HUBSPOT: Inbound Marketing and Web 2.

0
case study

HUBSPOT Case Study: Group 11 (1-to-1) Pgina 1

The problem in this case is that Hubspot needed to make a transition from its initial start-up
structure (organizational structure, target customers and pricing strategy) in order grow, and the
dilemma was how to best approach this change. Hubspot faced three main issues for this: a)
identify target customers, b) modify their pricing model and c) how to develop the growth
strategy.

Hubspot was good at building a community, e.g. over 300000 unique visitor in 2008, and
thousands of freeware subscriptions in 2009. Nonetheless they had a diverse universe of
customers, from small business owners (Ollies) to marketing professionals (Marys), different
type of business ranging B2B or B2C, and size (over or under 25 employees). Table C shows
there was a potential market evenly distributed among B2B and B2C. For Hubsport, the decision
to identify a target customer was difficult. This is seen when contrasting exhibits 6 where 73% of
customers were Ollies and exhibit 5 which indicated that Marys accounted for 68% of new
customers from Sep-Dec 2008. Although the B2B customers were important for Ollies and
Marys, there was an interesting growth of Marys in B2C. Thus a segmentation of customer was
required to better assess their different needs.

At the end of 2008, Hubspotss products responded to the main two customers (Ollies and
Marys), still its pricing model was similar for both, where Marys paid a slightly higher monthly
amount as its software package included more features (exhibit 7). This was something Hubspot
needed to analyze as Ollie and Marys had various pros and cons as customers. Ollies represented
a lower cost to acquire ($1000) and where quick to sign in, but cancel subscription early, while
Marys cost more to acquire ($5000) and took longer to sign in, by stayed for longer using the
product. Assuming no churn rate an Ollie had to maintain subscription for 2 months and Marys
had to maintain subscription for 9 months, to pay off their acquiring cost. The previous scenario
meant that HubSpots 2008 projections including the 100 paying customers from 2007 made the
current pricing model not viable to support the high cost of Marys (see appendix 1).

Another issued faced was the Hubsport was still a small company, seen in that it only had few
engineers to build the software therefore it was hard to catch up with the sales team. Thus the
product vs customer vs pricing situation presented an optimization and planning issue to keep the
company growing.

The previous two points require a growth strategy. At the same time it made the owners question
their vision, i.e. to inbound or outbound. The strategy for growth had to clarify which customer to
target, how to roll-out the respective products, whether to keep it a SaaS, and the transition into a
new pricing structure to maintain current customer and capture more value from new ones.

The objective of our proposed solutions is to keep Hubspot as the software-to-have for inbound
marketing and grow financially from a start-up to an established business. For this we set out the
following actions:

Hubspots culture and vision should be maintained. Web 2.0 is continuing evolving as more
businesses are using the various channels and HubSpot can differentiate itself as the inbound
marketing which weighs more than outbound marketing (inbound represents
37% marketing budget while outbound 30%). HubSpot has the expertise to create

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traffic and analyze and qualify leads filling the respective demand of Ollies and Marys. At the
same time we differentiate from our two main competitors by proving a lower price (Eloqua is
more expensive) and focusing on inbound marketing (Marketo is a mix of inbound and
outbound). Our conclusions are founded by overlaying HubSpots competitive field (exhibit 3)
with customers needs a) traffic creation and b) leads analysis and qualifications, in line with
HubSpots main strengths, as seen in appendix 2. Thus the company should not consider
outbound as an alternative.

As showed in appendix 4, our two segmented customers have showed different needs in terms of
product features and consumption behavior. Based on the current churn out rate, we can estimate
consumer lifetime value of Ollies is $4,750 and Marys $10,500 (see calculation in appendix 3).
Therefore, according to our segmentation strategy, we propose following product bundles
by differentiating product price and product features:
1) Product pricing:
o As Ollies have a shorter customer life and less marketing budget, we suggest
keeping current up-front fee and a lower monthly fee. As suggestion, up-front
$500 and monthly fee in the range of $150 to $250.
o As Marys have a longer customer life and lower price sensitivity we suggest
increasing both up-front and monthly fee. As suggestion up-front $600 and
monthly fee in the range of $600 to $750. Meanwhile, Marys are interested in
deeper analytics, we suggest additional fee for each service of deeper analytics.
o As CMS system helps lower churn rate, we suggest initial fee of $300 covering 6
hours consulting to encourage both of them to use such service.
2) Product features:
o As Ollies prefer quick and simple solutions, we suggest tailor-made product
focusing on generating leads.
o As Marys have a high demand of analytics, we suggest tailor-made product with
more sophisticated tools to meet the needs of deeper analytics.
o As frequent log-in helps lower churn rate, we suggest to provide service update on
a regular basis to encourage a continuous use of our service.

After clearly identifying the segmentation of consumer and differentiation of products, we need
ensure market-centered organizations that are capable of translating strategy into actions:
1) Engineering:
To invest on product development and innovation to continuously provide with relevant
service to enhance our competitive advantage of generating leads as well as analytics.
2) Sales force:
To divide sales force to separately serve Maryer & Ollies by providing Maryer with long-
term, more sophisticated support, providing Ollies with quick & simple service.
3) Marketing:
To continue make a buzz for inbound marketing to create inbound marketing
community rather than a simple business

Finally the strategy has to be sensitive to our current customers, Appendix 5 indicates a tentative
layout of the plan. Starting with the internal reorganization, then gradually change the product
offering for consumers.

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 Appendixes

Appendix 1: Costumers and Revenue Projections for 2008

Appendix 2: Expanded Competitive Field

HubSpot
inbound market

Core features . Ollies

Create Traffic
(lower cost)

Marys Analyze and

Qualify Leads
Specialty features.
(higher costs)

Close Sales

Appendix 3: Life time value calculation for Customers

Churn Rate Life time Income Profit Cost Lifetime
(months) (monthly) Valie
Ollies 4.3% 23 250 5,750 1,000 4,750
Marys 3.2% 31 500 15,500 5,000 10,500

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 Appendix 4: Consumer profile
Marys Ollies
Business Small size with 1-25 employees Big size with 26-100 employees
size
Marketing No dedicated team, no support Supported by Marketing team & consultants
team team
Service SEO to increase visitors Monthly analytics & reporting
focus
Life circle Much value from first few months Stay longer
CMS 13% 2%
service

Appendix 5: Proposed action plan for 2009

H1: Reorganize sales department and provide relevant training.

H2: Introduce new product package for the Marys & Ollies.

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