KS Experiment #2: The Higher the Funding Level, the Lower the Price for All Backers

27 July 2014 | 51 Comments

The KS Experiment series is a new type of blog entry where we feature a different, new, or innovative method for Kickstarter projects to be more attractive to backers and creators. We’re not advocating these ideas–we’re just putting them out there to get feedback in the polls and comments.

The other day I was talking to local designer and publisher Aaron Belmer, and he brought up an idea that I had once considered and dismissed. But Aaron offered a new perspective that made me see the idea in a new light, so I wanted to share it with you to get your thoughts.

The Idea

When a project reaches a certain overfunding level, instead of adding more stretch goals, start decreasing the price of the product for all backers based on economies of scale.

The Problem

One of the tricky things about a Kickstarter campaign is how to plan for success. First you just hope to fund the project, and of course you plan for that. But how much money will you actually raise, and from how many backers? You have no idea.

This makes creating stretch goals pretty difficult. Many creators loosely structure stretch goals based on economies of scale–the more units of a product you make, the lower the manufacturing cost per unit, so you can enhance each product without much of an additional expense.

So let’s say you plan a series of stretch goals every $5-$10k. At a certain point, economies of scale has a diminishing impact on these additions, and you might simply run out of stuff to add. Or maybe you started out on day 1 with a really robust product (you didn’t withhold any cards or additions that aren’t costing you extra to make). What do you do?

The Full Concept

Imagine a stretch goal chart like this. The core product is priced at $45 at the beginning of the project.

  • $25,000 – Funding Goal
  • $30,000 – small stretch goal
  • $35,000 – small stretch goal
  • $40,000 – small stretch goal
  • $45,000 – small stretch goal
  • $50,000 – big stretch goal
  • $75,000 – price for all backers decreases to $43
  • $100,000 – price for all backers decreases to $41
  • $150,000 – price for all backers decreases to $39

When that $75,000 goal is met, you would close the $45 reward level, open a new $43 reward level, and notify backers to reduce their pledge.

Important: If the project ends with a any backers who haven’t decreased their pledge, you can send them a mass payment via PayPal or a voucher (you can do this on ShopLocket) for a future purchase made through your website.

Update: After reviewing Kickstarter’s guidelines, offering a voucher or money back to backers is probably not allowed: “Offering a reward at a lower price than what it may cost post Kickstarter is fine, but a future discount or coupon as reward is prohibited. Additionally, vouchers in exchange for a particular item (a meal, a book, etc.) are fine, but monetary gift certificates are prohibited.”

The stretch goals could also be based on number of backers, but I think funding total might work better here.

Why It Might Work

Two of the major reasons why stretch goals work is that they compel backers to share the project with others and increase their own pledges, and they help to convince backers on the fence to join in the project. Ideally, this type of stretch goal would encourage people to pledge to the project early so they could cause the price to drop–they get to be a part of making the project better for everyone, including themselves.

In a way, it’s the opposite of an early bird reward, but everyone wins. Instead of rewarding those who snag the precious few early-bird levels and punishing those who find out about the project too late, this system would make everyone feel rewarded no matter when they discover the project.

Also, as a nice side effect, you get more backers to pay attention to the project as it progresses so they won’t miss the chance to decrease their pledge (but again, if they do forget to do so, you can easily refund them via PayPal or ShopLocket after the project).

While everyone likes to pay less for something, this is more than about saving a few dollars–this is about the swell of excitement when people come together to make something better. The power is in the hands of the crowd for this method.

Why It Might Not Work

One of my concerns is that it might have the opposite effect. The system might encourage backers to stay on the fence, waiting for others to trigger the price decrease. Perhaps they’ll feel like they’re “losing” if the price doesn’t go as low as it potentially could. One way to address this would be to include one price-drop stretch goal ($75,000 in this example), but not reveal others until you reach that goal.

My second concern is the overall perception of the project on the days that those price-drops trigger. If you have 1000 backers when you reach $75,000 and they all decrease their pledge by $2, the overall funding will drop to $73,000 (you’d have to lock in the stretch goal the first time you reach $75,000. Or base it on total backers, not total funding).

Another concern is that it will clutter the reward sidebar. The good thing is that lower-priced reward levels are listed on the top of the sidebar, not the bottom, so despite the clutter, backers would continue to see the core reward first.

My last concern (I’m sure others will arise in the comments) is that it actually makes the premium reward less appealing than more appealing because the core price would go down while the premium price stayed the same. You could have the premium price on a similar scale, but that would clutter the sidebar even more.

Your Thoughts

I’d love to hear what you think in the poll and the comments, especially if you don’t like it (as a backer). Thanks!

51 Comments on “KS Experiment #2: The Higher the Funding Level, the Lower the Price for All Backers

  1. When you posted about the first fresh experimental idea, this was what I was thinking through, but I had some of the same doubts you did and couldn’t find a way to make it work. Also, you don’t want people to help reduce the price, then drop out altogether leaving you with lower funding and no economy of scale to deliver on…

    I’ll keep thinking about this one, because I find it the most interesting idea so far.

    1. I think you’d basically calculate the economies of scale based on the resulting difference between the stretch goal funding total and the number of backers at the time. So if you need $80,000 to make the economies of scale work, the stretch goal would trigger around $85,000, for example (knowing that you’ll lose around $5,000 when people decrease their pledge).

  2. hey jamey, i’m devouring everything you’ve created and shared re: kickstarter success (and failure) and i thank you because i will be so much better because of you – if there’s ever anything i can ever do for you let me know

  3. My concern is, as a backer, now I’m committed to following the project so I don’t get shafted if the price change kicks in. What if the price decrease doesn’t kick in until the last 10 minutes of the campaign and the project end time is inconvenient for me to watch/wait to swap my pledge? If I happen to forget to check the project, after the campaign, I get charged $6 more than everyone else if the top goal is reached.

    Following a project closely isn’t how I back projects, primarily because I back so many. Unless I’m really really interested in the campaign, I’m the type to just drop my money on the pledge level I want and never think about it until I get the address request or it shows up in my mailbox.

    I probably wouldn’t complain (as really it’s my own fault) but I wouldn’t be happy, or like you suggested, I’d just wait until the end so I know I’m getting the lowest price. Granted, it’s only $6, but you’re just asking for trouble because you’re going to have people who will absolutely complain and you’ll be dealing with $6 refunds. Or, if you’re using a post-campaign tool, you may be able to mitigate this with folks adding extra goodies anyway by forcing them all to the lower level when you import them so they’ll have a $6 credit in the tool to buy extra goodies. It could be a way to encourage folks to buy extra stuff.

    1. @Kicktraq: It’s easy to send money to people en masse via PayPal’s “mass payments” function–with that in mind, the $6 upcharge would only be temporary. Hopefully that wouldn’t break anyone’s bank account for a week or so while I waited for the pledges to come in.

    1. Brent: Is that from a creator’s perspective? It’s easy to create a new reward level during the project, and it’s easy to send out a mass payment via PayPal after the project.

  4. If you are using a pledge manager, you can use what CMON does now (collect shipping in the pledge manager) and you can reduce the shipping for everyone by the stretch goal amount. Since CMON now collects shipping in the pledge manager even from US (at least I think they do), it would work. This also prevents shipping from inflating the KS amount (and a sudden drop from everyone reducing their pledge).

    Of course, it does require a pledge manager and some people might not trust you and it requires a pledge manager, but it might be a whole lot less fiddly than trying to do it on KS.

  5. I don’t like the idea. I don’t think backers actually really want to save money–part of why they make pledges is to offer support to a project. Usually a backer will pledge as much as he or she is able to. For some that might be a dollar, for others it might be a thousand dollars. It goes back to the psychology of crowd funding. If they just wanted to buy a product they could do that elsewhere. What they really want to help a project get off the ground. They want to be involved and help out as much as they can.

    If you give them a discount as a certain level I don’t really think many will care all that much. I think a better strategy would be to give backers extra rewards if the project reaches certain funding goals. So, for example, if you reach 150% funding then everyone whose getting a physical reward will also have some extra goody added to their shipment.

    1. Soupmaster: Thanks for your comment. Sure, what you’ve described here is standard practice for stretch goals. However, I think one of the biggest reasons backers support a project is because they want the end product–I think that’s probably the biggest reason for the vast majority of backers and projects. Their desire to be involved in the creation of that project varies from person to person.

  6. Kicktraq brings up an interesting point about the credit. It reminds me of a game store I heard about that requires players to pay a $5 “door fee” then gives them a $5 coupon for the store. The money isn’t the point – where that money is going is the point.
    I the same way a project which offers add-ons could simply force bakers all to the lowest price-point, like already mentioned, and then offer the remaining balance as a discount for add-ons in thepledge manager.
    It would email a little extra leg work, but could convey an extra sense of value to the backers since they didn’t do anything extra to earn the voucher.

  7. I kinda have mixed feelings. I understand it is a better to sell a game for 40$ rather than sell it for 45$ and add some untested stretch goal, but somehow I would rather have the second than the first. People nowadays take stretch goals for granted…but remember that the original goal of the backer should be to help someone with their project.

    1. MK: I think part of the reason this idea came to mind is the constant stream of requests creators get about stretch goal. A lot of backers submit ideas or requests for us to change the stretch goal amounts, or sometimes even threats to withdraw pledges if the 20th stretch goal isn’t reached. As important as stretch goals are, they seem to bring out something unhealthy in some people.

      Also, for me, I want to cram as much awesomeness into the core game that I present on day 1. I don’t want to withhold cards or custom components. I have the luxury of doing that because I’m confident we’ll fund the project, but at the same time, part of the reason we fund projects is because we don’t withhold that stuff. So I’m trying to think of some creative new ways to look at stretch goals, as seen by both of these KS experiment posts so far.

  8. Maybe another way to do it is to make a stretch goal that gives people credit on stonemaier.com. That way you don’t have to create any new pledge levels and it also drives more people to your website to create a greater connection.

    1. @Garrett: I’m glad you brought up that point. Kickstarter doesn’t allow future coupons/discounts as rewards, so I’m guessing that extends to stretch goals too. So I wonder if they wouldn’t even allow for this system at all (the one I described), given that it leaves the potential for a number of backers to get a voucher post-Kickstarter.

      1. Doesn’t necessarily mean it’s allowed, maybe they just ‘got away with it’ but the Twilight Struggle digital Kickstarter had a GMT store voucher as a stretch reward.

  9. I do not like the idea for it looks messy. It could only work if you, as the project creator, can reduce the pledge for all the backers rather than having them do it, though I understood it is not possible.

    On the other way this is a very good concept though in part it is already done by stretch goals and you adding new components which increase your costs which is compensated by the mass scale reduction. Also I think that to convey better that the offered price drop is related to mass production it would be best to have a stretch goal parallel to all other goals which is purely dependent on the number of backers, to be precise those backing at least the base version. What do you think about that option instead?
    This idea of parallel goals is related to what I already mentioned on other occasion about lowering the stretch goals in return for sharing the project on social media.
    Privateer is the project where I came across it first: https://www.kickstarter.com/projects/971032770/privateer-0

    Ultimately, like other guys have already said, to name a few Kicktraq, Derik & Garrett, it sounds great to offer some credit for the backers thus directing traffic to your site and in return increasing the sales.

    PS: Thanks for this post I am looking forward to see more in this series.

    All the Best to you all guys for a very nice discussion.

    1. Konrad: Thanks for your thoughts. I think there’s a lot to be said about Privateer’s method. Mostly I really like it, but in general I prefer Likes to be made out of a genuine affection for a company or project, not a one time discount. But it’s something I might explore on a future KS experiment–thanks for bringing it up!

      As for the credit, I’ll have to check with Kickstarter to see if it’s okay. I know it’s not allowed for individual rewards, but it might be fine if it’s offered to all backers. I have my doubts, though, now that I’ve re-read the official guideline:

      “Discounts, coupons and gift certificates – Offering a reward at a lower price than what it may cost post Kickstarter is fine, but a future discount or coupon as reward is prohibited. Additionally, vouchers in exchange for a particular item (a meal, a book, etc.) are fine, but monetary gift certificates are prohibited.”

  10. Great idea in theory, but I’m not entirely sure Kickstarter is the ideal platform to host this oddball modification of the Dutch Auction.

    1. Klaus: Sure, let’s use an example to see how minimal this amount is. Say a pledge starts at $50, and by the end of the project, the pledge cost has dropped to $44, but the backer hasn’t manually decreased their pledge. Thus there is about a 10% fee (KS + Amazon) that is unrecoverable unless you refund the backer through Amazon within 60 days of the project ending. Let’s say you don’t, because it would take forever. So that’s a $0.60 loss.

      Then you have to send the $6 through PayPal’s mass payment system, which actually is free. For some people there will be a 3% standard PayPal fee…I don’t know exactly how many people, but let’s say for the sake of argument that it’s everyone. 3% of $6 is a $0.18.

      So in total, you’re paying an additional $0.78 per backer that doesn’t decrease their pledge during the campaign. Sure, those dollars add up, but…do you really think $0.78 is a major factor in determining whether or not this proposal is a good idea? I think there are much bigger factors in play.

  11. This is a very interesting read – a lot of insightful comments here. Personally, I disagree with this approach 100%. Why? You are giving people a reason to revisit the Kickstarter and reduce their commitment to you. This is the absolute last thing you want to do. Up until this point in the campaign momentum will be in the company’s favor (especially since this is in the stretch goals). But now you say, “hey everyone – go reduce your pledge!” I imagine that this might be the opportunity for some people who are still sitting on the fence to back out all together. (Yes – the game is now cheaper, but they may be struggling with the overall cost to begin with – this opportunity might make up their mind for them).

    A stretch goal like this would not motivate me to join a KS at any stage. If I joined early this would be too far away to bank on. If later (and the stretch goal is all but gauranteed) it is not enough of a discount for me to overlook the basics (i.e. what kind of game is it? will I like it? What will the quality be? etc) – because no matter what way you spin it, I cannot save $6 by spending $40!

    Cheers,
    David

  12. I’d rather that dollar or two extra go to the creator – I’ve already decided that the amount I’ve pledged is acceptable to me, so why not leave it at that? Changing amounts just feels really fiddly for what amounts to a very small amount compared to the overall cost. I’d much rather you either keep the money so you can keep doing what you’re doing, or else use it to improve the product quality for everyone.

    The Province kickstarter ( https://www.kickstarter.com/projects/laboratory/province-a-competitive-building-microgame-for-2-pl/ ) did this – rather than adding more stuff (the goal was to be a tiny game able to be sent in a standard envelope), they improved the quality of what was sent, so there was slightly thicker cardstock, and more time spent on the art, as well as a couple of stickers. So nothing huge (but it was also only a $5 price point), but made the final product better.

    I’d rather you did this sort of thing with your games too, if it means you can commission a few more pieces of artwork (several slight variations on a card frame, or different artwork for each player mat for instance), then that’s something that benefits everyone, and is far less work than organising refunds, or getting pledges changed.

    1. RodeoClown: Thanks for your comment! I appreciate your generosity as a backer in being okay with a creator keeping those extra dollars.

      I can see how those improved components work for a smaller game like that, and I think component upgrades are good for new creators starting out. As a repeat creator, there are certain components I just couldn’t see myself putting in the retail version of the game–I want to start out with the good stuff.

      But I do see your overall point about improving the product instead of decreasing the price. That’s what we currently do–I just wanted to see if this model was interesting to people. :)

  13. Seems like a lot of hassle, but in theory it seems like it would work well. I would jump on it if you could decrease costs on tiers. I understand not allowing project leaders the ability to raise it. But lowering it would seem to be a good idea.

  14. RodeoClown makes a good point from a backer’s perspective that I tend to forget about: if I pledged to your project, then I already am trusting you with my money. Personally, I don’t care what percentage of my money goes to printing my copy, how much goes toward extra copies for your retail sales, or how much you pocket. Like Rodeo said, I’ve already decided to give you $X. Trying to work out a way of “giving back the extra money” is likely a completely unnecessary complication.

  15. From a consumer point of view, I don’t like it. I’ve already made the decision to back at price X. Making everyone change pledge level could be quite a hassle and put people off.

    From a creator point of view. There’s also the potential chance that backers see that it may be discounted later and decide to wait, and it never hitting that goal.

    I’d rather the additional revenue being used for either a larger print run for post-kickstarter sales, copies donated to gaming events, for how to play videos/reviews or helping the creator create their next project.

    1. Jen and Derik: Yeah, that seems to be the trending thought here, that if you were happy to pledge to the project at $X, a new price of $X-Y isn’t making you any happier as a backer. Thanks for your input!

  16. While this idea seems fun, it may end up being more trouble on both the creator and backer side of things. In one of your earlier blogs you mention finding the right price point for a game and this seems to cloud what that right cost is. In the example above the game started at $45 and at $150K got dropped to the $39 price. I think starting at the lower price you are more likely able to achieve the $150K. Then you would space out the existing stretch goals to get there. Alternating small and large stretch goals to match not only the cost associated to create the content but the pace of the campaign seem a better way to drive interest.

    1. Matt: I see what you’re saying. In fact, this idea could lead to the negative side effect of creators overinflating the starting price, which isn’t my intention. In terms of production, it makes sense that the price could fluctuate based on the number of copies being made, but it sounds like backers don’t really care about that–it’s simply the creator’s responsibility to find the most appealing, fair price and stick with it.

  17. Hey Jamey – Interesting idea. I think I like the idea of a reduced pre-order price based on volume, but I suspect it will make the project page pretty messy. It will be hard to know what the current price is, and as you mentioned, the sidebar gets very cluttered as you add more tiers. One of my pet peeves is when a project page doesn’t clearly define the pledge levels and contents. If pledge levels are confusing, my confidence in the ability of the creator to deliver the correct rewards is reduced. More often than not, I pass on projects that confuse me. Unfortunately, Kickstarter feels like the wrong place for an approach like this.

    To me, this feels like a great approach for a non-kickstarter pre-order system. If you’re doing pre-orders through the SM games website, you can have a running counter that tracks the current price. Maybe you calculate the price as $45, and each pre-order reduces the price by half a penny. People can pre-order on the website, authorizing a maximum of $45, but then you only charge them the final price at the end of the pre-order period. It’s fun for a person to place their pre-order because they can see the price drop immediately once they place their order.

    I think it was mentioned above by Vinson, but I think this approach could work on KS if you separate shipping from the pledge. So the price of the game remains the same, but you reduce the shipping charge with the stretch goals. (This also makes international pledges simpler as well) You keep the pledges constant this way, but still offer essentially the same discount, just in a different way.

    1. aegisys: That’s a good point that this method may be better suited for pre-order system for a game through a website. I’m not aware of a program that currently does it this way, though. ShopLocket is close–you have the option on the ShopLocket widget to take credit cards (you don’t see the credit card numbers) but not charge them until the product ships, but I don’t think you can change the price after the initial transaction, even if you’re trying to lower it. But that capability would be pretty cool.

  18. In theory it could probably work well with a more robust system, but the Kickstarter platform is a long way off, and the workarounds are messy. On my first project, I am positive that I lost a lot of backers because my rewards were messy and confusing. They were messy and confusing because I changed international shipping rates midway through the campaign, after finding a cheaper solution than USPS. The result was a lot of duplicate rewards with different shipping rates tied to them (e.g. $27 + $18 international shipping, $27 + $9). It was a tough call – lowering international shipping to get more international backers, at the risk of losing backers overall due to confusion. At the end I decided that it was better for the backers to lower the shipping rate, even if it meant funding lower because people were confused. In retrospect it was the right decision. Still, it was a logistical nightmare trying to contact all of those backers to switch reward levels so that I could close them out. It didn’t work – there was always a straggler or two. Then I became inundated with questions like, “what’s the difference between the $27+18 & $27+9 pledge levels?” I would then have to explain that they were the same, and that they should opt for the cheaper version. Very confusing. In addition it gives people another opportunity to cancel. As with stretch goals, if you don’t hit your number then it will look silly if you never get that price decrease. Most games don’t fund in the range where they can leverage that much buying power for discounts with manufacturers. Still, I’d be curious how an experiment like this might turn out. On the plus side, outside of all of the messy logistics, it would make for an interesting story idea and would probably get a bit of press.

    1. Dennis: Thanks for your comment. I can see how having those outdated reward levels that you’re stuck with could be confusing for backers (and frustrating for you).

      I think maybe it would work, as aegisys pointed out, if it was a pre-order system hosted on your own website, but that’s a whole different animal than Kickstarter. Heck, maybe there’s already a Kickstarter clone out there that does this! :)

  19. This is totally viable in a charity context, like the more you “buy” the greater the amount of money i’ll give to X for charity for each purchased item, I KS it’s not viable i guess, for many reasons stated by others.

  20. Likely nobody said anything. KS rarely reviews a project once it goes live unless someone alerts them to an issue. If it was a stretch goal, likely it was added post campaign. I don’t know if that’s even an issue you’ll see more of as they aren’t reviewing ANY projects unless specifically asked to.

    1. Idonno why the comments are so wonky sometimes. I replied to a comment above, I’m not sure why it orphaned me separately.

  21. I didn’t vote in the poll above. I’m just not sure how well it would work. I guess I’m leaning towards no with a caveat. I have been on projects where they had a Early Bird price or a one day special later on in the project. I feel like you can accomplish what you are suggesting here through this method. I’m saying don’t make it a clear stretch goal.

    But you can announce though the updates that due to the success of the project you will be adding in a new funding level at a lower than expected price. Anyone who wishes to change may without fear of adversely affecting the project. This way if someone doesn’t get in on the deal they don’t feel robbed. They were clearly notified with plenty of time to go change their funding level. Do I wish I caught the one day special on the one project…Sure… But I don’t complain that I could have gotten my game at $3 cheaper. I actually like this more than early bird specials.

  22. Valuable commentary ! I learned a lot from the points ! Does someone know if I might be able to access a blank KS ST-28D version to fill out ?

  23. This is essentially Massdrop’s business model. It’s an interesting idea, but I think it would be more likely to take off if Kickstarter were to implement an embedded feature that allowed this.

  24. I think this idea seems a little complex for people to understand. I didn’t think PayPal was required to sign up to KS? Its been so long ago I don’t remember but if its not then what about refunding backers not on PayPal?

    Also, economy of scale is based on ordering another print run rather than a dollar amount isn’t it? You can estimate that but if 1000 people order with free shipping or 1000 people order with $20 shipping the difference is a huge dollar amount but the economy of scale would trigger identically wouldn’t it? So this would only really work if you charged shipping post Kickstarter, at which point you’d essentially be saying, “Hey your game is $2 cheaper. Now give me $12 for shipping.” Which would not make me feel better off as a backer.

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