MARKETING MANAGEMENT – I

Case Study
HubSpot: Inbound Marketing and Web 2.0
Date: 29.08.2022

Submitted by:
Group 12 Section D

Abhirup Chowdhury 2022PGP010

Chandrachur Paul 2022PGP109
Deepti Basumatary 2022PGPH006
Syed Abdul Khayyum 2022PGP408
Kaviya R 2022PGP198
 HubSpot: Inbound Marketing and Web 2.0

DECISION PROBLEM AND CAUSES OF THE PROBLEM:

Brian Halligan and Dharmesh Shah, the founders of HubSpot, are faced with the challenge of
deciding upon three different issues being faced by the company:
1. Analyze the customer base and select the section of customers to serve to maximize
the company’s returns.
2. Decide upon a pricing strategy to attract new customers and simultaneously improve
the upon the profitability of the existing customers.
3. Determine if they could achieve the expansion of customer base through inbound
marketing alone or needed to supplement their strategies with outbound marketing
techniques.
Despite being a small company with limited resources, HubSpot, the propagators of the
inbound marketing approach had already attracted a diverse customer base. Their
customer base consisted of ‘Owner Ollies’, the owners of small businesses and the
‘Marketer Marys’ or the marketing professionals working in larger organizations.
However, HubSpot was finding it difficult to cater to the requirements of such a diverse
set of customers as each of them demanded different features to be added and updates
made to the existing software to meet their individual goals in the best way possible. It
not only enhanced the complexity of the existing software but also added to the costs of
sales and customer service.
These concerns necessitated the founders of HubSpot to promptly decide upon the
aforementioned problems.

SITUATIONAL ANALYSIS:

COMPANY:
HubSpot, a software company founded by two MIT graduates, propagated the philosophy of
a new marketing approach known as ‘inbound marketing’, which aimed to bring about a
drastic change in the existing marketing techniques. As opposed to the conventional
outbound marketing approach which pushed a product to a large number of people through e-
mails, tradeshows and telecommunication, the inbound marketing technique aimed to pull
potential customers towards a product. HubSpot offered a complete inbound marketing
software based on Web 2.0 tools. Comprising of various approaches like blogging, search
engine optimization and social media marketing, the product enabled the users to promote
their product, identify potential customers and finally convert them into final customers for
their businesses. HubSpot’s user-friendly interface and provisions for designing content for
blogs, websites, and social media attracted a wide customer segment and enabled them to
acquire a base of 1000 customers over four years of its existence.

CUSTOMERS:
Reasonable pricing of its product combined with the wide range of features enabled HubSpot
to attract a diverse set of customers. The company classified its customer base into two broad
categories – namely the ‘Owner Ollies’ or the owners of small businesses harboring between
1 to 25 employees, and the ‘Marketer Marys’ or the professional marketers working at
various large companies. Each customer segment sought different benefits from the inbound
marketing software. Accounting for 73% of HubSpot’s customer base, the Owner Ollies
mainly aimed to generate more leads for their businesses and had a churn rate (rate of
cancelling their HubSpot subscription) of 4.3%. In contrast, the Marketer Marys focused
primarily on analyzing the market demand data and projecting future demands and had a
lower churn rate of 3.2%.

CONTEXT:
With the number of customers expanding at a steady pace, it was becoming increasingly
difficult for HubSpot to regularly meet all the requirements of its diversified customer base.
In addition to their varying requirements, the two major customer segments also differed in
terms of their subscription prices, durations of subscription, and the initial cost accrued by
HubSpot in converting a customer of a particular segment. To resolve this growing concern
within the company, Halligan and Shah, the owners of the company must come up with a
decision on which of the two customer segments they should focus on and what should be
their ideal pricing policy so as to generate the maximum possible returns. They must also
decide whether they should continue promoting the product through inbound marketing or
expand their marketing strategy to include outbound approaches.

DECISION CRITERIA AND AVAILABLE ALTERNATIVES:

The alternative solutions mentioned below are evaluated based on the following key criteria:
 Profitability for HubSpot
 Gaining sufficient market for the products so that the company can sustain over a long
period of time
 Maintaining the hype of inbound marketing among customers so that the demand for
the product does not die out over time
 Retaining HubSpot’s stand on inbound marketing against outbound marketing as this
is a critical factor around which the mission and vision of the company are built

1. Advocating for inbound marketing: It is mentioned that a B2B business generally

spends about 37% of the marketing budget on inbound marketing and 30% is spent on
outbound marketing. This is an indication that the hype of inbound marketing is
catching up and, in this situation, it will not be beneficial for the company to resort to
outbound strategies. Hence opting for outbound marketing should be kept at bay for
time being.
2. Retention of Owner Ollies: From the available data it can be observed that the churn
rate for Owner Ollies is 4.3% and the portfolio share for the same is 73%. As this
sector is the major hub from where the company is getting the client base, steps
should be taken towards retaining them. As the customers are believing that they
derive the maximum value in the initial months, the company can structure the
modules in a way that the clients can visualize the long-term effect of using HubSpot
in their business. Being able to analyse the client’s business and explaining the long-
term profitability should be HubSpot’s priority for Owner Ollies.
3. Growth of Marketer Marys: This segment generally has high knowledge of the
process and usually derives value from the product over the long term. So, to meet the
needs of this segment, HubSpot should possess adequate quality of resources to
 handle them and try to reach out to more Marketer Marys. The focus should be on
increasing the number of customers in this segment while retaining the quality.
4. Market penetration: Upon evaluating the given data, we find that the B2B churn rate
is 3.3 whereas it is 6 for B2C. Hence, following the trend, more focus should be on
serving the B2B customers. It is also noted that CMS users can derive the most value
from the HubSpot product compared to non-CMS users. Therefore, CMS users should
be awarded more incentives to maximize the sale so that more customers would enter
the CMS service.
5. A mixture of inbound and outbound marketing: Though the company is pillared
on the idea that inbound marketing is superior to outbound marketing, there are
inherent complexities and disadvantages of inbound marketing. From exhibit 10, we
can infer the proportion of customers to leads. For example, for August the number of
leads are 2143 whereas the customers are 85, which is only 0.03%. There is also an
untapped market because of the way inbound marketing operates. Even if the
company does not include the outbound strategies directly in its operations, they can
mask them as new initiatives and leverage their benefits. The same can be offered to
the customers by showcasing the derived results. It is evident that a mix of inbound
and outbound marketing will yield greater result. Hence, HubSpot can add outbound
marketing products to its portfolio and act as a one-stop shop for all marketing
requirements. Although this will go against their current motto, this will be effective
as a long-term strategy.

RECOMMENDED SOLUTIONS AND JUSTIFICATION:

Recommended solutions
(i) Increase the amount from $500 to around $600 for the additional consulting hours
after the original four hours of $500 have been exhausted for both Owner Ollies
and Marketer Marys.
(ii) Charge Owner Ollies higher for the start-up fee, say, from $500 to $600-$700.
(iii) Introduction of 6-month or 1-year packages with certain discounts to retain
customers for a longer period.
(iv) Introduce more small free programs to create buzz.
(v) Create a real-time tracking system of conversion progress.
(vi) Focus more on Marketer Marys as compared to Owner Ollies and on the
customers who hosted their websites on HubSpot’s Content Management System
(CMS) as compared to customers who hosted elsewhere.
Justifications for the recommended solutions
(i) It will be a feasible transition in the change of pricing as it is obvious that the
firms would be willing to go ahead for extra consulting hours only if they are
satisfied with the initial suggestions provided in the original four hours of
consulting.
(ii) Owner Ollies derived much of their value in the initial months as a customer as
they were focused on using SEO to increase their visitors and cancelled their
subscription once they believed that their optimization was done. Owing to their
profitability and their early exit, it would be right to charge them a bit higher than
the Marketer Marys.
(iii) The introduction of packages would give HubSpot certainty about the minimum
customer base they would be having during a certain period, and this would
ascertain the revenue too.
(iv) Introducing more small free programs giving insights about the entire big picture
would bring them more visibility and provide them the opportunity to cater to a
larger customer base. They also won awards to support their claims.
(v) Just like Salesforce software, they can create an easy-to-use customizable
software to help firms create a database of their prospects and track their
conversion progress in real-time and keep their market presence high as
Salesforce software was the industry standard.