Agreement to Recoup Funds from Cooler Project Gets Icy Reception

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.

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…