Everyday is a struggle at a startup: clients aren’t closing, cash is running low, the product is buggy; the battle seems to never end. This is to be expected, and an entrepreneur needs to persevere through the tough times to get to the good.
But what if the tough times never end? What if your target audience just doesn’t want your product? What if your target audience wants the product, but doesn’t want to pay for it?
When do you persevere, and when do you pivot?
It’s impossible to predict the future. As an entrepreneur, it’s important to take a look at the social factors, economic factors, and technology factors in your industry to determine when it’s time to pivot.
Fab.com originally launched as a social network mash-up for the gay community. The team pivoted 11 months later and has since skyrocketed in growth and sales.
Instagram was originally a mobile application with a feature for filtering photos. They pivoted to focus purely on the photo aspect of their product, and 2 years later, they sold for $1 billion.
Andrew Warner of Mixergy originally launched the company as a startup-event community. He later focused on original educational content for entrepreneurs and has since seen great success.
The list can go on and on. For this post, we will focus on my startup pivot, why we did it, and how it has led us to success.
The original product.
RewardMe originally launched as the easiest way for SMBs to create a rewards program. We utilized a QR code at the point of sale to determine if a customer was at the location. Customers earned points for a visit and could redeem a reward via our mobile application.
Social factors that lead to our pivot.
We quickly realized that it’s EXTREMELY hard to get customers to download an app in-store. Furthermore, only 2 out of 10 customers have an iPhone or Android, and even less know what a QR code is and how to scan it.
Because businesses viewed us as a 3rd party application, they always asked us the same question, “how many users do you have?” They believed it was our job to get them customers, not their job to use our product to get loyal customers.
Economic factors that lead to our pivot.
SMBs don’t have a lot of extra money to spend. They understand traditional advertising such as newspaper or penny-saver ads, but are completely new to mobile and app marketing. We quickly found that SMBs were not looking to pay for a product that created loyal customers; they want a product that will bring them new customers – like Groupon.
Furthermore, SMBs don’t like to give away free items – it cuts into their margins and they’re very wary of anything that makes them “lose” money.
Technology factors that lead to our pivot.
QR codes were fun and novel at one point, but weren’t massively adopted. Relying on a fading technology could lead to very poor positioning in the market.
The technology also did not have anything defensible – it was too easy for competitors to copy with a me-too product.
Our pivot: enterprise digital loyalty platform
Social pivot: we built a loyalty platform for the iPad, allowing ALL customers to join – not just smart phone users.
Economic pivot: we built an enterprise-level loyalty platform targeting restaurant franchises instead of SMBs. We found that franchises have the sophistication to understand how to use the valuable data collected with a rewards program.
Technology pivot: by creating software for the iPad, and syncing seamlessly with the POS systems, we created a technology that is patent-protected and extremely difficult to copy by competitors.
The next time you run into a crossroads at your startup, evaluate the social, economic, and technology forces in the industry. If all things point south, then it may be time to pivot in a new direction.
[This was a guest post from Jun Loayza, the Co-Founder of RewardMe, a digital rewards program for restaurants and retailers. In his entrepreneurial experience, Jun has sold 2 internet companies and lead social media technology campaigns for Sephora, Whole Foods Market, Levi’s, LG, and Activision.]