Case Analysis - Hubspot: Inbound Marketing and Web 2.0

1. Customer Lifetime Value:  OO = $4,815  MM = $10,625  B2B = $8,362.5  B2C = $3,251.25

2.  HubSpot should focus exclusively on B2B Marketer Marys

• MMs and B2B have highest Customer Lifetime Value (CLV)
• Marketer Marys are more reliable customers – lower churn rate

• In order to properly utilize HubSpot’s features, a minimum of 10 hours a week must be dedicated to using the software. OOs do their own marketing because they do not have the money to hire someone else. Small business OOs are focused on crisis control and the minimum efforts to keep the business running.  It is not reasonable to expect they will have the time or drive to put in these hours. In order to do so they would have to change their motivators and restructure their daily routines – this is not something within HubSpot power to make them do. Without the proper time, OOs will grow dissatisfied with the product and give up.

• MM’s are dedicated solely to marketing and have sufficient time to put in that 10 hours a week. With the time and motivation to best utilize HubSpot’s software, MMs will not grow dissatisfied and not cancel their subscription.

• There is macroeconomic risk with relying on monthly payments from OOs. Small businesses are less established and often operate under bad business models. The risks of OO small businesses failing and being unable to pay their monthly HubSpot fees are significant.

• MMs are generally employees of large, established, reliable businesses. There is a low risk of inability to pay monthly fees due to business failure.

• Owner Ollie’s derive immense initial value from Hubspot’s services. They heavily use the SEO services and once they think they have packed their sites with all possible optimization words they think they are “done” with site improvement and no longer require HubSpot’s services.

• MMs utilize more long term features of HubSpot software. MMs most heavily use analytics features of the software such as lead analysis. Such analytics features of the software hold a steady value as a part of marketing efforts of a company

• Marketer Marys have more money to spend

• OOs have tight budgets and are very price sensitive

• B2B business models are more compatible with inbound marketing.

• The buying process for B2C companies is generally minimally complex. Their customers require less resources to learn about the product and have an easier and faster decision making process.

• The buying process is generally much more complex with B2B. B2B customers have a longer decision-making cycle and derive greater benefit from blogs, webcasts, webinars and other web 2.0 programs. Because B2B has to focus more on closing the sale, they derive great value from HubSpot’s lead-qualification analysis.

• B2B Customers have minimal experience with Web 2.0 and can benefit from CMS

• Most B2C customers already have highly performing websites and strong social media presence.

• B2B customers are more likely to utilize CMS services and in turn will have lower churn rates.

• 68% of HubSpot’s customers are B2B

•  If HubSpot chose to target B2C they would risk losing a far greater portion of customers

3.

• If HubSpot’s new target market is B2B Marketer Marys they should differentiate their products with increased software development focus on those that attract B2B MMs.

• 13% of owner Ollies use CMS where only 2% of Marketer Marys do. With a focused target market, we can further develop the CMS system to target B2B MMs and create a web design platform that is very competitive on the web platform market. MMs may come for our analytics tools but they will stay when they realize the HubSpot CMS service they are already paying for are better than the web service they are already using.
• Volpe said, “We’re growing fast, there’s a market there. We have this gigantic vision for what what the product should do and it is relatively broad… today, our product is small, small fraction of what it needs to be. Sales and marketing have been ahead of the product and we just need to continue to focus on the product and hope that it will catch up more.”

• By differentiating products and focusing on analytics and CMS services to best service B2B MMs, HubSpot will be able to narrow its dauntingly broad product vison and focus on creating a product that will best serve the most reliable and lucrative market

• SaaS pricing is best for MM B2Bs

• MM B2Bs are a reliable market with a low churn rate. With even further focus on developing a product that will best satisfy their needs, they have an even lower chance of cancelling their subscription. There is a very low chance of this target market defaulting on monthly SaaS payments.
• HubSpot is a startup and needs a constant flow of money to continue to develop their product and keep up with the market. The SaaS pricing model is ideal for HubSpot’s early stage in the life of the company where investors are harder to secure.

• Focus efforts on MM B2Bs and the SaaS pricing model but offer a 6 month one-payment package for OOs and B2Cs

• “[OOs] experience a burst of increased leads in the first six months after using the software, as a result of the creation of inbound marketing programs”        

• OOs are already seeing the results with preexisting HubSpot software. Even with their high churn rate and acquisition costs of $1,000 we still see a CLV of $4,815.
• If we advertise our product to OOs as an indefinite service and they believe it is only valuable for 6 months, in their eyes, our product is not everything we said. If we advertise it to them as a 6 month package we fully satisfy their expectations and desires and we maintain the integrity of our product.
• They are already happy with our product for the needs they are seeking to have met, therefore there is no need to further develop it as a 6-month package. There is a proven market for our service as a 6-month package and it will require minimal acquisition expense and further development as such.
• Offer continued subscription plan after 6-month package with waived startup fee

4. Halligan and Shah are absolutely not too stubborn by refusing to conduct any outbound marketing. In doing so they are protecting the integrity of their company and the inbound marketing that they have coined. Perhaps, outbound marketing could temporarily increase traffic in the customer funnel but they would lose the trust of the market and their customers which would have far greater long term negative effects. Marketing is about image and perception, not necessarily reality. It is true that HubSpot does in some cases intend their product to be used in combination with outbound marketing strategies but this does not justify the use of such strategies themselves. Doing so would be perceived as hypocritical and dishonest, even if it is technically not.  If customers perceive HubSpot as dishonest and untrustworthy in any way, it could be detrimental to the wellbeing of the business.