In a world full of options, can you have too many? Seems like it. Research from Rotman looked into crowdfunding and found a sweet spot in the number of choices for potential contributors. Go beyond that, and the chances of a project hitting its fundraising goal drop.
The study pinpointed the sweet spot for crowdfunding success on Kickstarter: offering 33 choices for contributing to a project. But the exact number isn’t as crucial as the idea of “overchoice.” Even in crowdfunding, there’s a limit to how many options you should give—a problem seen in many other situations too.
“I am always struck by restaurants who have a huge menu,” the researchers explain. “I am sure that as consumers, we would like to have some choices, but it gets to the point where we get overwhelmed by it.”
Successful raises
Crowdfunding websites have become a go-to for raising money, whether it’s for a family in need, a live theatre show, or a new startup. These platforms, like Kickstarter, offer various options for contributors.
On sites like Kickstarter, projects often provide different rewards – like merchandise or event tickets – but only if the fundraising goal is met. If not, no money changes hands. But here’s the catch: less than half of Kickstarter projects succeed with this all-or-nothing approach. Since its launch in 2009, Kickstarter has garnered $7.65 billion in pledges, but almost $600 million was for projects that fell short of their goal.
Analyzing Kickstarter data from March 2013 to May 2016, Prof. Elitzur, Prof. David Soberman, and Peri Muttath discovered that theatre projects thrived on the creativity-focused site, with over two-thirds hitting their target. Journalism projects, on the other hand, struggled, with only 20% making it.
Raising success rate
Examining success rates in relation to the number of contribution choices across over 100,000 projects, the researchers identified an inverted U relationship. Initially, success rates increased with more contribution choices, but after reaching a peak, they gradually declined for projects offering additional options.
“We need however to keep in mind that the number of reward options is only one of the variables affecting the probability of success,” the authors explain. “Others include the monetary goal of the campaign, the price attached to each reward option, the duration of the campaign, the social network of the project creator and the creator’s history in previous campaigns.”
For those gearing up to launch a crowdfunding project, here’s the scoop: leverage your social media platforms, highlight your project’s popularity in your pitch, and bear in mind that when it comes to options for contributors, sometimes having “more” can actually result in less success.
