Business pivots can turn a struggling company into a thriving one. Whether changing the name and product completely, or just altering company practices, looking at customer behavior is the best way to move forward. If you continuously ask: “Which people are churning?”, “Where are they spending the most time?”, “The least time?”—you'll know where to go next.
We collected 10 stories of companies who found success by letting users' behavior change them, each revealing a unique lesson about how to listen to your customers.
1. Instagram — From checking-in to photo-sharing
Instagram is now known as a photo-sharing empire, but it started out like a lousy Foursquare. Co-founder Keven Systrom's original product was Burbn, an app for checking into locations, making plans, and sharing photos.
They had a few zealous users but topped out at 1,000 total. A little while after Mike Krieger, the other co-founder, came on board, the pair decided they needed a pivot.
Looking at their user data, Systrom and Krieger found that no one was really using most of their features—but people were sharing a ton of photos. They decided to strip out everything else and produce a prototype just for photo-sharing. They sent this prototype to 100 Burbn users, and got more output in one weekend than Burbn had ever received total.
So they went through with the switch and launched Instagram, which got 25,000 signups on its very first day.
Systrom advises, “[Follow] what people love. If you just play user psychologist a little and you listen to your users and you see what they're focusing on and what they're ignoring...good things can happen.”
2. Yelp — From email to reviews
Yelp's mission has always been the same—allow users to get word-of-mouth reviews. The idea was born when one of the co-founders needed a doctor but couldn't find any useful reviews online.
However, co-founders Jeremy Stoppelman and Russel Simmons thought small at first. Yelp was just supposed to be a site through which people could email their friends for recommendations, which would then be posted so everyone could see. This version of Yelp wasn't very successful.
But Stoppelman and Simmons looked at the behavior of their early users and found that many were writing reviews just for fun, without being emailed by a friend first. Once they decided to focus on letting anyone post reviews, the site took off.
Yelp underestimated their users' desire to share reviews with strangers, and almost missed out on a fantastic opportunity. Don't limit your users based on what you think they'll be willing to do—provide them with a host of options and let their behavior tell you what they want.
3. Southwest Airlines — From guesswork to the perfect routes
Southwest is now a huge proponent of using data for everything from personalizing service to saving money on fuel. But they don't just let customer behavior dictate tailored customer service—they use customer behavior to make some of the biggest decisions at their company.
In the airline business, you need to make sure you have the right flights in the right places. The way to do that is to look at demand for various routes. But Southwest goes a step further by also keeping track of the city pairs which are searched for on their website, not just booked. Thus, they get a real picture of which flights customers want offered. This also gives them a major timing advantage—the customers that book a flight now won't necessarily want to book the same flight in a month, but the customers that are just searching for that flight now very well might. Southwest has a better shot at being able to rearrange flights to meet this future demand.
Southwest attributes their continual growth in new customers and loyal customers to their data-based philosophy. At Southwest, they believe data should be self-service and interactive, so any employee can become a “data warrior.” And when everyone is interacting with the data, you have a much better shot at estimating future demand.
4. Groupon — From politics to retail
What is now Groupon started as The Point, a site for organizing people to action. The idea was that there were a lot of events out there (boycotts, protests) which individuals wouldn't be willing or able to do on their own, but would want to in a group. It was supposed to be political and social—not about purchasing goods.
However, the site struggled, and founder Andrew Mason had to start generating revenue. He was inspired by a campaign which users had posted on The Point not to organize political action, but to get a large group together in order to receive group discounts on products. Taking this idea, Mason added a Groupon section to the side of The Point.
Although Groupon was supposed to just be a side project to get The Point some revenue, it quickly attracted much more buzz and activity than the rest of the site. Within a few months, Mason knew that the right move was to listen to users and make his company focus just on Groupon.
You can't imagine the myriad of uses someone could have for your product. By looking at what groups of customers are actually doing, you may come across a new idea that's just as successful as Groupon.
5. Pinterest — From retail to collections
Pinterest was born as Tote, a site allowing users to shop at different clothing retailers, and receive updates for sales and new items. However, users weren't making purchases—the payment technology was just not sophisticated enough to make on-the-go payments easy. For an app all about mobile shopping, having users who didn't make purchases was disastrous.
But when founders Ben Silbermann, Evan Sharp, and Paul Sciarra looked at their users' behavior, they found that people were spending much more time building up collections of their favorite items and sharing them than searching for new items to actually purchase. So instead of giving up, they pivoted and created Pinterest as it is today—an app for cultivating collections.
Tote could've just been scrapped—subpar payment technology seems like a good enough reason. But instead of turning their back on their mistake, Silbermann, Sharp, and Sciarra used it as a learning opportunity. Even if your product fails, there'll be useful data from it which can help kickstart your next project.
6. National Car Rental — From bankruptcy to billions
In 1993, National Car Rental was hemorrhaging money.
Its parent company, General Motors (GM), was threatening to liquidate the company unless it became profitable soon. So National turned to the only hope it had left—data. National invested $10 million to build a revenue management system that would track bookings, cancellations, forecasts, and more.
By analyzing customer demand, National was able to institute differential pricing based on type of car, day of the week, and time between booking and rental. They were also able to divide their inventory of cars between locations in a way that maximized the number of cars they could rent to walk-ins. Because National was getting up-to-the-minute data, they could make many price changes and measure the impact on customer satisfaction and revenue.
This revenue management worked—National returned to profitability almost immediately and revenues improved by $56 million in just one year. When GM did sell National in 1995, it wasn't just for peanuts, but $1.2 billion (over $1.9 billion in today's dollars).
Your customers are not all the same, so don't treat them that way. By segmenting customers as National Car Rental did, you can improve the service they get as well as your bottom line.
7. Chegg.com — From classifieds to textbooks
Co-founder Aayush Phumbhra knew he needed to make a change, so he started to investigate patterns in user behavior. Phumbhra found that Chegg.com only had significant traffic at the start of each semester, and that most of the ads posted were about buying and selling textbooks. Recognizing an opportunity, he bought 2,000 textbooks from Amazon and began renting them out to Chegg visitors.
Once it was clear that this experiment was a success, Phumbhra made textbooks rentals the focus of Chegg. The site took off and is still growing today, providing scholarship connections and tutoring services in addition to renting over a million textbooks a year.
Your company doesn't need to do everything it set out to do. By focusing in on your best use case, like textbook sales for Chegg, you can become a top contender for that market.
8. Flickr — From gaming to photo sharing
Whimsical online role-playing—sound like Flickr?
Probably not, but that's where the photo-sharing startup began. Founders (and newlyweds) Caterina Fake and Stewart Butterfield (also now of Slack fame) started off by developing the virtual world Game Neverending in 2002 in which players traveled around, built objects, and interacted with other players. In order to expand on instant messaging between players, a vital part of the game, they decided to add in photo-sharing capability in 2004.
But instead of being a small feature that attracted players to remain with the site, the photo-sharing tool soon became more popular than the game itself. When Fake and Butterfield looked at their user behavior and found this out, they made the choice to put the game aside and focus on what people really wanted—the photo application.
Thus arose Flickr, which attracted millions of users and was bought by Yahoo! in 2005—netting the previously deep in debt couple $40 million.
Analyzing the effect of every feature you add to your product helps you find new opportunities. Don't just measure the number of new users—look at whether that feature is drawing people to your whole product, or just to that add-on.
9. Twitter — From text to hashtags
Most of the major features we associate with Twitter were actually invented by users.
That's right—@-replies, hashtags, and retweets all came from the minds of people outside of Twitter.
After Robert Anderson's first @-reply tweet, @-replies quickly became popular and Twitter made them an official feature in May 2007. The popularity of @-reply also influenced the overall direction of Twitter—pushing the company towards cultivating a conversation platform instead of just a place for status updates. Twitter looked at what their users were doing, and added that functionality into their product.
A similar story holds for hashtags and retweets: while Twitter initially dismissed these features as nerdy or cumbersome, they changed their minds as the new concepts soared in popularity.
Co-founder and ex-CEO Evan Williams says, “Most companies or services on the Web start with wrong assumptions about what they are and what they’re for. Twitter struck an interesting balance of flexibility and malleability that allowed users to invent uses for it that weren’t anticipated.”
Remember that your company doesn't decide what's nerdy or cumbersome—your users do.
10. Avon — From books to cosmetics
The name Avon is synonymous with cosmetics—but the company sure didn't start out that way.
Avon founder David H. McConnell began as a door-to-door book salesman in the 1880s. A common marketing tool used by salesmen was to offer a free gift to a potential customer if they agreed to listen to the sales pitch—since McConnell was mostly dealing with housewives, he decided on perfume. He teamed up with a local pharmacy to create a fragrance to give away in small vials while attempting to sell some merchandise.
Ever the savvy businessman, however, McConnell dove right into this new business opportunity. In 1886 he launched the successful California Perfume Company (later renamed Avon). And it was this same drive to give his customers what they wanted which led him to hire female salespeople at a time when opportunities for women to make a living were few and far between—because he believed they would be best at marketing to his customers.
Even before big data, looking at user behavior was essential to adjusting your product—the strategy hasn't changed, only our tools have.
Let your users change you
Your users' behavior is the best source of information about what they want. By exploring it, and keeping your product flexible, you can become the best product for your market.
The important thing is to keep your eyes peeled and keep asking questions of your data. You don't have to already know where your product is going—or even what question to ask. If you keep iterating on imperfect questions about customer behavior, you'll discover the best way forward.