07. Hubspot Case

MARKETING MANAGEMENT

CASE ANALYSIS  HUBSPOT: INBOUND MARKETING and WEB 2.0

Submitted by: PGP ‘H’, Group 8 SN 1 2 3 4 5 6 7

Name of Student ASHISH TOMAR PARESH KOTKAR ISHANI MITTAL TATSAT PRAKASH PANDEY PRATIBHA INDORIA SAHIL AGGARWAL DHAVAL VAIDYA

Roll No. 2014PGP067 2014PGP245 2014PGP137 2011IPM112 2011IPM072 2014PGP318 2014PGP411

Company and Industry overview: Hub spot was founded in 2006 by Brian Halligan and Dharmesh Shah. HubSpot provided web-based software solutions were projected as a complete Inbound Marketing system. Inbound marketing refers to the marketing activities that involve attracting visitors or prospective customers towards oneself rather than having to go out to get their attention by adopting measures such as cold calling, direct mail, radio, TV ads etc. It involves extensive usage of blogs, podcasts, Search Engine Optimization, Social Media Marketing and other forms of content marketing in order to promote a company. Hub spot itself followed Inbound Marketing as its primary marketing strategy. The company divides its customers based on two broad parameters. Small Business Owners (Owner Ollies) and Marketing Professionals (Marketer Marys). The Owner Ollie is an entrepreneur heading a business ranging from 1-25 employees and makes up for 73% of Hubspot’s customer portfolio. Meanwhile, the Marketer Mary is a trained marketing professional working in big companies having a pre-existing knowledge about marketing tools and practices and makes up for 27% of the customer portfolio. The Company followed a Software as a Service (SaaS) monthly pricing model for its customers in which rather than paying a large upfront fee, the customers had to pay a smaller monthly fee between $ 250-500. By 2009, the company had achieved a 1000 customer mark but there were still some issues in the mind of Halligan and Shah which needed to be addressed.

SWOT ANALYSIS of HUBSPOT     

 

STRENGTHS Offered integrated services spanning all three areas of attracting customers to their business Positioned themselves as the thought leader in the Web 2.0 space Strong financial base Customer friendly programmes that required no prior programming knowledge Both founders are experts in their respective fields OPPORTUNITIES: The fairly popular Freeware Grader offers opportunity to increase profits through charging small amounts to use the software Growing shift of business focus from traditional to inbound marketing techniques

WEAKNESS  “Practice what you preach” strategy didn’t allow them to leverage on traditional marketing tools  Could not provide web marketing expertise to the level required by B2C customers  Required significant time investment on part of customers, in order to understand the system

THREATS  Focus on Owner Ollies implies loss of revenue for HubSpot due to higher churn rates  Owner Ollies’ businesses would be more prone to recessions and this would have indirect impact on HubSoft’s demand

Issues · Should they choose one between the market segment of Owner Ollies and Marketer Marys or should they continue to serve them both? · Owing to the customer churn rates, should they now come up with a different and more suitable price model for their product? · Whether they should resort only to inbound marketing or also have a mix of outbound and inbound marketing for achieving the long-term goals of the business?

Analysis and Recommendations – To tap the market potential, the founders have to scale up the HubSpot business quickly. For this purpose, they need to take decisions regarding the following prospects – 1. Target Segments – which market to target -Marketer Marys or Owners Ollies -Inbound or outbound or mix of both

Marketer Mary v/s Owner Ollies – Let initial value = initial cost of acquiring customer Avg. Customer life = 100/churn rate (in months) Monthly profit = monthly charges for product Acquisition rate = total cost to acquire a customer Total value earned per customer = Initial value + (Avg. Customer life*Monthly profit) – Acquisition Cost

Owner Ollies (amt. in $) Churn Rate 4.3 Avg. Customer Life (months) 23.36 Acquisition Cost (1-time cost) 1000 Initial Amount (1-time revenue) 500 Monthly Income 250 TOTAL VALUE earned per customer 5340

Marketer Mary (amt. in $) 3.2 31.25 5000 500 500 11125

Hence targeting Marketer Mary will be more profitable though sales cycle is high. 2. Pricing Policy – Due to SAAS model, Churn rate is the major concern for deciding pricing policy for various customers. But customers who hosted their website on Hubspot’s CMS had lower churn

rate. To find out the impact of CMS on total value earned per customer, following is the schedule total value after moving to CMS for Owner Ollies. Total value earned per customer = Initial Amount+ Transfer Charges + (Avg. Customer life*Monthly profit) – Acquisition Cost Particulars Churn Rate Avg. Customer Life(months) Acquisition Cost Initial Amount Transfer Charges Monthly Profit/charges TOTAL VALUE earned per customer

CMS ($) 2.1 47.6 1000 500 500 250 11900

Non-CMS ($) 5.5 18.18 1000 500 0 250 4045

As can be seen above, total value earned per customer in case of CMS is way too higher than non-CMS and transfer cost for migrating from non-CMS to CMS is just 500. So, even after providing migration assistance free of transfer cost to non-CMS customers, HubSpot would earn a much higher value per customer (11400 vs. 4045) along with increased CMS customer base.

3. Marketing Strategy – If purely Outbound Marketing is adopted, then HubSpot’s brand image could be severely affected as it would go against their own preached principles of inbound marketing. However, at the same time, in order to achieve the aggressive growth target, they will have to use a mix of inbound and outbound marketing techniques.