Hubspot Case
Submitted by: - xxx
To understand the strategy which Hubspot should follow for further developing their business, we need to first understand its customers, its competitors and the company itself.
Customers:-
Right now, HubSpot is serving different customers with different requirements. This causes their engineering and sales staff to be stretched thin. They are falling behind on product releases and their sales staff is converting only 4% (exhibit 10) of the potential market into customers. To increase efficiency, HubSpot should narrow their target market. If they target the most profitable segment of customers, then they can acquire more of those profitable customers and increase overall profit.
The attached exhibit breaks down the LTV value for different customer segments based on their churn and revenue generation. Across all the segments, small B2B businesses have lowest …show more content…
churn rate of 1.4% and hence highest LTV of $17357. As shown in exhibit, total number of potential customers in small B2B business 12126. This would allow Hubspot to grow 12 times their current size. Hence, HubSpot should target this segment as their priority. They could even convert more than 12126 customers out of total market if their sales team is totally targeted at this segment.
The next most profitable target segment, as evident for attached exhibit, is Marketer Marys.
Within Marketer Marys, Hubspot should target B2B customers. This is because, B2B have lower churn rates compared to B2C customers. Also, Hubspot is already geared towards serving B2B customers.
Company (HubSpot)
The core competency for company is their philosophy of inbound marketing. They build and market their software using this philosophy. So they should not tinker with this philosophy and should stick to inbound marketing.
Another point to note from the exhibit 10 is that the biggest customer churn happens between 12th and 18th month. To address this phenomenon, they could offer discounts to customers after 12th month. Also, the customers who have switched to CMS have lower churn rate compared to customers who have not switched. So in order to increase customer retention, they could consider offering free CMS to all customers and possibly discounts to customers who adopt CMS. They would still be profitable after discounts as they seem to have very low marginal costs.
Competitor
HubSpot also have relative advantages over their nearest customer Eloqua. HubSpot offers software-as-a-service compared to the large upfront fee of Eloqua. This leads to low switching cost for customer and hence easier penetration for HubSpot. They also have ease of use over Eloqua. But they do need to upgrade their software for more sophisticated users. This would be more required when they start going after Marketer Marys B2B business.
To understand the strategy which Hubspot should follow for further developing their business, we need to first understand its customers, its competitors and the company itself.
Customers:-
Right now, HubSpot is serving different customers with different requirements. This causes their engineering and sales staff to be stretched thin. They are falling behind on product releases and their sales staff is converting only 4% (exhibit 10) of the potential market into customers. To increase efficiency, HubSpot should narrow their target market. If they target the most profitable segment of customers, then they can acquire more of those profitable customers and increase overall profit.
The attached exhibit breaks down the LTV value for different customer segments based on their churn and revenue generation. Across all the segments, small B2B businesses have lowest …show more content…
churn rate of 1.4% and hence highest LTV of $17357. As shown in exhibit, total number of potential customers in small B2B business 12126. This would allow Hubspot to grow 12 times their current size. Hence, HubSpot should target this segment as their priority. They could even convert more than 12126 customers out of total market if their sales team is totally targeted at this segment.
The next most profitable target segment, as evident for attached exhibit, is Marketer Marys.
Within Marketer Marys, Hubspot should target B2B customers. This is because, B2B have lower churn rates compared to B2C customers. Also, Hubspot is already geared towards serving B2B customers.
Company (HubSpot)
The core competency for company is their philosophy of inbound marketing. They build and market their software using this philosophy. So they should not tinker with this philosophy and should stick to inbound marketing.
Another point to note from the exhibit 10 is that the biggest customer churn happens between 12th and 18th month. To address this phenomenon, they could offer discounts to customers after 12th month. Also, the customers who have switched to CMS have lower churn rate compared to customers who have not switched. So in order to increase customer retention, they could consider offering free CMS to all customers and possibly discounts to customers who adopt CMS. They would still be profitable after discounts as they seem to have very low marginal costs.
Competitor
HubSpot also have relative advantages over their nearest customer Eloqua. HubSpot offers software-as-a-service compared to the large upfront fee of Eloqua. This leads to low switching cost for customer and hence easier penetration for HubSpot. They also have ease of use over Eloqua. But they do need to upgrade their software for more sophisticated users. This would be more required when they start going after Marketer Marys B2B business.