We started Punchh in 2010. In the first few years, every week we would find another startup looking to address the challenge of local marketing for local businesses. At one point in 2010 we had over 100 other startups try to address the same problem that we were.
By 2012, we had launched our first few pilots without a point of sale (POS) integration but while reviewing the results with one of the smarter, numbers oriented exec at one of the pilot chains, we saw that our engagement rates were not great and re-engagement rates, a key metric for loyalty apps, were downright anemic.
To investigate the issue, I decided to spend some time at the location to do some detective work. After a couple of days of painstaking and diligent observing, it became clear that our issue was lack of an integration with the POS system – typically the heart of a restaurant or retail operation. Our lack of integration was not only making it hard to engage the customers, it was also slowing down operations by introducing additional redemption processes.
When I brought this to the team there were a lot of question marks.
“We will never be able to integrate as the POS companies are based on old technology stack and hard to work with”.”We don’t have the resources”.”We don’t even know how many version are out there for each system”.”How will we ever scale this thing?”.”POS companies might view us as a threat and might not want to integrate with us”.”How do we build relationships with opaque and hard to reach POS companies?” etc.
Despite the skepticism, we persisted. I brought on a consultant who I had worked with before and who I thought would be great at handling the complexity of the problem.
To get things going, we used one of the pilot customers to pressure one of the POS companies to provide us with a system. After some more skepticism and some upfront payment we finally had a license code and a DVD (but no support) to install a system and get an integration going.
It took us 4 weeks to get a working POS system installation – a system where we could do the basics like opening a check and placing an order.
It took another 8 weeks to get the first integration code working. It took so long because we had no support – the only help we could get was from an obscure bulletin board.
And since POS integration needed a whole new backend system, another 8 weeks went to design and build the server components to handle the data coming from the POS systems.
But by the end of 5 months we had something ready to go to a customer site.
Our first customer installation took 6 customer visits – each a 100 mile round trip drive to San Francisco where the customer was – spanning over 4 weeks. During this time we were apologizing constantly to the customer for crashing their systems. The customer still persisted with us – I am very grateful – despite all the problems.
Although the first 6 months were painful, we learned a great deal during that period. We were soon onto version 2 and 3 and thinking about replicating the integration with other POS systems. When we tried the POS integration at the original pilot location, the numbers were a lot better. We were finally delivering measurable results to our customers.
Once we started getting results, we replicated the integrations to a huge number of POS integration, numerous partnerships. Each new integration brought painful business negotiations and technical challenges. There were countless delays in getting each integration rolled out. Slowly but surely we worked our way to a dominant position in the market.
While we were solving hard problem of POS integration, most of our competitors – some really well funded startups from top name VCs – were focussed on ease of selling and on scaling their solutions. They gave us the perfect opening as they were really not interested in solving the hard problem of POS integration.
The thing about solving hard problems is that, while they are painful, if you persist and solve them you might build something really valuable – a strategic advantage, product-market fit or even a hugely successful company.