FAQ: Are $1 reservation funnels effective?

We have a crowdfunding course called The Crowdfunding Essentials, and often get a bunch of really great questions from people who take the course and who want to know more. In these very short FAQs we'll answer some. Hopefully, these answers prove useful to you too. Check out the video below if you'd rather watch than read the answer to this question.

Read the previous question here.

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"What do you think of the idea of doing a $1 reservation funnel?"

The person who asked the question says: "I found many creators and agencies are doing this strategy. Do you think it's a good approach? If so, what can be expected with a VIP lead cost? And the conversion rate?"

So this is about collecting emails in the pre-launch phase of a crowdfunding project. What a lot of folks do, is they build what's called a reservation funnel, where (after people give their email) you also ask them to down pay $1. That $1 can, for example, ensure that a backer gets a VIP reward that might otherwise sell out quickly.

I think it's an excellent strategy and it's mainly important because this tests the intent level of the people behind the emails that you are collecting. If you're collecting hundreds of thousands emails, it might be from people who just sign up but are not really high intent. They might not convert.

So by letting them take an action, by letting them take out their credit cards, even if it's just for $1, that tells you that they have a really high intent on actually taking action. It's a great thing to do, if nothing else, to ensure the quality of the emails that you are collecting is actually of a high enough standard that you can expect backers to come from this.

You're not handing over your money to Facebook just to get bad leads. I think it's an important strategy to do.

Now, there are a lot of nuances here, so some people just do the $1. You could almost argue that the $1 is already somewhat of a low intent. We sometimes do $50 or a $100 if the product is slightly more expensive and it really works out great.

One of the things to realize in building a reservation funnel is there's a bit more setup involved. To be able to process those payments, you then need to figure out who made a payment to Kickstarter. Kickstarter doesn't have native integrations for that, so there's a lot of admin and things around it you need to consider before setting this up because it's not an easy implementation even though it's a really great system.

Now, in terms of part two of that question about the costs and the conversion rate? Hard to say, but I'll tell you some metrics from a previous project we did. We recently did a project that had this reservation funnel and we had about 35% conversion, I'd say from email sign-up to making a reservation.

And from the people who made a reservation, almost a 100% then converted into backers. The numbers can be really good. Now, obviously, your product has to be good, as well. If you have a terrible product or your Kickstarter campaign is really disappointing, or the pricing doesn't match people's expectations, then results may vary.

With a good campaign well-executed, these conversion numbers are usually pretty significant.