How Celebrities Charm Influences Crowdfunding Success - Literature review Example

Influence of Celebrity charm on Crowd Funding

Table of Contents

1.Introduction3

2.Literature Review4

3.Recommendation10

4.Conclusion12

• Introduction

Crowd funding is raising capital with the collective efforts of family, friends, individual investors and customers (Valanciene and Jegeleviciute, 2013). It is much different than the conventional approach of financing. Normally, people spend months, going through their contacts, looking for potential investors and spending a lot of time and resources. Crowd funding makes it even much easier to get interested funders in a shorter amount of time.

Crowd funding has the following benefits (Agrawal and Dubey, 2012; Mitra, 2012):

• Ability to reach out to people
• Promotion
• Validation
• Efficiency of the campaign

In this paper, an analysis will be provided on the influence of celebrity charm on crowd funding and how it can be effectively utilised for the success of crowd funding.

• Literature Review

Crowd funding:

According to Jacob H. Schiff, Professor of Investment banking Josh Lerner, crowd funding is not new to the world. Non profit organisations and political campaigns have been soliciting funds from people for more than a century (Blanding, 2013).

The first project that was crowd funded was a tour, arranged for the rock band Marillion, in the year 1997. After the release of their seventh album, the band was unable to finance for a tour. The American fans then raised $60000 through the internet for the band to tour in US (Freedman and Nutting, 2015).

Few examples of successful fundraiser websites are GoFundMe, KICKSTARTER, Indiegogo, Inc. etc. GoFundMe alone has successfully risen over $2 Billion for personal fundraisers.

According to Schuyler Moore, the following are the different types of crowd funding (Moore, 2014):

$1 Million Limit Crowd funding: This is the type of crowd funding based on the law that allows equity and debt offerings below $1 Million through websites. These types of crowd funding need not be registered with the SEC (Security and Exchange Commission).

Donative Crowd funding: In this type of crowd funding, budding entrepreneurs with innovative ideas submit the ideas on the crowd funding websites and solicit funds from the public. Aggregator Websites: Recently a law has been passed, which permits equity and debt offerings that accept ‘accredited investors’ to be advertised. Crowd funding aggregators use this law as the basis for sourcing investment (Moore, 2014).

According to Thomas Smale, Co-founder of FE International, following steps successful crowd funding (Smale, 2016):

• Conveying it to the investors, how it will benefit them: Letting the investors know about the cause of the fundraising is important. It will help get their attention towards the reason of crowd funding (Schwienbacher and Larralde, 2010)
• Offer good rewards: People will invest their money in the project only if they see a worthy return for their investment. Showing a good return and giving them a reason to connect with the project becomes important in such cases.
• Set a goal for funding: Setting a funding goal is one of the main steps towards starting a crowd funding campaign. A proper goal will provide the fundraisers with an idea of how much financing is needed in order to successfully complete the project. Also, it will provide a direction to all their efforts.
• Promotion of the campaign:

A constant buzz in media platforms will help in bringing the attention of the investors to the campaign. It will raise general curiosity of people in the project. which will further help in spreading the word.

The following methods can be used to promote the campaign:

• Using social media
• Using media and bloggers to get coverage of the campaign.
• Holding events at public places to drive up the interest and engagement.
• Keep the project backers in the loop: It is unnecessary to create hype, but it is equally important to keep people involved. Keeping them in the loop and providing updates will help generate their interest about the campaign.
• Delivering the promise: The last step of a successful crowd funding process is to deliver the promised reward.

Erin Niimi Longhurst, says that a fundraiser must keep the following things in mind while opting for crowd funding (Longhurst, 2016):

If the project is clearly defined: Having a clear definition of the project will help the fundraiser in setting a goal. Crowd funding is not a way to achieve the annual fundraising targets. A clear picture of the project provides an idea of how much funds are required. Also, it will help in providing a clear picture to the investors about the project.

If the project appeals to the mass-market: The project should be appealing to the mass audience. A proper market research, prior to starting the campaign, will help in generating that appeal. If it fails in appealing the public, then the objective of the crowd funding activity will not be met.

If the ongoing resources are present: The resources must be kept ready for the campaign. Reaching out to the investors right from the beginning of the campaign is the key to success of the campaign. Social media plays an important part here, giving the fundraiser an opportunity to reach out to a wide audience.

Proper planning of the message: The message that has to be delivered trough out the campaign, as well as after the campaign is over, should be planned out. These are vital factors to be considered before launching for the success of any campaign. Visual effects that will appeal to the general public, touching messages, creating a media page etc., are a few ways in which the campaign can be brought to the notice of the investors (Sola, 2012).

Celebrity Endorsement:

Marketers have always used celebrity charm as one of the most effective ways to influence people. Starting with television commercials for consumable products to complex financial instruments, celebrities never fail to garner attention. Presenting the people with a famous face is the fastest and easiest way of letting them connect to the cause (CPI, 2014). They immediately find an appeal in the purpose of the campaign. It can be easily introduced to the people with a famous face endorsing it. Also, the credibility of the campaign is verified immediately, with the appearance of a celebrity. Being an effective way of increasing awareness about the campaign and boosting it, celebrity charm is often considered to be one o the top notch tactics to create a buzz. Past trends have shown a great deal of success in the campaigns where, celebrity marketing has been used as compared to drives that have refrained from using celebrity marketing. There is a definite increase in the value of the drive with endorsement by a celebrity.

Due to this influence that the celebrities have on people, celebrity marketing has become one of the major and most effective business tactics that the big brands, in almost any industry, use in the present times. The industries that largely depend upon celebrity marketing are sports, beauty products and perfumes. As these industry mainly function on the image that they create, celebrity endorsement is their primary tool for attracting the customers. Also, the impact of globalisation has affected this aspect of marketing too. The celebrities in one region are now generating fan following in completely different geographical regions. People now take interest in the movies of different regions, sportsmen have fan following in different countries. Under such circumstances, celebrity marketing has become one of the main marketing tools to approach the foreign markets. A familiar face will immediately help the people in connecting to the product no which country the product belongs to. Now it has turned into a completely independent source of income for many celebrities. Every years, millions of pounds are spent of celebrity marketing. The demand of celebrity marketing is so high that many advertising firms have separated from the mainstream advertising business in order to form firms that specifically deal with celebrity endorsement. One drawback of celebrity marketing is that it is usually an expensive way of marketing. Many small and medium sized firms cannot benefit from the impact of celebrity marketing due to the lack of resources.

Although, it is a proven method to achieve success in campaigns, selecting a celebrity for this purpose is often a tricky job. According to Debiprasad Mukherjee, the following factors must be considered while selecting a celebrity for endorsing a campaign (Smale, 2016; Mukherjee, 2009):

• Relevance of the celebrity to the crowd funding campaign: People should be able to relate the particular celebrity with the campaign. Random selection of celebrity for the campaign may leave the audience and the investors confused, which may later lead to lack of purpose.
• Match with the target audience: It is very important to keep the fan following in mind while selecting the celebrity. The target audience should be able to able to identify with the celebrity (Belleflamme et al., 2014; Spry et al., 2011).
• Popularity of the celebrity: The level of recognition of the celebrity plays an important role in determining the success of the campaign. Popularity of the celebrity determines how many people will be actually attracted to the campaign.
• Credibility of the celebrity: Trustworthiness of the celebrity and the level of expertise with regard to the campaign and crowd funding goal, drives a curiosity amongst the people about the drive. This later helps them in relating to the cause of the crowd funding campaign.
• National and international appeal factor: Selecting a celebrity having both national and international popularity helps increase the audience base for the campaign. This opens up a wider platform for the crowd funding campaign (Jain, 2011). Reaching out to more people, in turn increases the reach to more investors.
• Controversy risks involved with the celebrity: One must be careful before selecting a celebrity about prior controversies. Getting involved with a celebrity who has been part of notable controversies may affect the credibility of the campaign.
• Multiple and previous campaign endorsements: A careful assessment must be made about the other endorsements done by the celebrity. Getting involved in contradicting campaigns will not create confusion in the minds of the people, but may also create a conflict of interest in the mind of the celebrity.
• Recommendation

Celebrity endorsement can be used as a successful marketing instrument in the crowd funding process too. The companies can successfully utilise the celebrity charm in order to gain attention of the investors and draw the mind of the people towards the cause of crowd funding. If used in an effective manner, celebrity endorsement can not only generate the required funds by the business, but also help in creating bond with the people that will help the company in the future too. A risk associated with using celebrity endorsement is that often the celebrity charm overtakes the cause of the promotion. The people might get more influenced by the celebrity and often forget or fail to understand the purpose of the crowd funding campaign. It becomes very important to understand the reason of the campaign and to communicate that reason to the people in a proper manner so that they do not lose the purpose of the whole campaign. Also, celebrity endorsement often requires a lot of resources. The budget of the campaign may not allow for such a costly promotional activity. In such cases, celebrity endorsement may not look like a feasible option. It is advisable to understand the finances of the crowd funding activity and properly evaluate the benefits that celebrity endorsement can provide. If the return on the investment looks much attractive, then the company can take the step forward to use celebrity charm in their marketing activities.

The following steps can be taken to increase the effectiveness of crowd funding by means of celebrity marketing:

• Selecting the right celebrity, who people will be able to relate to. Relevance of the celebrity with the campaign matters here in order to avoid any confusion.
• Selecting a popular celebrity will help in better promotion of the purpose of crowd funding, as more people will get to know about it.
• It is better to avoid celebrities who have been involved in major controversies. It might make people question the purpose of the campaign in a doubtful manner.
• It is better to avoid taking celebrities who are already involved with other campaigns. That may lead to confusion in the mind of people and the investors as well.

• Conclusion

Crowd funding is one of the most effective ways of raising funds in present times, due to its wide reach to the target audience and investors. The widespread usage of social media and internet in general, makes it much easier for fundraisers to reach out to the donors. In the literature review, a brief description was provided about the various types of crowd funding and the steps for a successful crowd funding. Also, how celebrities influence crowd funding and how to select the right celebrity for a crowd funding campaign has been described.

Reference List

Agrawal, P. and Dubey, S. K., 2012. Impact of Celebrity Endorsement on Consumers’ Buying

Behaviour. Worldwide Journals, 1(7), pp. 106-108

Belleflamme, P., Lambert, T. and Schwienbacher, A., 2014. Crowdfunding: Tapping the right crowd. Journal of Business Venturing, 29(5), pp. 585-609

Blanding, M., 2013. The Problems and Promises of Crowdfunding. [Online] Forbes. Available at: <http://www.forbes.com/sites/hbsworkingknowledge/2013/07/01/the-problems-and-promises-of-crowdfunding/#1af05a1e6de6> [Accessed 27 May 2016]

CPI, 2014. Celebrities in Advertising: Are Celebrity Endorsements Worth It? [Online] Available at: < http://www.celebrityperformance.com/en/celebrity-endorsements/> [Accessed 27 May 2016]

Freedman, D. M. and Nutting, M. R., 2015. A Brief History of Crowdfunding. [PDF] Available at: < http://www.freedman-chicago.com/ec4i/History-of-Crowdfunding.pdf> [Accessed 27 May 2016]

Jain, V., 2011. Celebrity Endorsement And Its Impact On Sales: A ResearchAnalysis Carried Out In India. Global Journal of Management and Business Research, 11(4), pp. 69-83

Longhurst, E. N., 2016. Launching a Crowdfunding campaign? Ask yourself these five questions first. [Online] The Guardian. Available at: <http://www.theguardian.com/voluntary-sector-network/2016/may/24/launching-a-crowdfunding-campaign-ask-yourself-these-five-questions-first> [Accessed 27 May 2016]

Mitra, D., 2012. The role of crowd funding in entrepreneurial finance. Delhi Business Review, 13(2), pp. 67

Moore, S., 2014. Crowdfunding for Dummies. [Online] Forbes. Available at: < http://www.forbes.com/sites/schuylermoore/2014/06/14/crowdfunding-for-dummies/#44906b794cec> [Accessed 27 May 2016]

Mukherjee, D., 2009. Impact of Celebrity Endorsements on Brand Image. [PDF] Available at :< http://usdrinc.com/downloads/Celebrity-Endorsements.pdf> [Accessed 27 May 2016]

Schwienbacher, A. and Larralde, B., 2010. Crowdfunding of Small Entrepreneurial Ventures. [PDF] Available at: <http://www.em-a.eu/fileadmin/content/REALISE_IT_2/REALISE_IT_3/CROWD_OUP_Final_Version.pdf> [Accessed 27 may 2016]

Smale, T., 2016. 6 Steps to Lunch a Successful Crowdfunding Campaign. [Online] Entrepreneur India. Available at: < https://www.entrepreneur.com/article/251660> [Accessed 27 May 2016]

Sola, A. O., 2012 .The Impact of Celebrity Endorsement on Strategic Brand Management. International Journal of Business and Social Science, 3(6), pp. 141-144

Spry, A., Pappu, R. and Bettina Cornwell, T., 2011. Celebrity endorsement, brand credibility and brand equity. European Journal of Marketing, 45(6), pp. 882-909

Valanciene, L. and Jegeleviciute, S., 2013. Valuation of Crowdfunding: Benefits and Drawbacks. Economics and Management, 18(1), pp. 39-47