Hubspot Case Summary
HubSpot
Should HubSpot expand its promotional tools to include more traditional ‘interruption’ type communications?
I do not believe HubSpot should pursue a more traditional type of communication. I believe doing so would undermine its brand and credibility in the marketplace. Moreover, adopting a more traditional, outbound marketing communications strategy would seem the wrong move for a company that hasn’t even properly targeted its customer base. Whom would they target with an outbound campaign? Would the message be unfocused and the investment wasted?
No, HubSpot should continue with its core inbound marketing efforts, only directed toward a more targeted market. It’s clear that there are specific segments which merit more attention than others. I believe the company should focus on the B2B customer, with a primary sub-focus on “Owner …show more content…
Ollies” and a secondary sub-focus on “Marketing Marys”.
Further, pricing strategy should be refined to reflect this new target market focus.
As Marketing Marys are lower margin (see Exhibit 1) customers, the pricing for this sub-segment should more properly capture the broader range of services being delivered to the group. In both sub-segments, there should be some pricing action focused on longer customer retention. For instance, once a customer reaches the 12 month mark of continuous service – just before churn rates begin to peak (see Exhibit 2) – HubSpot could lower its monthly fee by 50%. This would likely prolong customer retention and bring added revenue in the door (as opposed to zero revenue for churned customers). The retention effort could be strengthened by continuing the recent focus on CMS commitment on the part of customers. Sharpening its target market focus would allow HubSpot to hone its core offering while streamlining costs associated with complexity of the current unfocused market approach. From there, HubSpot would be in a better position to branch out into other markets and, should growth needs call for it, a foray into outbound
marketing.
How does your decision fit with its marketing strategy going forward?
Focus on 3 C’s. Customer – defined above, plus ignoring 50% of leads, which upsets sales and may signify a stubbornness around core inbound marketing efforts. Could partner with web providers. Company – have a strong reputation/awards, carved a niche. Strong product launch team and post sales support. Product shows early results for their customers. Competition. Marketo seems to be the closest competitor, even down to the salesforce.com integration. Salesforce.com owns the “Close Sales” portion of the market.
Exhibit 1 – Customer Profitability Gross Margin of Customer Segments | | Measure | Ollie | Mary | Upfront Fee | 500 | 500 | Monthly Fee | 250 | 500 | Avg No of Months Retained | 6 | 12 | Total Avg Revenue | 2,000 | 6,500 | Cost to Acquire Customer | 1,000 | 5,000 | Gross Profit | 1,000 | 1,500 | GP % | 50.0% | 23.1% |
Exhibit 2 – Churn Rate by Age of Customer
Should HubSpot expand its promotional tools to include more traditional ‘interruption’ type communications?
I do not believe HubSpot should pursue a more traditional type of communication. I believe doing so would undermine its brand and credibility in the marketplace. Moreover, adopting a more traditional, outbound marketing communications strategy would seem the wrong move for a company that hasn’t even properly targeted its customer base. Whom would they target with an outbound campaign? Would the message be unfocused and the investment wasted?
No, HubSpot should continue with its core inbound marketing efforts, only directed toward a more targeted market. It’s clear that there are specific segments which merit more attention than others. I believe the company should focus on the B2B customer, with a primary sub-focus on “Owner …show more content…
Ollies” and a secondary sub-focus on “Marketing Marys”.
Further, pricing strategy should be refined to reflect this new target market focus.
As Marketing Marys are lower margin (see Exhibit 1) customers, the pricing for this sub-segment should more properly capture the broader range of services being delivered to the group. In both sub-segments, there should be some pricing action focused on longer customer retention. For instance, once a customer reaches the 12 month mark of continuous service – just before churn rates begin to peak (see Exhibit 2) – HubSpot could lower its monthly fee by 50%. This would likely prolong customer retention and bring added revenue in the door (as opposed to zero revenue for churned customers). The retention effort could be strengthened by continuing the recent focus on CMS commitment on the part of customers. Sharpening its target market focus would allow HubSpot to hone its core offering while streamlining costs associated with complexity of the current unfocused market approach. From there, HubSpot would be in a better position to branch out into other markets and, should growth needs call for it, a foray into outbound
marketing.
How does your decision fit with its marketing strategy going forward?
Focus on 3 C’s. Customer – defined above, plus ignoring 50% of leads, which upsets sales and may signify a stubbornness around core inbound marketing efforts. Could partner with web providers. Company – have a strong reputation/awards, carved a niche. Strong product launch team and post sales support. Product shows early results for their customers. Competition. Marketo seems to be the closest competitor, even down to the salesforce.com integration. Salesforce.com owns the “Close Sales” portion of the market.
Exhibit 1 – Customer Profitability Gross Margin of Customer Segments | | Measure | Ollie | Mary | Upfront Fee | 500 | 500 | Monthly Fee | 250 | 500 | Avg No of Months Retained | 6 | 12 | Total Avg Revenue | 2,000 | 6,500 | Cost to Acquire Customer | 1,000 | 5,000 | Gross Profit | 1,000 | 1,500 | GP % | 50.0% | 23.1% |
Exhibit 2 – Churn Rate by Age of Customer