one-size-fits-all answer for how to price reward tiers, but the most important mantra to remember is you shouldn’t offer a discount that doesn’t let you afford to produce your product. When you set your funding goal, you’ll know how many units you need to sell — and at what price — to pay for your first manufacturing run. Use this number as a base, and carefully calibrate your reward tier discounts from there.
Can reward tiers be changed after launch?
Reward tiers cannot be changed after launch once a person has backed the reward. If it hasn’t been backed yet, the reward tier can be changed, but in most cases, I wouldn’t recommend you to change it. For example, if you tell your community that they can expect a certain price on launch day, you must honor that price or risk losing your credibility. Of course, you can decrease the amount of the discount in later stages of the campaign, but you have to communicate this with your email list and social channels exactly what new price they can expect.
