Crowdfunding and Public Relations Strategy

This assignment delves into the crucial role of public relations in successful crowdfunding campaigns. It examines various aspects like signaling effects, social capital formation, and the influence of mindset and learning mechanisms. The analysis draws from academic sources, highlighting the importance of PR activities in standing out within a crowded fundraising landscape.

Relationship Between
Crowdfunding and PR

Table of Contents
INTRODUCTION...........................................................................................................................1
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Crowdfunding and Public Relations (PR) are closely related to each other. PR has great
influence on the crowdfunding activities and campaigns. Crowdfunding is a new method of
raising finance from a large number of people and it helps in funding the projects and ventures.
Public relations is attempt to include the public with the company and maintain good
relationships with them (Ahlers and et.al., 2015). PR is done in order to inform the public about
their potential customers, employees, investors, partners, stakeholders and product or political
decision that the company is going to take. PR plays an important role in crowd funding
campaigns as it build connections and relations with the public. It builds the reputation of the
company and improves the customer loyalty towards the brand (Pais and Castrataro, 2014).
Crowdfunding becomes more effective with the help of good PR relations as it makes the brand
look more trustworthy and valuable. It has been seen that those companies which has better PR
strategies are more successful in raising funds from crowdfunding. They have better crowd who
are interested in the company and are ready to support the company financially as well. Good
public relations allow the company to take advantage of their image and get the much needed
help from the public and other stakeholders.
According to Hemer, 2011, "PR is a tool to build connections with the local people "
(Hemer, 2011). Earlier PR was only limited to media and press. But the emergence of social
media and the internet has made it very important for all the business. It has taken the brands and
their products to anew level. It not only builds good relations with the public but also helps in
building good image and helps in handling crisis management. Similarly, Lehner, 2014, quoted
that PR is all about "Value, reputation and building relations" (Lehner, 2014). There are experts
in the organisation which have responsibilities like writing contents, news, designing
communication activities, working with press, interviews,writing content on social media and all
other activities to understand the interest of the public at large. On the contrary, Galuszka and
Brzozowska, 2015, believes that "PR is also a marketing, advertising and communication
strategy that helps an organisation to deliver its message to the public " (Galuszka and
Brzozowska, 2015). The public includes customers, suppliers, employees, media, social media
networks, government and the community. PR has always been an important element in
marketing and communication activities of an organisation. It keep the company engaged with
the public which builds its corporate image in the society. It also helps in crisis management but
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the management has to ensure that the company is getting benefits from PR activities (Boschert
and et.al., 2013). They have to adopt new techniques and methods to engage people with the
company and its decisions.
Crowdfunding is a new way to borrow or gather funds from large number of people
especially through a website. These funds are used to develop new ideas and projects of the
company. As per Murray, Kotha and Fisher, 2015, "Crowdfunding involves inputs from the
public which begins with the crowdfunding process and help in the outcome of the entire process
and project " (Murray, Kotha and Fisher, 2015). These markets have emerged as the new source
of finance to assist innovations, ideas and new ventures. It has lot of benefits to the organisation
as it not only provides finance but also helps in marketing, public engagement, profiling,
boosting reputation and gaining essential feedbacks from the customers. Arvidsson, 2015,
believes that "PR acts as a financial backup and helps companies to succeed" (Arvidsson, 2015).
This source of finance costs very low and provides essential feedback before launching any
product in the market. On the other hand, Summers, Chidambaram and Young, 2016, finds
"crowdfunding a huge risk and a barrier for the organisation" (Summers, Chidambaram and
Young, 2016). The risk level is high as failure to achieve the objective can affect the reputation
and value of the company. The products and ideas have to be released to the public at its initial
level. There is always a risk of threat and actions from the competitors. But it has been used by
many companies and they have been successful in meeting the expectations of the public.
Crowdfunding is different from the mainstream approach to business finance. For
example, if a company wants to raise the capital to start a business or launching of new product
into the market, it is needed to develop a business plan, market research and develop a prototype
and sell it out into the decided segment. For this, the funding can be take either from bank,
investors or from venture capital. But, the finance can be made from developing the personal
contacts, family, friends, potential visitors etc. With the help of the following crowdfunding, it
can be easy to gain the attention of most of the investors and grow the capital for the business.
PR and crowdfunding are interdependent on each other and the company with the better
PR has more opportunities to invite crowdfunding (PR and Crowdfunding, 2015). PR involves
communication, interaction and engaging public. While crowdfunding involves selling an idea to
the public and encouraging them to fund it. Crowdfunding is an attempt to influence public with
the help of their PR to fund the new idea or innovation (Mendes-Da-Silvaand et.al., 2015). PR
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helps in gaining the attention of the public towards the crowdfunding campaigns and that is all
what it requires. More attention would facilitate the company in getting more funds. Public
relations build reputation and the company seems to be trustworthy. The local public would
support all those companies which are doing good and has strong relationship in the market.
Once a company builds strong relations and reputation in the market, it begins to look as a
credible and viable investment. Public will invest in the trustworthy business for a longer time.
According to Curtin, Gaither and Ciszek, 2015, "PR strategies helps in attracting people during
crowdfunding campaigns and it builds trust and loyalty towards the brand" (Curtin, Gaither and
Ciszek, 2015). It facilitates in spreading the offer and pitching the business ideas to the public.
PR allows gives the opportunity to people to give their opinions and feedbacks to the company.
It is an effective way to spread the message and information. The interested public also helps as
they communicate the ideas to their peers. This gives the opportunity to the public to put forth
their ideas and grabbing the target audience's attention. As per Liao, Zhu and Liao, 2015, "PR
and crowdfunding are interrelated to each other. They require professional who can perform this
task effectively" (Liao, Zhu and Liao, 2015). PR also enables the crowdfunding company to
attract those people who have never been contacted. These people can not only become potential
customers for the future but also add value to the company. The PR professionals have expertise
in mass media and networking as well. These areas give excellent opportunity and exposure for
carrying out crowdfunding campaigns. These sources build PR relations and increase the
bandwagon. It is essential for the companies to explain the reason of crowdfunding to the public
and various media can be useful in doing that. PR cannot be overlooked during the crowdfunding
campaigns. It plays an important role for its success and has to be considered while formulating
strategies. Lehner, 2014, believes that "PR is very important as it ensures transparency and
communication " (Lehner, 2014). The company has to be reliable otherwise no one would be
interested in investing in it. The company which has effective PR strategy has more chances to
gain followers for the crowdfunding because PR helps in raising the brand awareness. The PR
activities are not much costly as well. They help in developing social presence and the credibility
of the business is increased. Initially a company has to develop its PR strategies (Galuszka and
Brzozowska, 2015). It has to ensure that favourable content is released in the public. Though, it
is impossible for a company to control and change the contents of an intermediary like
newspapers, magazines, TV, radio and social networking sites. But they can act in such a manner
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which makes it more reliable and improves its goodwill in the market. This will take long time
but it will be favourable if the company is planning to raise funds from crowdfunding. The better
PR will give them better response from the public and they would even recommend their peers to
invest. This will give them more investors and better potential customers.
PR does not present the information directly to the public. It uses third party to do so and
people trust the information in newspaper, magazines and in social media (Murray, Kotha and
Fisher, 2015). PR strategies are more effective than promotions and it is for the same reason that
for crowdfunding as well it is used. According to Pais and Castrataro, 2014, "PR can give better
results than advertisement and make crowdfunding more successful " (Pais and Castrataro,
2014). Crowdfunding these days uses third party sites for starting up new project. All the details
regarding the project like contents of the project, target capital and the money needed for it.
Projects can be anything ranging from video games. magazines, arts, fashion and new
innovations. Developing public relations is a time consuming process and it takes efforts to build
a strong relation with the customers. But it can be very useful and cost effective when it comes
to crowdfunding (Ahlers and et.al., 2015). Unlike advertising, PR uses third party to to share the
information. It makes it unpredictable and a long process. There can be many intermediaries
which can be used like trend setters, employees, spokesperson, industry analysts, print and social
media. It is difficult to control and influence these intermediaries. As such crowdfunding
becomes very tough to accomplish. It takes effective planning and building relationships to
achieve it. Unlike advertisement, many people have to be convinced to build the image of the
company in the corporate world (Liao, Zhu and Liao, 2015). They have to be persuaded that the
services and products are worthy for the market. PR can been seen as an essential part of
crowdfunding campaigns. Many companies have realised the benefits of this and they have
began to improve their public relations. It not only about informing people, spreading the
message, grabbing the attention and creating buzz in the market (Why public relation is
important, 2011). The companies have to look trustworthy and reliable in the eyes of public.
Companies have to build golden relationship in the market if they are planning for overcrowding
campaigns in the future.
There are lot of regulations on crowdfunding as many of the fraud companies use it to
take advantage of the people. UK government has set up financial and legal consequences for
not following the rules. The growth of this type of source has been beneficial for small
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businesses (Arvidsson, 2015). It has given new opportunities to them and they have been
considering the benefits of PR in their business as well. By maintaining a good relationship with
the public they can take financial help from them easily. Small business and new start ups are
using it for their advantage. But it is important for them to ensure that good PR strategies have to
be in place otherwise their funding campaigns will not work (Murray, Kotha and Fisher, 2015).
Many of the companies have not been able to meet the expectations of the public. This has been
detrimental for the image of the company. All the rules and regulations have to be followed and
transparency has to be maintained with the public. This will ensure that the community as well as
the government of the country is satisfied with the crowdfunding campaigns and activites.
CONCLUSION
It can be concluded that crowdfunding cannot be successful unless a company has good
public relations. The relationship and connections have to be build with the customers. PR is
time costing and lengthy process. It may take years for a company to build its reputation which is
hampered by one wrong event. Crowdfunding should be considered only when the company is
sure that they would be able to meet the expectations of the customers. Crowdfunding is highly
dependent on PR and its growth. A company with better relations and connections would
succeed in this and others will not. Public will only support a trustworthy and reliable company
which is safe to invest. So it is essential for all the companies to develop and implement their PR
strategies and make it more effective. A powerful PR would ultimately help the company to
make its crowdfunding more successful. The funds acquired from it are of low cost and indicated
good reputation of the company.
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REFERENCES
Books and journals
Ahlers, G.K and et.al., 2015. Signaling in equity crowdfunding. Entrepreneurship Theory and
Practice. 39(4). pp.955-980.
Arvidsson, S., 2015. To Stand Out in the Crowd. How public relation activities effect a
crowdfunding campaign for a tech-startup.
Boschert, L. and et.al., 2013. Crowdfunding. AKU Society.
Curtin, P.A., Gaither, T.K. and Ciszek, E., 2015. Articulating public relations practice and
critical/cultural theory through a cultural-economic lens. The Routledge.
Galuszka, P. and Brzozowska, B., 2015. Crowdfunding: Towards a redefinition of the artist’s
role–the case of MegaTotal. International Journal of Cultural Studies.
Hemer, J., 2011. A snapshot on crowdfunding (No. R2/2011). Working papers firms and region.
Lehner, O.M., 2014. The formation and interplay of social capital in crowdfunded social
ventures. Entrepreneurship & Regional Development. 26(5-6). pp.478-499.
Liao, C., Zhu, Y. and Liao, X., 2015. The Role of Internal and External Social Capital in
Crowdfunding: Evidence from China. Revista de cercetare [i interven] ie social, 49.
pp.187-204.
Mendes-Da-Silva, W. and et.al., 2015. The impacts of fundraising periods and geographic
distance on financing music production via crowdfunding in Brazil. Journal of Cultural
Economics. pp.1-25.
Murray, A., Kotha, S. and Fisher, G., 2015. Persuading Crowds: Mindset, Learning and
Influence Mechanisms in Crowdfunding Campaigns. Learning and Influence Mechanisms
in Crowdfunding Campaigns.
Pais, I. and Castrataro, D., 2014. Crowdfunding and free labor: gift, exploitation or investment?.
Sociologia del lavoro.
Summers, J.D., Chidambaram, L. and Young, A.G., 2016, Venture Signals and Social Media
Buzz in Crowdfunding: Are" Buzzworthy" Projects Worth the Hype?. IEEE.
Online
PR and Crowdfunding. 2015. [Online] Available through:
<https://www.squareknot.co.uk/blog/pr-and-crowdfunding--it-s-time-you-met/103>.
[Accessed on 19 April 2016].
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Why public relation is important. 2011. [Online] Available through:
<http://www.inc.com/murray-newlands/why-public-relations-is-important-for-your-
business.html>. [Accessed on 19 April 2016].
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