lOMoARcPSD|8072454

Hubspot Case Study For Bridget Akinc'S Marketing Principles

- A- Grade
Marketing Principles (Boston College)

StuDocu is not sponsored or endorsed by any college or university

Downloaded by sda sda (sdanagn@gmail.com)
 lOMoARcPSD|8072454

Name 1
In 2006, Brian Halligan and Dharmesh Shah founded HubSpot with aims to revolutionize the way
companies market their products and/or services in the Web-2.0 world. HubSpot’s main objective is
to enhance customers’ marketing by either replacing their traditional outbound marketing methods
with inbound marketing, or adding to their traditional methods, resulting in a mix of outbound and
inbound techniques. The goal of the Web-based software product that HubSpot developed was to
“enable a firm to generate more qualified leads, to generate those leads more efficiently, and to
convert them into sales” (p. 4). This process is known as “customer funneling.” HubSpot has put its
own methods to practice, filling its customer funnel through the use of inbound marketing techniques
such as offering various freeware, a website with information, a LinkedIn page, and YouTube videos
to promote the use of inbound marketing to the businesses it wants to make into customers. While
HubSpot is a B2B company itself, it provides to a variety of different sized customers that are either
B2B or B2C. At its start, HubSpot followed all leads in its customer funnel. Once the number of
customers grew to be too large, HubSpot used a lead-rating algorithm to qualify leads before they
were turned over to the sales force, and in 2009 had begun to weed out almost 50% of those
considered “low-quality.” HubSpot’s goal for itself is to accelerate company growth and increase
profitability.

HubSpot offers both products and services to its customers, as inbound marketing is considered
both a product and a service. The company provides products such as SEO tools, Link Graders, and
software for lead tracking and analysis. To onboard these products, a customer has to pay $500 for
HubSpot to provide them the service of using a consultant. The $500 fee goes towards the consultant
helping the company with, “(1) setting up the software, (2) using the SEO features to get found, (3)
converting prospects to leads to customers, (4) analyzing their results, and (5) institutionalizing the
process so that it could be repeated” (p. 5). After this, a customer may still use the consulting service
at a rate of $500 for four hours if needed.

HubSpot’s customer segment of small business owners, Owner Ollies, derived more initial value from
HubSpot compared to Marketer Marys, the customer segment of marketing professionals. Owner
Ollies used HubSpot mainly in order to generate more leads in a fast and simple way, primarily
through SEO. This causes retention issues among the Owner Ollie segment, as they tended to find
value in HubSpot for only the first few months, cancelling their subscription after they were done
“optimizing.” Marketer Marys found the most value in HubSpot’s analytics and reporting, which is
executed monthly and thus lengthens the typical customer life for Marketing Marys.

Downloaded by sda sda (sdanagn@gmail.com)

 lOMoARcPSD|8072454

Name 2
Exhibit 1, CLV calculations

Segments # Months on Paid Monthly Lifetime COCA CLV CLV * amt of

Subscription Revenue Revenue 2008
Customers

OO 23 $250 $6,250 $1,000 $5,250 $3,643,500

MM 31 $500 $16,000 $5,000 $11,000 $2,805,000

B2B 30.30 $375 $11,864 $3,000 $8,864 $5,734,773

B2C 16.67 $375 $6,750 $3,000 $3,750 $1,132,500

The Customer Lifetime Value (CLV) of an Owner Ollie is $5,250, and the CLV of a Marketer
Mary is $11,000 (refer to Exhibit 1 for numbers factored into the equation). If the decision to target
one of the segments is based on this number alone, HubSpot should target the Marketer Mary
segment because the CLV is more than double that of the Owner Ollie segment. However, more than
just the CLV should be taken into account when deciding which segment to target. Based on
HubSpot’s number of customers in 2008, there were 694 Owner Ollies and 255 Marketer Marys.
Multiplying these numbers by the CLVs for each segment yields a total CLV of $3,643,500 for the OO
segment and $2,805,000 for the MM segment as of 2008. Though this is an interesting metric, the
decision cannot be based solely on these CLV totals. The values of other segments, such as B2B and
B2C, can also be calculated, but only using assumptions as there is not enough data on B2B and B2C
as stand-alone segments. To make an assumption that about half of each segment is OO or MM, I
averaged the given monthly revenues and COCAs for the OO and MM segments and then used them to
calculate the CLV for B2B and B2C segments, resulting in $8,864 and $3,750, respectively. These are
very rough estimates, but could be fixed if HubSpot were to use accurate monthly revenues.

Since the CLV calculations for Owner Ollies and Marketer Marys alone cannot be the sole basis
of HubSpot’s decision between the two, there is more information that should be considered. In
examining Exhibit 5 of the case study, the amount of new customers that fall under either OO or MM
are given for September through December of 2008. Based on these numbers, for OO each month had,
respectively, 24, 31, 27, and 34 new customers. So, on average for this period of time, each month the
OO segment grew by around 29 customers per month. At the same time, the trend is showing a slight

Downloaded by sda sda (sdanagn@gmail.com)

 lOMoARcPSD|8072454

Name 3
increase in the amount of new customers each month, as the range grows from 24 in September to 34
new customers in December. For MMs, each month had 41, 60, 68, and 74 new customers,
respectively. This is an average of 60.75 (rounded to 61) new customers each month. The influx of
new MMs, however, is accelerating at a much faster pace than OOs according to this data. Over just 4
months, the range grows from 40 new customers to 74 new customers. This indicates that HubSpot is
acquiring more new MM customers than OOs, and at a more rapid pace.

Though Marketer Marys are more difficult and more expensive to acquire, their growth is
larger and faster than that of Owner Ollies. OOs have also proven more difficult to retain for the long-
run than Marketer Marys, as seen in their higher churn rate (4.3% versus 3.2%). The MM segment
finds value in monthly analytics and reporting, thus they have a longer customer lifetime and will
bring more value to HubSpot in the future, as opposed to Owner Ollies that tend to use HubSpot’s
optimization and then cancel their subscription a few months after they start, as previously
mentioned. Overall, Marketer Marys should be targeted by HubSpot. They have the longest lifespan,
best projected growth (as seen in Exhibit 5 of the case study), a higher CLV for each customer, and
“lower macroeconomic risk” than small business Owner Ollies (p. 12).

In the consideration for CLV, HubSpot does not have a discount rate or the cost to serve values
for OOs and MMs. The discount rate would not affect my recommendations because it would be the
same in each customer segment’s calculation, as it applies to HubSpot as a firm overall. The costs to
serve may alter the CLV outcomes, but unless the difference in the cost to serve each segment is
extreme, it should not be enough to alter my recommendations, especially since part of the logic in
my decision dealt largely with the size and rate of growth and lifetime length for each segment being
more favorable for Marketing Marys. Unless the cost to serve is astronomically higher for MMs in
comparison to OOs and thus lowers the MM CLV so that it is much less than the OO CLV, MMs would
still be a wise choice for HubSpot to target moving forward.

Downloaded by sda sda (sdanagn@gmail.com)