05: The Crowdfunding Success Matrix

Zach Smith: (00:00) Funded Today Nation welcome back to the Funded Today Podcast I’m Zach Smith: and on today’s episode you might feel like you’re back in business school. We’re going to talk about a Matrix that “Crowdfunding Success Matrix” to be more precise. What do black holes, shooting stars and supernovas have to do with Crowdfunding.

Announcer: (00:23) The Funded Today Podcast is hosted by World-Renowned Entrepreneurs and Business Experts Thomas Alvord: and Zach Smith:, to get a help with your next big business idea or to take your business to the next level go to fundedtoday.com.

Zach Smith: (00:38) Welcome back I’m Zach Smith.

Thomas Alvord: (00:38) And I’m Thomas Alvord:.

Zach Smith: (00:41) In our last episode we talked about why your Crowdfunding Campaign or new invention might initially fail, and why that’s actually okay, if you felt like your down on your luck, and you never had success as an entrepreneur before that is the episode for you. Now in today’s episode we want to talk about the first Paradigm we used to analyze a Kickstarter or Indiegogo Campaign, and most importantly over the years we actually learned that you can use this exact same matrix to analyze any business ventures, it’s quite simple.

Thomas Alvord: (01:13) Really this Paradigm this matrix that we use looks at how good is your product, and then also looks at how good or bad is your marketing, and it’s super simple but it actually has a lot of implications and matter substantially because if you have a campaign or a business or an Ecommerce website and things aren’t going the way you wish they were or you thought they would, really it comes down at its core do you have a product problem? Or do you have a marketing problem? Let’s talk about what this looks like and by the way you can get the show notes and look at what we are calling the Crowdfunding Success Matrix in those show notes so you might want to pull that up your driving probably not it’s very simple as Thomas said the “Crowdfunding Success Matrix” is just like those Business Matrix’s if you’ve ever been to business school or done something like that with the “Four Quadrants” divided by an “X-Axis” and a “Y-Axis”, so let me just briefly kind of describe it for you in the bottom right you’ve got “Quadrant 4” bottom left “Quadrant 3”, top right “Quadrant 2”, top left “Quadrant 1”. On the Y-Axis you have your product and your product is either bad or good, Y-axis batter good; X-axis is your marketing and your marketing is either good or bad, so then it follows that “bad product, bad marketing” “Quadrant 4”; “bad product good marketing” “Quadrant 3”; “good product bad marketing “Quadrant 2”; and “good product good marketing Quadrant 1” and all combined this is called the “Crowdfunding Success Matrix”. Now we want to get in explain to you each of these Quadrants and how you can tell which quadrant you’re in and how you can skip or jump out of some of these quadrants to make it to ultimately the best Quadrant which is “Quadrant one Good Product Good Marketing”.

Thomas Alvord: (03:24) If we look at Quadrant 4 which we call outer darkness it’s a product that has bad marketing and the product itself is also a bad product, and let me take a little tangent here and describe how we would define a product whether it’s good or whether it’s bad, really it comes down to does this product convert when you send traffic when people see this product do they buy it or do they not buy it? And to provide a framework for averages there’s two metrics that we look at in terms of crowdfunding, and you could also use this for e-commerce but these numbers apply to crowdfunding which is the conversion rate and the Earnings per Visitor. Now conversion rate and earnings per visitor are the two things that you want to look at to determine whether or not you have a winner or a loser. Well both are very simple let’s start with “Earnings Per Visitor” we call that EPV for short “Earnings Per Visitor” Earnings Per Visitor is a simple metric for determining how valuable your traffic is so your conversion rate is for every hundred visitors that come to your website what percentage of them make a purchase.

So if there is 100 people that come to your page and three people make a purchase or a pledge your conversion rate is 3% it’s that simple. Now your earnings per visitor is a different metric it basically says for every visitor that comes to your page how valuable are they right or how valuable is your product how much revenue is generated by each visitor that comes. So if you have a 100 visitors right and you have $500 generated in revenue. your earnings per visitor would be $5 right? You had 100 visitors with $500 in sales or revenue so on average each visitor generated $5. 

Now that could have been one person making a purchase for $500 or it could have been five people making a purchase for $100 it doesn’t really matter how many people made a transaction, really is just saying on average what’s the value of each visitor an important thing to realize is the value that’s more important, is it conversion rate or earnings per visitor and the reality is most people think it’s the conversion rate, the conversion rate actually doesn’t matter at all it’s really the earnings per visitor, because let’s say I have a product that has a 5% conversion rate, and let’s say I have another product that has a 10% conversion rate well you might think hey the product with a 10% conversion rate that’s a better product right it’s 10% of everyone who goes to your website is purchasing it, well what if the cost for that product is only $1 what if the cost on the other product where it’s a 5% conversion rate is $100,000 well obviously you would be generating way more revenue with the higher priced item right.

So, basically earnings per visitor is factoring in what’s the conversion rate and what’s the value of that transaction and that’s giving you the earnings per visitor. So crowdfunding when we’re looking at is a campaign performing well is it performing not well really we’re looking at the product and we’re saying how does this product perform do people want it or do they not? Is it a good product or a bad product and so what we’re looking at is the earnings per visitor or that product?

Zach Smith: (07:19) Now Thomas more earnings per visit or as it relates to crowdfunding campaigns for Funded Today Nation and for those of you listening to this podcast can you give them a little bit of a high and low so they know what a good earnings per visitor might be for their crowdfunding campaign?

Thomas Alvord: (07:35) Absolutely different traffic is going to convert at a different rate and have a different earnings per visitor so if you land press usually the conversion rate and the earnings per visitor for each for all the traffic that comes is usually going to be higher than if you’re running ads on social media as an example. Or if you’re sending out an email to an email list usually that number might be even higher depending on how nurtured they are and how engaged they are, so on average though if we’re looking across all the traffic sources okay a campaign that has a $2 earnings per visitor is about average okay, if you have say a $5 to a $10 earning per visitor then you’re have a great campaign, and if you have an earnings per visitor that’s like $0.50 then yet you have a bad product.

Zach Smith: (08:32) And I think that transitions us nicely into the idea of a good EPV versus a bad EPV and a bad EPV is indicative of a campaign sitting in outer darkness.

Thomas Alvord: (08:44) Yeah absolutely.

Zach Smith: (08:45) So you don’t want to be in outer darkness to wax a little religious here the scriptures have said there’s weeping and wailing and gnashing of teeth, it's painful you get a bad product in bad marketing and that’s when you end-up in “Quadrant 4” these are the types of campaigns that aren’t backed by your friends and family. Remember in our “Triple F Episode” this is when you have a product that even your mom isn’t going to back.

Thomas Alvord: (09:11) And the campaigns in the outer darkness are the campaigns nobody ever sees because they’re so bad, and the few people who do they don’t even pay attention to them right. Your marketing is bad your product is bad, and so it’s just a bad campaign overall, so you don’t want to be there. Now if we move on to “Quadrant 3” you might think “Quadrant 4” is the worst Quadrant right hey you got a bad product bad marketing it’s actually not the worst quadrant to be in. Quadrant 3 which is the bottom left which we call the “black hole” is actually the worst quadrant to be in.

Zach Smith: (09:47) A picture a black hole right, I’m not a scientist but a black hole basically sucks everything in so your throwing your ad dollars at something that simply not converting, there is picture of your bank account getting sucked out, that’s the idea of a black hole.

Thomas Alvord: (10:02) Traffic you send people who come and see it they don’t purchase it they don’t like it, you don’t have a good conversion rate, you don’t have a high earnings per visitor but you have good marketing technically if you had good marketing you would immediately turn your marketing off when you see you’re not generating revenue right you’re not having a good ROI.

Zach Smith: (10:23) And Thomas I think it’s important to define good marketing as well because when we talk about good marketing that’s not just eyeballs on the page like we talked about earnings per visitor a little bit your earnings per visitor improves when you have qualified traffic, so good marketing needs two elements first you got to drive a lot of traffic everybody wants eyeballs on their page just give me more traffic. My product is going to raise tons of money, send more visitors to my page it's going to raise tons of money, not true right remember Thomas’s definition of Conversion Rates and Earnings Per View that’s not the case. Good marketing combines a lot of traffic and targeted traffic to your e-commerce or crowdfunding page.

Thomas Alvord: (11:02) Right in the “Crowdfunding Success Matrix” what we’re looking at is a bad product with good marketing when we say good marketing we’re talking about your sending a lot of traffic, and you’re doing good creatives and you have a good cost per click. Now the reason this is a black hole is because literally you are flushing your money down the toilet. If we didn’t have an outer space beam with outer darkness and black hole and shooting stars and a supernova we probably would have had a toilet with money in it being flushed down right? But the idea is look you’re sending this effort, this money, this time, this energy, to run the marketing and you might have the most spectacular marketer who does the most beautiful and effective creatives but it doesn’t matter right it’s all for not it’s completely wasted it’s a black hole because that product is literally sucking everything all the light all of the life and you’re left with nothing after all is said and done, so you don’t want to be in that quadrant.

Zach Smith: (12:05) Now Thomas what product comes to mind most readily for you when you think of the black hole? I think we both could agree it’s probably a smart water bottle that you are in, you remember that story?

Thomas Alvord: (12:16) Yes I do

Zach Smith: (12:19) So this product and I won’t call him out because that’s probably mean but this was a product that the creator designed originally because he was getting tons of headaches. He had a desk job he was working and he just felt terrible every day and he went to a doctor and the doctor attributed his headaches to not being hydrated enough, not drinking water makes sense right? Well he goes and creates a smart water bottle and when we see his product and when we look at the pitch and we review the page in the video he has designed this product not to remind himself and others to drink while they’re working eight hours a day, ten hours a day twelve hours whatever it may be, but when they’re playing a sport so they’re playing soccer, they’re playing a basketball game, and somehow they get a little buzz or notification time to drink now I don’t know about you I’m fairly athletic I play a lot of sports and Thomas does as well, if I’m playing sports I don’t need to be reminded to drink I simply am thirsty I’ve been running hard and I drink it’s a natural response it’s subconscious even and so he actually had a great idea for a product. The problem was he didn’t have the right pain point addressed in all of his pitch material to sell that product and that was a black hole. He threw money at it, he threw money at it he threw traffic at it and it all converted horribly.

Thomas Alvord: (13:43) Now let me share one other example of the black hole of a client that we worked with, and this was a pet product and again I don’t want to you know speak ill of people we work with so I’m going to say what the product was but it was a pet product okay, they wanted to raise a lot of money literally they raised between Kickstarter and Indiegogo over a million dollars okay? Well what you don’t know they told us they didn’t want to keep working with us because they were going to do stuff on their own because we were generating an ROI targeting specific audiences that were generating a positive ROI but they just want to scale this okay like crazy, and so literally they spent over a million dollars to raise a million dollars just because they wanted to go get in some of the big pet stores across the country, that is an example of a black hole, they didn’t have a good product their earnings per visitor was not that good and so they spent and threw so much money at it and literally sucked up their money and they were doing it just with the hope that they would be able to get a retail placement.

Zach Smith: (14:56) Every time you see a $1 million dollar campaign, even $100,000 campaign, a $5 million dollar campaign you might think oh my gosh this guys has made it he has accomplished the dream, he’s a successful entrepreneur I would recommend to follow the advice that Thomas and I have told you today, earnings per view conversion rate don’t immediately assume that when you see a million dollar campaign it’s the most successful thing ever, it could quite possibly be exactly like that pet product Thomas shared with you, a horrible product with horrible conversion rates that has simply been gamified and manipulated through sending massive amounts of traffic at substantial deficit’s and losses, and is not what it seems. I think a lot of people listening or podcast and those who are considering crowdfunding might not realize that happens quite a bit.

Thomas Alvord: (15:43) And the only reason people are typically doing that from what we found is they’re trying to get in with venture capital or a retail placement. Everyone is going to be different, I imagine most of those guys or gals are going to look at it and say hey what was your net how much did you spend? How did this convert? Not just hey here’s how much you post and maybe that would get you the interview based off of how much it generated but once they dig down and analyze the numbers they’re going to see through it.

Zach Smith: (16:12) We have lots of clients making it on “Shark Tank” and they’ll say I raised $2.6 million dollars and Thomas and I are like what was your net on that? While that might not actually get shown on TV rest assured that when “Mark Cuban”, “Daymond John” “Lori Greiner”, “Mr. Wonderful” signs a deal, there’s a lot of stuff happening in the back in to get to the net profit of the company.

Thomas Alvord: (16:35) And what’s interesting about the black hole Zach is I think a lot of this might even have more application to people outside of crowdfunding especially the VC’s and the people who are really trying to push new product because with crowdfunding typically it’s somebody who is in a startup phase, and they have a limited budget and they’re not going to go spend stupid money trying to promote it, and they’re going to be more calculated in what they do. It’s the people who are trying to play the big game that I see run into this problem and it’s those people who I think have a product, or app installs, or whatever and they don’t they don’t have the revenue right. I understand it’s a different game we have these users, we have these app users, whatever we have this traffic now how do we monetize it and obviously that’s not a bad thing you look at people like Facebook which didn’t really have revenue and then they figured out how to monetize it once they went public they really focused on that obviously they’re an animal now they make massive amounts of money that’s not always the case, but you really got to think what is the product, do you have a good product here? Is it smart to be spending so much money don’t be a black hole if you have a bad product then do not spend and send tons of traffic to it.

Zach Smith: (17:53) I love that, so “Quadrant 4” “Outer Darkness”, “Quadrant 3 Black Hole”. Now let’s get on to some exciting happy news this is “Quadrant 2 Shooting Stars” or “Meteor Showers” we had a meteor showers a year or so later and we’ll explain here momentarily. Of all the Four Quadrants in my opinion Shooting Stars are probably our most favorite. Shooting Stars are the Crowdfunding Campaigns that have a great product, but the marketing either isn’t there or it doesn’t last. When you look up in the night sky and you’re out with that where there’s no city lights and you see a star go across the sky great that is not a star again scientists don’t rip us up here but you see that shooting star right fly across the sky and it’s fleeting, that’s the type of marketing we’re talking about when we’re referring to “Shooting Stars and Meteor Showers” it's there for a second and then gone “flash in the pan” kind of thing. 15 minutes of fame these are your shooting stars.

Thomas Alvord: (18:56) And a lot of campaigns start off as a shooting star because they’ve lined up some PR, or they’ve had some other connections, or they’ve done some pretty launch and then they launch and they come out with a bang they raise $50,000 dollars in the first day and then it dies down.

Zach Smith: (19:13) Probably one of my favorite examples of a shooting star comes from a “belt campaign” we worked with, it was a magnetic type of belt this campaign started off with quite a big bang had a mild spike in the first of their campaign, and then everyday kind of had a little meteor shower effect where you’d see some pledges come in for the next seven to ten days. But then midway through the campaign although every single crowdfunding campaign experience is a mid-campaign low, this campaign was having like one backer a day for probably 10 to 15 days, and then we got the marketing right we decided to work with this campaign and huge spike at the end a lot of times shooting stars you have that initial success then you have that dead middle period, and then if you don’t ever forgot how to get your marking right you have your dead in period too, so you don’t know you have a shooting star and tell you prove good marketing, and so that’s what happen in this campaign, we implemented the marketing that’s raised $200 million dollars and the rest is history and this campaign averaged over $12,000 dollars a day for the campaign and had huge days at the end of the campaign it had days raising well over $70,000 - $80,000 bucks so shooting stars.

Thomas Alvord: (20:31) And with a shooting star you don’t always have to have a big bang or a day with a whole bunch raised, another campaign that comes to mind that we worked with was “SpineGym”. “SpineGym” was a thing to work out your spine and it was a home gym as the name implies and after the first week or so they hadn’t even raised $10,000 and they were completely dead so they never were really a shooting star I guess you could say right there was never a moment of like this awesome, fame that they had and then it kind of died down like they literally were just kind of dead. Now what’s interesting is they had a good product but from the appearance you couldn’t tell they had a good product anyone looking at it would be yeah that’s kind of a crummy product, based off of how much they’ve raised and how many backers they have, but once we worked with them and put our marketing behind it they raised over half a million dollars and so really we saw oh! initially they were a shooting star right they had a good product but bad marketing, so their success was fleeting it wasn’t sustained, it wasn’t massive and that’s where you get to be a “Supernova” when you take a good product like SpineGym and then put good marketing behind it.

Zach Smith: (21:56) And that’s exactly what happened with SpineGym, SpineGym ultimately became a supernova and over and today has raised over $2 million dollars for this product that originally looked like it was almost in outer darkness so very exciting, and as Thomas mentioned our last Quadrant is a “Supernova” that’s “Quadrant 1” that’s where you want to be really simple, good product what is good product mean? Good marketing what is good marketing mean? We’ve talked about those that gives you a “Supernova” a good product combined with good marketing is a Supernova, the best example of supernova is probably a “BauBax Travel Jacket” invented by “Hiral Sanghavi” we helped them raise over $4.4 million dollars it had the Triple F it had the powerful launch. And then right after the powerful launch it had the sustained good marketing that led it to become I think at the time of us recording this podcast it is the sixth most funded campaign in crowdfunding history. The “BauBax Travel Jacket” most of you heard about it, it’s went on to be in airports all around the world it’s a travel jacket that has 10 or 20 different pockets in and things that you can hold your gloves in, hold your - has a case for like a cozy for a drink, it has a little microfiber cloth to clean your glasses with or make your sunglasses cleaner remove smudges from your phone or tablet devices, just very innovative, very cool they took a traditional jacket and said how can we make this functional? How can we make this the only jacket you’ll need when you’re trying to get from “Point A to Point B? How do we get in and out of security get on a plane travel make it our destination that’s the “BauBax Travel Jacket”.

Thomas Alvord: (23:42) Now how can you take this matrix and apply it outside of this, how do we apply it and I’ll give an example just a week ago how I applied it. Now I wasn’t necessarily thinking Crowdfunding Success Matrix and that’s not the vernacular I was using when I was talking with one of our clients, but there was a client we’re working with and they had a successful raise on Kickstarter, raised over $100,000 dollars the campaign converted well it was a good product with good marketing, and on their e-commerce, on their website we started working with them. We turned on traffic and started running traffic things weren’t converting, so then we tweak some of the marketing some of the audience targeting, some of the placements ransom marketing and things still weren’t converting okay, at that point the client said hey how about we do this make this tweak and then send some more traffic as I thought about doing that I realized that’s actually not what we need we don’t need more traffic. Right now we have a conversion issue if your conversion rate is under 1% it doesn’t matter if I send a 1,000 visitors or a million visitors, the ROI won’t be there.

We literally have to go and we have to fix the conversion rate in a way we already know he has a good product it’s a little more nuanced then this paradigm of what’s your product, what’s your market. But in this case we have to say okay what are we going to do so the product converts, part of that is changing the webpage, part of it is changing the offer, by changing the webpage and how the product is presented the products the same right but how the product is presented in a way it helps move the product along the scale of being a good product right because it’s the perception of these users of these visitors that are looking at the product and what they perceive the value and the benefit of the product being right, we need to improve that and tweak that, and then also with the marketing instead of just sending the traffic right away hey how do we put some offers in there for the specific product that will get it to convert. We’ve come up with the campaign that we’ve worked with and will test that and we’ll see how it goes, it’s a very big picture paradigm, and another way to look at it instead of do you have a good or a bad product or good or bad marketing another way to look out is this, do you have a good or bad conversion rate and is the amount of traffic your sending good or bad, high or low and really that’s what you’ve got to look at, hey I’m not generating sales okay well is it because you don’t have the right traffic or is it because it’s not converting and then focus where you need to focus first, and if you do have sales well are you able to do it out of positive ROI, if you don’t have it at a positive ROI obviously more traffic is not your answer, more marketing is not your answer, your answer is going to have to be to tweak and improve your conversion rate and if you can’t do that then it might be you have about product.

Zach Smith: (26:53) In our next episode we’re going to talk about the “7-P’s” of Crowdfunding Success and we’ll talk about seven specific ways that we have found over the course of this $200 million raised that you can improve your products conversion rate, because I think most of you are like okay great now you’ve fixed my mindset, now I’m not like a lot of those people on crowdfunding who say if I could just get more eyeballs on my page I’d make tons of money as because that’s probably not true, it’s probably a conversion rate, it's probably an earnings per view issue that you’re dealing with i.e. a product issue and we’ll talk about that “Product” being one of our “7-P’s” in our next episode I love the definition of supernova though but before we close I just I just Googled this and this this is what came up, a supernova is an explosion of a star that briefly outshines an entire galaxy radiant as much energy as the sun or any ordinary star is expected to emit over its entire lifespan. Normally this shiny and energy radiation last several weeks or maybe even months does that sound like a Crowdfunding Campaign or might just the nerd that doing this too much, that’s exactly what you want to happen in your 30 to 60 day campaign, no peaks, no valleys and troughs just steady consistent supernova like pledges throughout your entire campaign, and that’s what happened with “BauBax” and that’s what happened with any of those Supernova Type Campaigns that you see that raised the big money on Crowdfunding. So we hope you enjoyed this episode today, we’re really excited apply the “Crowdfunding Success Matrix” I love what Thomas said how we simplified it, and to not think of it as a bad product or bad marketing even but just how are my conversion rates? How is my marketing? Is my marketing good or bad are my conversion rates good or bad

Thomas Alvord: (28:38) Look at is it a traffic issue or a conversion issue if it’s a traffic issue you have a good conversion or good Earnings Per Visitor well you just need more traffic where do you get that, if you have enough traffic and you just have no sales then it’s a conversion issue it’s an Earnings Per Visitor and you need to figure out how do you present the product differently so people purchase it how do you tweak your website if that’s what’s needed or do you actually just have a bad product there’s not a market for it at least not for the channel or the platform which is what we’ll talk about in our next episode, but again those are things to look for is it a conversion rate or a traffic issue that’s what it comes down to.

Zach Smith: (29:19) Alright it's that time a week again the Funded Today product of the week and my pick for product of the week is “Arrim ONE”, “Arrim ONE” is the first AR Multifunctional Measuring Device that actually works it's pretty cool you attach it to your smartphone and then to measure a straight line distance a little laser beam pops out. You pop that you aim that laser beam right at your first point and then you go to your endpoint and you measure it and then right on your smartphone it pops up the distance and inches centimeters or feet and tells you exactly what it is to measure, so you don’t need someone else to help you out you can do it yourself and it works right through your smartphone, pretty cool, pretty powerful it is still funding on Indiegogo InDemand right now check it out Arrim ONE A-R-R-I-M ONE.

Thomas Alvord: (30:09) My product of the week is the “NanoPen” it’s the world’s smallest indestructible “EDC Pen Tool” imagine a pen that you could clip on to your keys right it has key ring and it has a screw that you can unscrew so you basically always have a pen with you and like I said it’s indestructible, it’s waterproof they’ve put it in fire, or cars run over it, smash proof they smashed it with rocks, and it basically won’t break you always have a pen with you and it’s never going to break, it’s pretty awesome I want one of these for myself that’s why I’ve chosen it for a product of the week check it out the NanoPen.

Thomas Alvord: (30:49) Thanks again for tuning in be sure to tune into our next masterclass. We’re in be discussing Funded Today’s “7-Ps” for Crowdfunding Success after you understand each of these “7-Ps” you will find out just how critical they are to your campaign success. If even one of these “P’s” is off that can be the difference between success and failure and as always remember “don’t wait until tomorrow” get Funded Today.

Announcer: (31:18) Funded Today is the worldwide leader in Rewards-Based Crowdfunding on Kickstarter and Indiegogo combined today have raised over $200 million and counting for thousands of new ideas innovations worldwide, if you’ve got an idea for a new product or invention visit fundedtoday.com to speak with one of their expert