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coolest cooler

Agreement to Recoup Funds from Cooler Project Gets Icy Reception

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Last month the Oregonian reported that the Oregon Department of Justice reached a settlement with Portland-based Coolest Cooler project over complaints the company hasn’t delivered its crowdfunding rewards to expectant backers in a timely manner. The project is currently three years behind schedule and has failed to ship over 21,000 of its $200 coolers. The new ruling suggests backers may be entitled to a $20 refund from Coolest Cooler, or 10% of their original investment.

If it sounds crazy, at least it’s sanctioned crazy. After numerous highly publicized projects have failed to deliver on time, many backers now know what they’re getting into when supporting a crowdfunding project – but that doesn’t mean backers won’t become angry when a project fails to meet their expectations. If expectations aren’t managed properly, this may create a potential crisis for an entrepreneur hoping to leverage their project into a business.

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In these types of delay scenarios, rewards-based crowdfunding platforms (Kickstarter, Indiegogo, etc.) go to great lengths to distance the company from responsibility. In its terms of use, Indiegogo makes it clear the platform is merely a ‘venue’ to enable the act of crowdfunding. Additionally, these ‘venues’ help shield failed projects from responsibility for delivery failure when backers are repeatedly told they are “pledging” funds or getting a “perk” or getting a “reward” – versus simply purchasing a product. This messaging is repeated in various forms throughout the communication channels of these platforms.  (For more, view this blog titled: Kickstarter is not a store).

Here’s my question – shouldn’t a crowdfunding project work hard to ensure its potential evangelists (i.e., ‘backers’) are treated fairly and compassionately? I dare say, they should be coddled. Most communication professionals would nod in agreement (with the possible exception of the ‘coddled’ part), but most crowdfunding project creators are not communication professionals and I’ve observed that they do a lot of funny things to avoid confrontation.

My recently completed grad school terminal project explored communication practices in rewards-based crowdfunding campaigns. I chose to study crowdfunding because the lifecycle of its business model is like a regular business on hyper-drive. In the span of a few months you can observe a business evolve from the fruition of an idea to the delivery of its product, and all of its communication efforts (or lack thereof) are recorded on the crowdfunding platform, on its social media platforms, in media stories and within forums.

In the coming weeks I’ll share some of what I’ve learned on the AM:PM PR blog. I believe this information will be of interest to communication professionals and may help to inform effective business communication practices.

Background.
Contemporary crowdfunding platforms enable entrepreneurs to bring their dreams into fruition in a manner that was unthinkable 10 years ago. If an entrepreneur can connect to the internet, they can communicate with nearly a billion English speakers. Additionally, new technology enables entrepreneurs to reach potential consumers that would otherwise be impossible for anyone outside of large population centers. Today, an entrepreneur living in rural America could conceive a business idea and launch a crowdfunding campaign using free technology available on the internet to promote and fund it.

The entrepreneur may choose from a range of crowdfunding and social media platforms to tell their unique story, combining narrative with photos, videos and written testimonials. Social media and search engine optimization offered by crowdfunding websites, combined with desktop or mobile friendly browsing allows easy access for potential consumers. Communication-centric technology enables project creators to post updates and share links to these updates on separate social platforms to reach new networks; users can, in turn, share with their additional networks, expanding the reach of the project. Interested consumers pledge directly using safe financial technologies offering the secure transfer of funds.

In rewards-based crowdfunding campaigns, entrepreneurs include deliverables to encourage investors to pledge varying levels of funds to support the effort. In the event the project is successfully funded, the entrepreneur can post messages of appreciation to everyone that came together to support their campaign. The entrepreneur, in turn, uses those funds and begins to work toward actualizing their vision and to fulfill pledges to backers. However, challenges arise when the project creator is unable to fulfill campaign promises in a direct, timely manner – and responds to these challenges with inconsistent, combative or unclear communication – or, in the worst case, no communication at all. This lack of communication creates a communication crisis that threatens brand and reputation and is entirely avoidable with strategic communication planning.

To be continued…

Postcard from space

Crowdfunding Crises Offer Communication Case Studies

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Earlier this fall I read a news story about a Scotsman who raised money on a crowdfunding platform for a project that would purportedly send the world’s first postcards from space.

The project was in the news, not because the venture promised to strap a couple cameras to a weather balloon and take photos from twenty miles into the earth’s atmosphere, but because it failed to deliver on its basic promise. Angry customers formed an online revolt that led a newspaper reporter to take notice.

I don’t know if this SpaceCard was simply part of a clever self-funded publicity ploy to get the postcard app ByPost into the news, but the online reaction does offer another intriguing case study for my grad school terminal project.

Anatomy of a Typical Crisis.
My terminal project will explore crisis communication responses to crowdfunding crises. My interest was initially piqued last year after a company contacted AM:PM PR for crisis communication messaging help. They had created a great product funded through Kickstarter but were over a year behind schedule delivering the product. Additionally, the company was struggling to communicate its challenges to its backers and needed to open new sales channels to fund operations while navigating manufacturing conundrums. The appearance of the product for sale online before most backers received theirs threatened to create a firestorm of angry comments on review sites, which could have ballooned into news stories and increased undesirable attention. The situation was blunted with our help, and by honest and clear communication. No media picked up the story, and as of last check, the company is still quietly working away to get its product to its initial backers while concurrently offering its product for sale through a variety of channels.

Apology Videos.
The following apology video is for a project from Canada called the “Peachy Printer.” It raised $50,000+ on IndieGogo and another $650,000 on Kickstarter. Backers were supposed to get their printers in 2014, this apology video is from Oct. 2, 2014.

On October 23, 2016 the project creator posted updates at IndieGogo and Kickstarter to share news of police investigations after an investor was accused of using funds to build a house.

Since we helped that unnamed organization stave off a consumer revolt last December, I have been collecting stories like the “Peachy Printer” – and about other companies facing similar challenges. There are tons – from Seattle to Portland to San Francisco to Scotland and beyond. The challenges faced by these crowdsourced campaigns are similar to those faced by many entrepreneurial endeavors, and I intend to contribute to a growing body of research with my project.

Scholarly Research.
I’ve already done a fair amount of due diligence exploring existing scholarly research that may apply and form a foundation for my efforts. There are entire fields of study that may be relevant including crisis communication, issues management and operations management-related studies. One researcher whose work I’ve enjoyed is Timothy Coombs. His research offers insights that may be applicable to crowdfunded campaigns, including the Situational Crisis Communication Theory. Part of the theory suggests that companies that are new or without a track record will receive more flexibility in the court of public opinion for their fledgling efforts to meet customer demand and expectations. The key component is clear communication, yet most crowdfunded campaigns (and startups) I’ve observed are run by passionate and proud individuals that aren’t quick to admit when they’ve made a mistake.

Case Studies.
The Coolest Cooler is another interesting case study. The company created a cooler that includes a blender, Bluetooth stereo, USB charger and corkscrew in addition to other amenities. The company ran into trouble when it experienced manufacturing delays and then had to start selling its product through online retailers before all backers received their cooler. This led to negative commentary on review sites that de-evolved further into a crisis of communication when media began running with the story. My research will help to come up with guidance other businesses may follow to avoid experiencing the same painful dilemma.

Other similar crowd-funded products facing similar crises include a talking robot called Jibo that’s two-years behind its delivery schedule. The Glowforge printer, which broke customer’s hearts again this past week when the company admitted it wouldn’t get product out for the holidays, is now on track to deliver two years behind schedule.

Opportunities.
These crowd-funded projects are fascinating to study because they provide an opportunity to observe consumer reaction to business decisions in real time. You can see what the company did (or didn’t do) to communicate clearly, and review and gauge consumer reaction. The information will help to inform future best practices for crowdfunded projects, entrepreneurs and traditional startups.