The rewards commonly used in reward-based crowdfunding campaigns fall into three categories (Colombo et al. 2015; Thrridl and Kamleitner 2016): pre-orders, services, and recognition. Particularly, campaign creators offer their products in a pre-order mechanism through which backers have early access to the products. As part of the process, contributors also evaluate the products and may offer creators useful suggestions on how to make the products better to satisfy their needs. Recognition and services are examples of immaterial rewards. Recognition as a reward applies to the entry-level backers (backers contributing a small amount of money). Here, creators may write thank-you letters to such backers or display their names on the website in order to acknowledge their contribution. Creators may also provide special services, instead of physical products, as rewards for backers. Examples of these may include private performances and screenings, training and educational experiences, free use of commercial services being developed, and so on.
Reward-based crowdfunding is a two-sided market (Tomczak and Brem 2013). Specifically, the supply side of the market consists of a group of backers who are willing to contribute to crowdfunding campaigns to achieve material or immaterial compensation. The demand side of the market consists of a group of campaign creators who design their campaigns in order to get projects they are developing funded. This two-sided market is in most cases operated through an online intermediary (crowdfunding platform) such as Kickstarter.
In this chapter, a framework is applied to explain the mechanism of reward-based crowdfunding. It consists of four essential elements (campaigns, creators, backers, and platforms) of the whole reward-based crowdfunding process (Ordanini et al. 2011). The three elements (creators, backers, and platforms) will be discussed separately at the different phases of the crowdfunding process namely---the preparation phase, the crowdfunding phase, and the outcome phase. Specifically, the preparation phase refers to the period before launching campaigns. The crowdfunding phase refers to the active fundraising period of campaigns, and the outcome phase refers to the consequences of crowdfunding campaigns, once they are closed and the fundraising period is over.
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Figure 1. Reward-based Crowd Funding ModelÂ
RBCF Key Player
Key players in reward-based crowdfunding (RBCF) include the project creators, backers, crowdfunding platforms, and intermediaries.
Project Creators: These are individuals or businesses that propose a project or idea and seek funding through RBCF. They create a campaign on a crowdfunding platform, set
a funding goal, and offer various rewards or perks to attract backers. Project creators can be entrepreneurs, artists, inventors, or social causes seeking financial support.
Backers: Backers are individuals or organizations that support a project financially by making pledges or contributions. They are driven by various motivations, such as interest in the project, desire to help the creator, or interest in the rewards offered. Backers typically receive rewards based on their level of support, which can range from a simple thank-you note to exclusive access to the product or service being developed.
Crowdfunding Platforms: These online platforms serve as intermediaries connecting project creators and backers. Popular RBCF platforms include Kickstarter, Indiegogo, GoFundMe, and Patreon. These platforms provide project creators with tools to create and manage campaigns, showcase their projects, receive funds, and facilitate communication between creators and backers. They may charge fees, such as a percentage of the funds raised or transaction fees.
