In what’s likely to be our last Kickstarter themed blog for a while, we’re going to focus on Stretch Goals and Backer Levels.

From the creator’s pov, the goal of a stretch goal is obvious: to make more money, or to fund further projects. Of course, if you wanted to fund further projects, you could theoretically start a second kickstarter. (And, if money was all you really cared about, you’d likely skip all of this hobby stuff and go become a stock broker.)

WHY A STRETCH GOAL?

What is the point of a stretch goal? Here are some reasons:

• A stretch goal encourages backers of a lower level to reinvest at a higher level. This can be because of a new level is created (that wasn’t there before), or because a higher level has become increasingly valuable.
• A stretch goal encourages players to spread the word of the kickstarter to others, as having more investors join will increase the value of a level for all backers.
• After a project has been funded, the stopping point is more abstract. However, a stretch goal gives a psychological end point that a promoter can “push” people towards. Whenever a goal is met, it gives backers a feeling of accomplishment, much like leveling up a character in an RPG.
• As mentioned above, a stretch goal allows a creator to fund further projects. The advantage to tacking it onto an existing kickstarter is that you already have positive momentum, with a captive audience of people who have already given you some funds, and might be interested in similar products.

WHAT MAKES A GOOD STRETCH GOAL?

Of the panels and articles I’ve seen, the litmus test I’ve seen for a stretch goal is a two-part question:

• Does the add-on depend on the base project? (Rather than being a stand-alone product in its own right.)
• Is the add-on finished or near finished?

If the answer to both of the above is “no,” then it doesn’t sound like a good stretch goal item. For example, if you’re selling an RPG rulebook, going through the work of writing a novel for the setting is a poor idea, as it involves as much work as the rulebook. (Of course, if the novel’s already finished and edited, that’s just fine.)

HOW DO I OFFER THESE STRETCH GOALS ITEMS?

There are three ways to offer stretch products to members through Kickstarter:

1. Add-Ons – When a stretch goal is reached, you can give members the option of adding the item on as an add-on.

• Pros – The cost is easy to calculate; easier customization (i.e. mix & match items); anyone can do it!
• Cons – Because it’s not listed in the basic backer levels, backers are more likely to miss it; because anyone can add it on, it doesn’t encourage members to increase their level to a higher one.

2. Added to Old Level – The item is added onto to an existing back level.

• Pros- Pleases current backers; encourages those who haven’t backed to jump in; Good for small, no-cost items (ex. desktop art); increases backers at lower level to upgrade.
• Cons – Doesn’t encourage current backers to increase pledge (unless at lower level); increases cost without increasing revenue (more on this later.)

3. New Backer level – When a certain stretch goal is reached, the creator adds a new backer level, which merges an older level with the new product.

• Pros – Increases backers at lower level to upgrade; provides more revenue; easier to track cost of new item.
• Cons – If not promoted well, older backers might miss the new level; done too excess, can make you look greedy; less backer customization of products than “add-ons.”

PRICE BREAK-DOWN: BAD EXAMPLE

Imagine if you will a fictional Kickstarter creator named Steve. Steve has a really BAD kickstarter stretch goal set-up; we’re going to do everything wrong, just to prove how wrong it can be.

Kickstarter name – KittehPower! – Steve’s fake kickstarter is about releasing a photo book of kittens wearing superhero costume pieces. It has a modest goal of $100.00 (which includes KS’s cut & taxes) and only two backer levels:

• $5 – PDF – Backers get a digital copy of the KittehPower! Photo book.
• $20 – Paperback – Backers get a hard copy of the KittehPower! Photo book. (Cost: $10.00)

Very early into the campaign, the goal is met (Steve is happy). So, Steve adds a stretch goal. He really wants to raise $100.00 so he can buy a cheap photo editing software- with it, he hopes to more special effects to his Kittehs! He adds the following stretch goal:

• $200 – If we reach $200, we will add 20 new pages of kitteh pics in the book.

Flash forward, the $200 money gets raised! Steve is so pleased, he offers all of his cat-superhero-photographer friends (of which he has many) a chance to jump into the stretch goals- he wants to pay his friends $100.00 each to add their own photos to the book. He adds a series of stretch goals to the kickstarter for $100 each, all of them saying:

• $300 / $400 / $500 (etc)- For each $100 that is pledged, we’ll add another 20 pages of Kitteh photos to the book.

Why this is a Terrible Set-Up:

The model above doesn’t take a lot into account. Such as:

• Kickstarter Inc’s 10% cut and taxes. (Although, technically, the software might be fileable as an expense on Steve’s tax return, but that’s a whole ‘nother matter.)
• Any backers who bought a book are adding $20 towards the stretch goal, but only $10 to the profit.
• By adding more pages to the book, you increase the cost of the existing product without taking any additional money from the backers who’ve already bought it.

Assuming that each the first $100 was made by having 10 new backers buying new physical books, let’s see how much this stretch goal “earned”:

First Goal:
+$100 revenue
-$100 cost (software)
-$20 (KS’s 10% cut and taxes)
-$50.00 ($10 Cost for each new book)
-$15.00 (Assuming 20 color pages adds $1.50 to the 5 new and 5 old books)
= -$85.00

Now, if Steve got really carried away and reached $600 (initial $100 + five stretch goals), you end up with:

+$600 revenue
-$100 cost (software) (1st Stretch)
-$400 for friend photographers
-$120 (KS’s 10% cut and taxes)
-$420.00 (30 physical books, each now Costing $14.00)
= -$440.00

And thus, a successful $600 equals a huge deficit. Now, just imagine his goal had been for $6000 instead: he might end up with a negative $4-5K.

HOW TO AVOID THIS:

1. If you’re running a digital only or “print-it-yourself” model (see last week), you’ve avoided ONE of the pitfalls already, in that the only costs to consider are for the creators.

2. If you ARE dealing with physical items, only introduce new stretch goal items through add-ons (ex. Pay $5 more to get this keychain) or through a new backer level (ex. The Deluxe level for $50).This way you’re never increasing the print or production cost of an existing, already-paid for item, like Steve did. (Poor Steve. He’ll never learn.)

3. Include your stretch goal level to include all inherent costs plus MORE. I’d recommend double. Like the “stockpile” business model, this means that every stretch goal you reach is paying for that stretch goal and the cost of the next goal too.

STRETCH GOALS: GOOD SET-UP

Steve’s friend, Zara, is running a game kickstarter. She has reached her goal, and wants to hire a guest author to write a new adventure for the setting. It’s a little short, and uses new new art, so her guest and her agree on paying the writer $200 for the adventure (and that includes the editor too). For the following, we’ll assume that Zara is using only the digital only or “print-it-yourself” model.

$200 ~ Writer
+$50 (KS’s 10% cut and taxes- remember, divide by 0.8)
X2
= Stretch goal of $500.

This means if the goal is reached, the next guest writer, who is also paid $200.00, is already-paid for in the budget. This will likely mean that you have $200 that you, the creator, can pocket; but should something end up costing a bit more than you anticipated, you have a little more of a buffer to pay the guests.

However, Zara’s not going to give this PDF away. She’s going to encourage existing backers to increase their level:

$5 – PDF Version
$20 – Print-it-yourself Version + PDF
$30 – Print-it-yourself, + the Guest PDFs.

Resourceful, no?

STRETCH GOAL STRINGS

If you’ve met a few stretch goals, you could theoretically string them into a very long chain, giving your $30 backers an ever increasingly great value for their buck. This is what Evil Hat did with their campaign, which was amazingly successful. However, unless you really know what you’re doing, I would caution against this: while it gives lower backers a LOT of incentives to increase their pledge, it gives backers at the $30 level little reason to increase. I would instead recommend an alternative:

Soon, Zara’s first stretch goal (and thus, 1st guest author,) is reached, she introduces these two levels:

$20 – Basic – Print-it-yourself Version + PDF
$30 – Deluxe – Print-it-yourself, + all Level A PDFs

Level A PDFS – 
Guest PDF 1 
Mystery PDF 2 (Unlocked at $2000) 
Mystery PDF 3 (Unlocked at $2500)
Mystery PDF 4 (Unlocked at $3000)

Thus, the deluxe backers gain one extra pdf for $10 (not great, but not bad.) However, the players have an idea of how good the level will be (fingers crossed). As more stretch goals are unlocked, the extra value of level goes from theoretical to factual, and suddenly you’re getting 4 pdfs for $2.50 each- sweet!

Once the fourth pdf is unlocked at $3000, Zara opens a new level, Level B PDFS, and amends the backer levels:

$20 – Basic – Print-it-yourself Version + PDF
$30 – Deluxe – Print-it-yourself, + all Level A PDFs
$40 – Royale with Cheese – Print-it-yourself, + all Level A PDFs AND + all Level B PDFs

Level B PDFS – 
Guest PDF 5 
Mystery PDF 6 (Unlocked at $3500) 
Mystery PDF 7 (Unlocked at $4000)
Mystery PDF 8 (Unlocked at $4500)

And thus, players are encouraged to increase their level once more. Of course, you can only stretch them so far, but you get the idea. If Mystery PDF 8 is unlocked, perhaps the next goal squeezes a fifth PDF into both Level A & B (4.5 & 8.5?)- this will help satisfy your current backers.

WHEN DOES IT BECOME TOO MERCENARY?

No matter how many levels you make, always ask yourself: “Is the product worth it?” Paying $40 for several hundred pages of well-done, well-edited product sounds worth it- however, paying $40 for something you slapped out in an hour just so you can fill the obligation of one of those stretch goal slots is not. They might buy something you haphazardly publish, but they’re not going to buy it twice. That’s part of the reason raising that extra double for each author is nice: if you end up having to pay for a second author or editor, or find that the author turned in something twice the length (and thus twice the price), you can spend a little more to get a quality product.

Last week, I talked about Ecognomics: the assumption that product = profit. Sadly, this is not always the case, unless you plot things out just right. Likewise, a successfully funded kickstarter can mean a product that is paid for, or a heck of lot of unforseen costs.

I’m going to run through a hypothetical kickstarter twice: once with selling electronic pdfs, once with hard books:

Electronic Version – Here’s the neat thing about pdfs… because there is no physical cost per unit, selling one costs as much to the vendor as selling one-million.*

*Assuming you go through a 3^rd party to handle downloads and bandwidth cost.

However, this also makes them deceptively tricky, for a few reasons.

1. For the above reason, it can be difficult to convince someone to buy a pdf. If it cost the vendor nothing to give away, why should someone pay $1, $5, $20 for it? This argument is not without some merit- personally, I find it ridiculous that book publishers insist on charging the same amount for an eBook as a physical book; it makes sense to deduct the cost of the paper and shipping and handling, and then pay what is left over.

2. Buyers aren’t the only ones who are unsure about the price tag. Because it costs you nothing to give it away, a generous creator’s instinct might BE to give it away. This is doubly so if they are struggling to find buyers. To quote the Barenaked Ladies lyric, “Can’t even give this stuff away, why would I sell it?”

The reason WHY you have to sell it lies in the old adage: TIME IS MONEY. Now, I advocate humans creating whatever they want, for their own joy and sanity. Creating can bring a state of mental peace or catharsis that cannot be quantified- just because a poet gets published and paid money doesn’t mean that their work was better than the Emily Dickensons of the world who choose to publish little, if at all.

However, if you DO decide to seek money for your creations, make sure you’re not underselling yourself. If you were paid minimum wage for every figure you painted or every campaign you wrote, you’d soon find out how much your work is worth.

A few weeks ago, Morris posted what an rpg writer was paid per word around the industry. http://www.enworld.org/forum/content.php?2301-What-s-a-Freelance-RPG-Writer-Worth#.VNwTtfnF-Sr

Using this as a basis, let’s take a look at the cost of the Skeleton Crew book, which currently around 105,000 words.

Publisher	Pay per word	Cost of 105,000 words	Cost divided over 100 pdfs
Paizo	$0.07	$7,350.00	$73.50
Wizards of the Coast	$0.06	$6,300.00	$63.00
Evil Hat	$0.05	$5,250.00	$52.50
Pelgrane Press	$0.04	$4,200.00	$42.00
Goodman Games	$0.03	$3,150.00	$31.50
Fat Goblin Games	$0.02	$2,100.00	$21.00
Purple Duck Games	$0.01	$1,050.00	$10.50

Now, I’m not certain what’s a fair price for a PDF, but I feel pretty certain that asking 73.50 is a bit much. That being said, many modest, first-time kickstarters are lucky to get 100 backers- and at 7 cents a word, that “free” pdf costs quite a lot.

However, as I am a humble guy who wants this kickstarter to succeed more than I desire money, let’s go with the lowest pay rate for myself, aka. .01 a word. That makes the foundation of our kickstarter at $1,050.00.

However, I can’t do the book by myself. We have one of our group members working as editor and publisher, who’s going to work damn hard on the book too. Let’s assume that this person is a saint, who will take a fraction of the cost of a professional. Let’s estimate the total pay: $350.00.

New total: 1400.00.

Next, the art! Our in-house artist charges $40 for a B&W art… let’s assume that we commission her for 15 pieces. We also pay her for a full color cover, bursting forth with tons of different characters (those cost extra), for $100.00. That’s $700.00 for the art.

New total: $2100.00.

Done, right? Wrong! Don’t forget taxes- kickstarters count as income! Our accountant isn’t here, so we’ll set it at a flat 10%. (Now: $2310.00.) Also, if you reach the goal, Kickstarter takes 10%. That means add an extra 10% on, right?

Wrong again, because math is WEIRD; adding an extra 10% (2541.00) and taking 10% again leaves you with 2286.00, about $25 short. To make sure you have enough after Kickstarter takes their cut, here’s the formula:

Kickstarter goal = amount you need / divided by .90.

In this case, the result is $2566.67.

Let’s round that up to $2600.00, just to have a buffer.

So, what does that mean? Well, let’s look back at the pdfs, and see how many we need to sell at what cost to reach that goal.

PDF Sale Cost	$ Raised at 100	$ Raised at 200	$ Raised at 500	$ Raised at 1000	# to Sell Reach Goal
$1.00	$100.00	$200.00	$500.00	$1,000.00	2600 sales
$2.50	$250.00	$500.00	$1,250.00	$2,500.00	1040 sales
$5.00	$500.00	$1,000.00	$2,500.00	$5,000.00	520 sales
$7.50	$750.00	$1,500.00	$3,750.00	$7,500.00	347 sales
$10.00	$1,000.00	$2,000.00	$5,000.00	$10,000.00	260 sales
$15.00	$1,500.00	$3,000.00	$7,500.00	$15,000.00	174 sales
$20.00	$2,000.00	$4,000.00	$10,000.00	$20,000.00	130 sales

Of course, the first time you glance at the chart, it might seem that charging more money is the key. However, you’ll notice the catch that, even at $20.00, it takes 130 sales, above your average 100 backers for a newbie kickstarter, just to reach your goal. Even if your product is good, you got to ask yourself: is it harder to convince 100 people to pay $20, or to convince 200 people to pay $10? I don’t really have the answer to that, but I know that the more your kickstarter extends to people who know you and your products less and less, you’ll have a harder time convincing people that the product is worth the money.

Paper-version – if you’re going with a paper-version, the rules of the above stay the same, except every price now has the price of the product, the shipping and handling added on to it.

Let’s assume your company is printing small batches, and going through a domestic printer. In this, let’s take a great company, Ka-blam, that prints our comic. A massive book of 350 pages, with B&W interior and color cover, costs 11.50 for one book. There’s a price break at 25 copies (10.50), and at 100 (9.50). Add in a round 3.50 for shipping and handling per book, that gives you: $15 at 1, $14 at 25, $13 at 100.

For example, the same above chart, adding the same values above:

Add to Cost:	Total Sale Cost 1	Revenue at 25	Profit at 25 (-350)
$5.00	$20.00	$500.00	$150.00
$10.00	$25.00	$625.00	$275.00
$15.00	$30.00	$750.00	$400.00
$20.00	$35.00	$875.00	$525.00
$25.00	$40.00	$1,000.00	$650.00

Add to Cost:	Total Sale Cost 1	Revenue at 100	Profit at 100 (-1300.00)	Revenue at 200	Profit at 200 (-2600.00)
$5.00	$20.00	$2,000.00	$700.00	$4,000.00	$1,400.00
$10.00	$25.00	$2,500.00	$1,200.00	$5,000.00	$2,400.00
$15.00	$30.00	$3,000.00	$1,700.00	$6,000.00	$3,400.00
$20.00	$35.00	$3,500.00	$2,200.00	$7,000.00	$4,400.00
$25.00	$40.00	$4,000.00	$2,700.00	$8,000.00	$5,400.00

Add to Cost:	Total Sale Cost 1	Reach Revenue $2600	Cost at Goal	Profit at Goal
$5.00	$20.00	130 sales	$1,690.00	$910.00
$10.00	$25.00	104 sales	$1,352.00	$1,248.00
$15.00	$30.00	87 sales	$1,218.00	$1,382.00
$20.00	$35.00	75 sales	$1,050.00	$1,550.00
$25.00	$40.00	65 sales	$910.00	$1,690.00

So, let’s imagine a hypothetical situation: you got exactly 200 sales. Let’s see what it comes at various prices:

Cost – Remember, this includes the approximately 20% for kickstarter and tax.

Product	Revenue	Reach Goal?	Reached Goal at	Cost	Profit
PDF $5.00	$1,000.00	No!	N/A	None	None
PDF $10.00	$2,000.00	No!	N/A	None	None
PDF $15.00	$3,000.00	Yes!	174 sales	-20% (-$600)	$2,400.00
PDF $20	$4,000.00	YES	130 sales	-20% (-$800)	$3,200.00
Book $20	$4,000.00	Yes	130 sales	-20% (-$800), – $2600 (books)	$600.00
Book $30	$6,000.00	Yes	87 sales	-20% (-$1200), -$2600 (books)	$2,200.00
Book $40	$8,000.00	Yes	65 sales	-20% (-$1600), -$2600 (books)	$3,800.00

Based on the 200 sales model, we can see that selling 200 $1 pdfs gets equals a failed kickstarter; whoever, a kickstarter that sells 200 pdfs at $15 each makes the same as a kickstarter that reaches $6000 selling books at $30, and makes four times the profit of a campaign that sells 200 books at $20 bucks.

One last chart: let’s see what happens if we calculate that each product level made EXACTLY the number of sales it needs to make to reach goal.

Product	Reached Goal at	Cost	Profit
PDF $5.00	520 sales	-20% (-$520)	$2,080.00
PDF $10.00	260 sales	-20% (-$520)	$2,080.00
PDF $15.00	174 sales	-20% (-$520)	$2,080.00
PDF $20	130 sales	-20% (-$520)	$2,080.00
Book $20	130 sales	-20% (-$520), – $1,690 (books)	$390.00
Book $30	87 sales	-20% (-$520), –$1,218 (books)	$862.00
Book $40	65 sales	-20% (-$520), –$ 910 (books)	$1,170.00

And thus we see how kickstarter goals are really sneaky, in that they measure only revenue, not cost. Adding higher priced goods at higher costs can make you reach your goal faster (the $30 book needs half the sales of a $15 pdf). And reaching a goal is GOOD- backers are more likely to sign up if the goal is reached, so the profits are more likely to come in. However, at the $30 book level, the artists end up with a mere 1/3^rd of their self-estimated cost, and less than a 1/4^th of what they raised from the kickstarter.

Luckily, this is not the ONLY model for a kickstarter- we’re going to explore a few of those next week.

In the mean, if you’re in the DC Metro Area, you should visit our booth at Katsucon this weekend, Feb 14-15th, in the Artist
Alley! It’s the first anime con featuring our newest book, the Cleric’s Guide to Smiting! Come on down!