MARKETING MANAGEMENT

CASE ANALYSIS HUBSPOT: INBOUND MARKETING and WEB 2.0

Submitted by: PGP H, Group 8
SN Name of Student Roll No.
1 ASHISH TOMAR 2014PGP067
2 PARESH KOTKAR 2014PGP245
3 ISHANI MITTAL 2014PGP137
4 TATSAT PRAKASH PANDEY 2011IPM112
5 PRATIBHA INDORIA 2011IPM072
6 SAHIL AGGARWAL 2014PGP318
7 DHAVAL VAIDYA 2014PGP411

















Company and Industry overview:
Hub spot was founded in 2006 by Brian Halligan and Dharmesh Shah. HubSpot provided
web-based software solutions were projected as a complete Inbound Marketing system.
Inbound marketing refers to the marketing activities that involve attracting visitors or
prospective customers towards oneself rather than having to go out to get their attention
by adopting measures such as cold calling, direct mail, radio, TV ads etc. It involves extensive
usage of blogs, podcasts, Search Engine Optimization, Social Media Marketing and other
forms of content marketing in order to promote a company. Hub spot itself followed
Inbound Marketing as its primary marketing strategy.

The company divides its customers based on two broad parameters. Small Business Owners
(Owner Ollies) and Marketing Professionals (Marketer Marys). The Owner Ollie is an
entrepreneur heading a business ranging from 1-25 employees and makes up for 73% of
Hubspots customer portfolio. Meanwhile, the Marketer Mary is a trained marketing
professional working in big companies having a pre-existing knowledge about marketing
tools and practices and makes up for 27% of the customer portfolio.

The Company followed a Software as a Service (SaaS) monthly pricing model for its
customers in which rather than paying a large upfront fee, the customers had to pay a
smaller monthly fee between $ 250-500.

By 2009, the company had achieved a 1000 customer mark but there were still some issues
in the mind of Halligan and Shah which needed to be addressed.


SWOT ANALYSIS of HUBSPOT
STRENGTHS
Offered integrated services spanning all
three areas of attracting customers to their
business
Positioned themselves as the thought
leader in the Web 2.0 space
Strong financial base
Customer friendly programmes that
required no prior programming knowledge
Both founders are experts in their
respective fields
WEAKNESS
Practice what you preach strategy didnt
allow them to leverage on traditional
marketing tools
Could not provide web marketing expertise
to the level required by B2C customers
Required significant time investment on
part of customers, in order to understand
the system
OPPORTUNITIES:
The fairly popular Freeware Grader offers
opportunity to increase profits through
charging small amounts to use the software
Growing shift of business focus from
traditional to inbound marketing techniques
THREATS
Focus on Owner Ollies implies loss of
revenue for HubSpot due to higher churn
rates
Owner Ollies businesses would be more
prone to recessions and this would have
indirect impact on HubSofts demand




Issues
Should they choose one between the market segment of Owner Ollies and Marketer
Marys or should they continue to serve them both?
Owing to the customer churn rates, should they now come up with a different and
more suitable price model for their product?
Whether they should resort only to inbound marketing or also have a mix of outbound
and inbound marketing for achieving the long-term goals of the business?

Analysis and Recommendations
To tap the market potential, the founders have to scale up the
HubSpot business quickly. For this purpose, they need to take decisions regarding the
following prospects
1. Target Segments which market to target -Marketer Marys or Owners Ollies
-Inbound or outbound or mix of both


Marketer Mary v/s Owner Ollies
Let initial value = initial cost of acquiring customer
Avg. Customer life = 100/churn rate (in months)
Monthly profit = monthly charges for product
Acquisition rate = total cost to acquire a customer

Total value earned per customer = Initial value + (Avg. Customer life*Monthly profit)
Acquisition Cost




Hence targeting Marketer Mary will be more profitable though sales cycle is high.
2. Pricing Policy
Due to SAAS model, Churn rate is the major concern for deciding pricing policy for various
customers. But customers who hosted their website on Hubspots CMS had lower churn
Owner Ollies (amt. in $) Marketer Mary (amt. in $)
Churn Rate 4.3 3.2
Avg. Customer Life (months) 23.36 31.25
Acquisition Cost (1-time cost) 1000 5000
Initial Amount (1-time revenue) 500 500
Monthly Income 250 500
TOTAL VALUE earned per customer 5340 11125
rate. To find out the impact of CMS on total value earned per customer, following is the
schedule total value after moving to CMS for Owner Ollies.
Total value earned per customer = Initial Amount+ Transfer Charges + (Avg. Customer
life*Monthly profit) Acquisition Cost

Particulars CMS ($) Non-CMS ($)
Churn Rate 2.1 5.5
Avg. Customer Life(months) 47.6 18.18
Acquisition Cost 1000 1000
Initial Amount 500 500
Transfer Charges 500 0
Monthly Profit/charges 250 250
TOTAL VALUE earned per customer 11900 4045

As can be seen above, total value earned per customer in case of CMS is way too higher
than non-CMS and transfer cost for migrating from non-CMS to CMS is just 500. So, even
after providing migration assistance free of transfer cost to non-CMS customers, HubSpot
would earn a much higher value per customer (11400 vs. 4045) along with increased CMS
customer base.

3. Marketing Strategy
If purely Outbound Marketing is adopted, then HubSpots brand image could be severely
affected as it would go against their own preached principles of inbound marketing.
However, at the same time, in order to achieve the aggressive growth target, they will have
to use a mix of inbound and outbound marketing techniques.