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ACHIEVING SCALE

How We Signed Up 10,000 Customers in 6 Weeks

San Francisco startup PointsHound knows a thing or two about scaling a company fast. Here's how it made inroads in the competitive travel industry.
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The U.S. travel industry is established, competitive, and noisy. So when a scrappy five-person San Francisco startup manages to make inroads, it's worth noting. After launching about a year ago, the hotel booking platform PointsHound signed up 10,000 members in six weeks and now boasts several hundred thousand more.

The carrot is an attractive one. Travelers can book a room at one of more than 150,000 properties around the world, pay the same as what they would using Expedia, Travelocity, Orbitz, or the hotel directly, but earn loyalty points or frequent flier miles and transfer them into one of 11 loyalty programs such as American Airlines AAdvantage or Virgin America Elevate. And if you don't care about miles you can even funnel points into your My Best Buy account and save up to buy stuff at the big box retailer.

PointsHound's self-proclamation that it's "the most flexible loyalty earning platform on earth" just might be true. Co-founder and CEO Pete Van Dorn tells me any day members will also be able to rack up Bitcoin currency and in February the site will begin to offer points and miles for car rentals as well, with digital downloads possibly coming down the pike later, meaning users may someday be able to dole points and miles into various loyalty programs every time they download movies, music, or e-books.

While a strong value proposition certainly helps with getting traction, here are several tricks Van Dorn says PointsHound employed to exponentially grow its member base.

Reward people for referring friends and family.

In PointsHound's first six months the company spent no money on acquiring users yet managed to garner 30,000 members through referrals. When a person sets up a PointsHound account he or she receives an email with a link to a page that generates a unique URL to share on social networks. When someone clicks on it and books their first room using the platform, both parties get points.

"For that segment of users that's really motivated by offers that involve points and miles, they'll do almost anything [and] they were very aggressive about sharing those links so when we first launched a website a number of bloggers picked up links," Van Dorn says.

Leverage influential partners.

PointsHound buys loyalty currency from its partners so big guns such as American Airlines and Virgin America are motivated to promote the program with their millions of loyalty program members.

"All of our partners have been pretty good about talking about us in their social media doing tweets and Facebook posts. They have much bigger followings than we have ourselves and we've done a lot of one-off promotions with the various programs," Van Dorn says.

For example, he says Virgin will promote PointsHound in an upcoming movie it's producing. "We'll be on their flights [because] we're kind of the main sponsor of that so leveraging partners that already have big installed bases really took us a long way," he says.

Be accessible to international customers.

PointsHound's original game plan didn't involve expanding internationally but loyalty programs in Brazil, India, and Europe began to demand inclusion and it turns out adding hotels in these places and accepting currencies other than the U.S. dollar were easy tweaks to make.

"Partnering with the big loyalty programs in those markets is really just a great way to enter because you've got [a] trusted brand behind you and stamp of approval," Van Dorn says. "So when a user in India gets an email from Jet Privileges, which is one of the big frequent flier programs in India, saying 'book your next hotel in PointsHound' that goes a long way."

Be willing to experiment.

Van Dorn admits letting users earn Bitcoin when they book hotel rooms on PointsHound is an experiment.

"Our assumption is that it's going to kind of open the aperture for us as far as the customers that we target," he says. "The guy that flies 200,000 miles a year with American AAdvantage probably isn't looking for that many more AAdvantage points. Maybe he'll choose to earn Bitcoin instead, we're not sure," he says.

Van Dorn says Bitcoin might also attract tech-savvy people as well as folks in emerging markets where currencies are unstable or international transaction fees are high.

Earning Bitcoin on the site, once the feature is turned on, will be a matter of first setting up a Bitcoin wallet on a third-party site such as Coinbase and linking it with PointsHound. "As soon as you've earned Bitcoin we'll be able to transfer that to you directly to your wallet, just like a PayPal transfer," Van Dorn says.

Sacrifice short-term profits to attract new users.

PointsHound has raised $425,000 in seed funding and currently is running at break-even, Van Dorn says, although he expects the company to lose money in 2014 as it ramps user acquisition through online marketing.

"Once we find out what's performing well we'll heavy up on those campaigns and turn off the ones that aren't performing as well, but we think the big opportunity in display is just to [educate the market about] the concept of earning these different virtual currencies on hotel bookings."

Will PointsHound prevail? Possibly, if domain expertise counts for anything. Van Dorn and his co-founder, Chris Boyd, worked together at Switchfly, a cloud-based e-commerce platform for airlines, hotels, and loyalty programs. Before that Van Dorn worked in marketing at Hotwire prior to it being gobbled up by Expedia, which is one of PointsHound's main inventory suppliers. As for Boyd, he was an early member of the Travelocity team and launched its first generation loyalty redemption platform.

Last updated: Jan 10, 2014

CHRISTINA DESMARAIS

Christina DesMarais is an Inc.com contributor who writes about the tech start-up community, covering innovative ideas, news, and trends. On Google+, add her to one of your circles. Have a tip? Email her at christinadesmarais (at) live (dot) com.




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