Fund Now or Buy Later? A Kickstarter Price Comparison

September 11, 2012
By

(This article was first published on Kickfollower Blog, and kindly contributed to R-bloggers)

Hi Internet! I’m Preeya, and I will be your guide in this blog’s quantitative quest for knowledge.

To get started, let’s talk about pricing. Part of the Kickstarter process is figuring out how much a hypothetical product will cost once it’s on the market. But how accurately can that be calculated without actually going through the production process? In other words, once a product has been kick-started and is out in the real world, how much does its price change? Luckily, we here at Kickfollower are busy gathering the data necessary to answer that question.

Here are some preliminary results:

That’s the Kickstarter price on the x-axis, the post-Kickstarter market price on the y-axis. The points are colored by type of product, as seen on the right. The red line marks where the price estimated by the Kickstarter inventor equals the true market price: products above the line had a higher than estimated market price, products below it had a lower than estimated market price, and products on the line had very savvy inventors.

As you can see, about half the products are below the line, with less than half above. Does this mean that people are generally getting a raw deal on Kickstarter? To find out, let’s ask our friend, statistics!

We ran a paired t-test, which determined that the mean Kickstarter overestimate of $3.05 was not significant (p = 0.356). So on average, prices of Kickstarter projects are not much over- (or under-) estimated. Good to know!

By the way, do you notice how the red line doesn’t quite fit the data? Upon further analysis, it turns out the the best-fit slope for those points is slightly less than 1, while the intercept is higher than zero. This suggests that lower-priced products are better deals on Kickstarter. Specifically, you may be able to save money if you back Kickstarter products with estimated prices of around $30 or less, while waiting for higher-priced products to come to the market.

Of course, our dataset is still quite small, so everything in this post should be taken with heaps of salt. But if you’d like to help us collect more data for awesome future analyses, please email [email protected] with shipped Kickstarter and Indiegogo projects we’ve missed! For example, although Kickstarter prices on average seem to be accurate, the graph above suggests that projects relating to food might be more likely to overestimate their prices. Topics like that could be the subject of future blog posts. I hope you’re as excited as I am!

To leave a comment for the author, please follow the link and comment on their blog: Kickfollower Blog.

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