NEW YORK (TheStreet) --Coca-Cola (KO - Get Report) is tapping into the $90 billion crowdfunding market, not to raise corporate funds, but as a powerful tool to reap the social media and branding benefits.
In doing this the beverage giant, which releases second-quarter 2014 financial results Tuesday before the market opens, joins Proctor & Gamble (PG), American Express (AXP) and other companies tapping into crowds to drive innovation, increase sales and improve results for investors.
At the Monday close of $42.40, Coke stock is up 2.6% for the year to date compared with the S&P 500, up 6.8% for the same period.
Richard Swart, director of research on crowdfinance at the UC Berkeley and author of the World Bank's Report On Global Crowdfunding, said engagement techniques like crowdfunding can be "the deepest form of social engagement," allowing companies to learn more about what customers, distributors and employees are socially passionate about.
Most companies want to be perceived as socially responsible and caring. By giving seed money to crowdfunding projects that focus on what Coke lovers care about, the company forges both a stronger rapport while advertising to the world that it's a company with a conscience.
As Swart explained, "Brand loyalty is increased with a social media marketing effort than with most other forms of marketing. Crowdfunding creates collaboration and cohesiveness with a company's customers and the general public, and that's worth a fortune."
For example, Coca-Cola sponsored a crowdfunding effort in Mexico to provide more clean water sources in rural areas. This project fit well with the World Bank's enthusiasm for crowdfunding as a means to promote economic growth in developing countries and gives positive publicity for the sponsoring company.