The 1-3 rule of crowdfunding

The 1-3 rule of crowdfunding is one of the 20 golden rules of crowdfunding.

If you thought crowdfunding was easy, you might change your opinion after reading this article. However, don’t despair. With good planning and the right kind of work, nothing is impossible.

What is the 1-3 rule of crowdfunding about?

The 1-3 rule of crowdfunding tells us that only between 1 and 3% of the visitors to a crowdfunding campaign will convert into backers.

If your campaign is converting less than 1% of the visitors into backers it can be due to several issues: your targeting (you’re aiming at the wrong audience), the design of the campaign, lacking a ‘wow factor’, pricing, rewards structure or a combination of the previous factors. Most campaigns with less than 1% conversion don’t reach their objective.

On the other hand, if the conversion rate is higher than 3% it might mean you’re only reaching your immediate circles (3Fs). There is room to be more aggressive with your communications and reach new audiences. A campaign with a conversion rate higher than 3% might not be achieving all of its potential.

The majority of successful campaigns have a conversion rate from visitors to backers between 1 and 3%. And that takes us to the conclusion that to be successful in a crowdfunding campaign, you have to communicate a lot. We’ll see it with some numbers in the next section.

That’s why a well-thought communication strategy is indispensable. It has to target the right audiences, starting with your immediate circles to start a snowball effect and have enough content to cover the whole timeline of the pre-campaign and post campaign.

How to meet this rule?

Most platforms will have a dashboard to monitor this metric that we can call VBCR (visitor to backer conversion rate). But even if your chosen platform doesn’t give you a reading of the VBCR, you can still calculate it dividing the total of backers by the number of visits.

Let’s do some quick, calculations. Assuming an average pledge of £40 and with a conversion rate of 2%, you would need 1,250 visits to raise £1,000. By the way, the £40 pledge can be considered slightly conservative as the average pledge in Kickstarter is over $80 at the time of writing.

To do an even quicker, back of the envelope, calculation, here’s a little shortcut. In the previous calculation, the number of visits is 25% higher than the objective (1,250 vs. 1,000). This ratio will remain a constant whatever your objective (if we keep the assumption that the average pledge is of £40). So, to quickly calculate the approximate number of visits for a given objective, you can just multiply 1.25x your objective. For a £5,000 objective, you’d need 7,250 visits, and so on.

In any case, all this suggests that raising money through crowdfunding is not trivial. And, we can’t stress this enough, raising is intimately related with communicating. And this is down to the team behind the campaign. But let’s leave this for another blog post.

The keys to meet this rule

• With a well-planned communication strategy.
• Targetting your communications to the right audiences.
• Fine-tuning your campaign if needed (new rewards, etc).

Wrapping it up

The rule of 1-3 tells us that most successful campaigns have a conversion rate (VBCR) of between 1-3%. A lower rate probably means there’s somethign wrong with the campaign and a higher one that perhaps you’re not reaching enough people.

If you need help putting together a communication strategy to meet this rule, please don’t hesitate to contact me.