Hubspot: Inbound Marketing and Web 2.0

Marketing

Professor: Dr. Stephan Worm

MBA HEC Paris

HUBSPOT: Inbound Marketing and Web 2.0

case study

Group 11 (1 – to – 1):

Qing                 SHEN

Ankit                 GUPTA

Cesar                 VERGARA

Haneul         KIM

Timo                 MARQUEZ

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 a potential market evenly distributed among B2B and B2C. For HubSpot, 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, HubSpot’s 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 HubSpot’s 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 HubSpot 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:

HubSpot’s 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 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 HubSpot’s competitive field (exhibit 3) with customers’ needs a) traffic creation and b) leads analysis and qualifications, in line with HubSpot’s main strengths, as seen in appendix 2. The Web 2.0, changed the way in which marketing was done, from pushing products or services to potential customers, expecting a response, to pulling customers to the business products and services, responding to their needs. Thus the company should not consider outbound as an alternative.