Using Indiegogo, the LEGO Group is testing the viability of the new product line LEGO FORMA. Instead of release the product in the traditional way, the company is asking fans to kick start the funding of the product line. It is a controversial move, as the LEGO Group clearly has plenty of resources to fund products, so seemingly wants to avoid following legislation that prevent vendors from taking money for products prior to them shipping.
It is not just the LEGO Group using this method though, as AdAge reports that other large corporations are also using the crowdfunding method, including Coc-Cola and Tyson. “But before even doing a global launch, we wanted to pilot it to see if there was an appetite,” said Senior Marketing Manager Kari Vinther Nielsen.
According to the feature, fickle consumers mean that companies are not always sure how well new ideas will resonate. Although Indiegogo was originally designed for entrepreneurs and creatives, the web platform has been intentionally seeking out large clients after a successful collaboration with General Electric. Now, big names like the LEGO Group are common on the website.
Big companies “just started putting products that they had in their pipeline on Indiegogo so they could gauge the product fit early on in the life cycle,” sais David Mandelbrot, chief executive of Indiegogo. “There’s a country mile between somebody saying they will buy it, and actually pulling out their wallet and making a purchase.”
This quote illustrates the controversy – although words like “crowdfunding” and “kickstarter” are used, there is a strong suspicion that these products are already full funded and will be ready to sell regardless, but this avenue is used to avoid consumers pre-ordering the product and then cancelling the order before it ships.
While the company gets data from the process, Indiegogo gets fees for facilitating it. 5% of the total funds raised go to the company with an additional fee for card processing, with additional service fees for managing the campaign.
“These departments—R&D and marketing—are usually cost centres within those enterprises, so they are actually generating revenue through projects on Indiegogo in addition to getting the insights,” Mandelbrot adds. Mandelbrot says Indiegogo is launching around three to five new corporate campaigns every quarter.
“We’re getting a lot of feedback, which is what we wanted to do,” Vinther Nielsen told AdAge. “We reached our funding goal, which is a nice number. But what’s important to us is having this open dialog with the community.”
While the practice will continue to prove controversial, the success of this campaign will be likely to dictate whether the LEGO Group runs similar schemes in the future.