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Intro to Marketing Professor Cohen Archie Carlson Tantular 4/23/2012
0. I agree with HubSpot that the “rules of marketing” have changed. As a new start-up. However. the rules of marketing are still very different for specific companies. if a business only offers products which appeal to older or specific customers who are not familiar with web 2. Additionally. it only captures a small market. For a company like HubSpot. IM is effective because potential customers are already familiar with the platform and are shopping around. In fact most companies rely on a balance of both marketing strategies. HubSpot should not widen its focus to serve any customer that comes its way. Inbound marketing (IM) is definitely a growing trend for many companies. By widening its focus HubSpot will need to cater to a wider range of . For example many automobile companies cannot rely solely on IM to achieve their targeted number of customers. The rules of marketing may have changed but it definitely does not mean that IM is the only answer for marketers. Q2. IM will not work. specifically people who are familiar with 2. OM should still be pursued if a company is seeking for large sales and large customer base. Many marketers have realized the importance of web marketing and have begun to turn to it.Q1. The most optimal marketing strategy may still be to apply both methods of marketing with the right balance. companies looking to sell products to a wide range of people and are looking to have large number of sales will not find IM as useful as outbound marketing (OM). IM is also good because it is cheaper and provides very informative details on the company’s products. One example of a business where IM will not work is a business that that sells electric wheelchair. Despite this. Social Medias have become a major part of web marketing because of their large followings.0 and know what product they are looking for. whose products appeal to a certain type of customer. While IM is good because it is cheaper to imploy and brings in higher value potential customers.
In addition. 73% of HubSpot’s customers are the OO. HubSpot will also reduce its cost and build a stronger brand identity. (Exhibit 3 & 4) This shows that HubSpot has higher potential in converting the OO into their customer and can derive greater value from them. Although HubSpot will risk losing a lot of potential customers. Moreover. Additionally. narrowing its focus will allow it to concentrate developing better products as there is less conflict from trying to maintain the demands of different customers.625 is higher than Owner Ollie’s (OO) CLV of $4815. (Exhibit 2) This means that HubSpot collects more revenue from the OO than from the MM. different customer value different types of features. HubSpot may have to change their marketing and pricing strategy or even loosen their funnelling methods. Because of this. Market potential for small businesses is a lot larger than the market potential for medium or large businesses. If . Furthermore. the customer acquisition rate for small businesses (B< 25) is also much larger than that for larger businesses (B>25). Firstly.. by pursuing this strategy.customers who have different familiarity and comfort with the web 2. Secondly.0 tools. because HubSpot’s acquisition cost for OO is one-fifth of that of MM. However. this does not imply that MM are the most valuable customers. These will be discussed further in question 4. it will not be able to focus on developing the products which are most valuable to their existing customers. it can consider widening its focus. hence increasing the cost of production or updates. When HubSpot has earned enough customers and has grown bigger as a company. However. HubSpot will need to divide its product development processes further. the breakeven point for OO (3 months) is much lesser than the breakeven for MM (10 months). Who are HubSpot’s most valuable customers? From Exhibit 1 we know that Marketing Mary’s (MM) customer lifetime value (CLV) of $10. Instead HubSpot should narrow its target to its most valuable customers for now.
and derive greater value from HubSpot’s products. This is because the acquisition rate for the B2B customers is a lot higher than that for a B2C (business-to-customers) customer. It will not be able to promote the better products because it will be focused on satisfying the needs of its differentiated customers. Since the B2B companies are the ones that benefit the most from HubSpot’s products. Q3. Finally. most of its customers have not been around long and a lot of them are probably not fully acquainted with its products yet. HubSpot should also focus on the B2B (business-to-business) customers. HubSpot is still a germinal start-up company. HubSpot’s software-as-a- . have the lowest churn rates.the main rule for HubSpot is to become profitable as quick as possible then a shorter breakeven time means that HubSpot can become profitable sooner. HubSpot can also focus its development resources on features that are valuable. This will make current customers unhappy because services rendered to them are going to diminish. the B2B companies also derive greater value from the lead-qualification analysis that HubSpot provided due to their buying processes. Furthermore. I think that HubSpot should narrow their focus on the OO B2B. Overall. No. the churn rate for B2B (3. HubSpot should not differentiate its product further. Instead HubSpot should focus on one set of services that can be developed further and that is most valued by the customers. This means that the B2B customers have higher CLV. HubSpot should not change their pricing strategy but rather should tweak the prices a little in order to capture more immediate value from its customers. By narrowing to only the OO B2B. they will be more loyal to HubSpot and will not hesitate to commend its services. Differentiating its products more will mean that HubSpot will need to divide its product development further.3%) id lower than the churn rate for B2C (6%). They offer high market potential.
HubSpot can increase the initial payments for its product. Instead the pricing model allows customers to pay cheaper monthly instalments hence lessening their immediate burdens. HubSpot will not lose these customers by increasing its price. . This is attractive to most businesses that are not familiar with the effects of HubSpot’s product. Both types of customers will like the low upfront cost and the non-binding policy. new customers should not be affected by this price change. Exhibit 5 shows that a large number of HubSpot’s customers discontinue their services at the 18 months stage. It pushes these businesses to the purchasing stage sooner because of a lower commitment. Even though increasing the price of the product may make existing customers unhappy. HubSpot should address those people who rarely log-in to their accounts as they do not gain as much value and will complain about HubSpot’s services. it will continue with the monthly payments. HubSpot should find out the reason behind this sudden jump in churn rate and change its pricing strategy to tackle the 18 month point problem. Since both the OO and MM’s demands for the products are inelastic. it will increase the immediate value from the customers and hence decrease the breakeven time. The SaaS pricing model should entice both the OO and the MM. In order to capture more immediate value from its customers. The rationale behind this theory is that both the OO’s and MM’s demands for the product are inelastic.” The MM on the other hand has more money to spend on marketing products. Instead by increasing the upfront cost and monthly cost of its product. HubSpot should also address the churn rate of its customers. HubSpot can include routine checks with customers as part of the pricing package.service (SaaS) pricing model is good because it does not force the customer to pay a huge upfront cost for its products. Additionally. This is because the OO “doesn’t even think about marketing most of the time… He typically doesn’t shop around and try to find any other software competitive. the business start using HubSpot’s product and derive great value from it. Once.
This means that while OM will generate more customers. HubSpot should not differentiate its products further. HubSpot should maintain its SaaS pricing strategy. This means that extensive OM may not be an answer too due to its sheer cost. In terms of the awareness-interest-desire-action (AIDA) model (Exhibit 6). However. IM do not capture enough market potential. HubSpot loses a lot of potential revenue that OM can bring in. which wish to be the market leader in the product they offered and wants to grow as quickly as possible. Halligan and Shah should look more into OM that do not require as much investment. as mentioned in the case. As discussed in the previous questions. Finally. However. Yes Halligan and Shah are too stubborn by not doing any OM. Doing so will just increase its product development and maintenance costs and it will not be able to prioritize updating and developing its best valued products. HubSpot should also take into consideration the OO’s and MM’s indifference towards price and increase its prices to derive higher immediate customer value. This has two implications for HubSpot: firstly.Overall. This will be discussed further below. secondly. However. The pricing strategy is good because it provide low initial commitment fee but instead derive a constant flow of revenue provided the customers continue subscribing to the service. Both implications are undesirable for HubSpot. Q4. its popular IM strategy that employs interesting blog posts and videos causes the interest stage to be very effective. On the other hand. HubSpot risks losing its market share to its competitors who use OM to capture market potential. the cost of acquiring new customers through traditional OM is about six to seven times larger than the cost through IM. The effectiveness will decrease slowly at the desire and action stage because HubSpot’s . the breakeven point for these customers are so much later than the initial customers pulled in through IM. HubSpot’s current IM strategy has very ineffective awareness stage. the price increase should not be too steep as to drive out all the demand.
HubSpot can increase the effectiveness of the awareness stage. it should focus on internet ads on the most popular websites. the best companies employ the right balance of OM and IM. It can either put up its ads on these websites or it can build a partnership with these websites.strategy is pulling not pushing the customers. By putting their ads on popular websites. the AIDA model also suggests that HubSpot should employ certain OM to capture more awareness for its products. and magazine ads because it will increase acquisition costs steeply. For HubSpot to partner with existing popular web services. After all. This will push the curved up and change its curvature. With OM. HubSpot will also increase the credibility of its products. HubSpot should focus on some OM to achieve their goal of being market leader and to generate more profit. employing OM may devalue HubSpot’s brand image and loyalty. Rather. HubSpot should be able to identify the websites that most potential customers dwell around through their lead-generation software. it can provide these websites free HubSpot’s search engine optimization (SEO) services but should ask these websites to mention HubSpot or visibly put up HubSpot’s logo on their website. TV ads. To conclude. Instead they should promote the use of IM as a very powerful supplement to traditional OM. Therefore. Naturally an increase in awareness will lead to more generation of customers. Meanwhile. . Before pursuing this strategy they should stop disparaging OM in order to not hurt its brand image. In terms of OM HubSpot exclude the pricey bill-boards. For HubSpot to pursue even the slightest OM its executives can continue preaching the values of IM but they should not disparage the use of OM.
25 months 30.3% 6.0% 31.26 months $1000 Acquisition Cost $250 Monthly Profit $4815 CLV Exhibit 2 HubSpot Customer division Exhibit 3 .3 months 16.625 - OO 4.2% 3.Appendix Exhibit 1 Segment’s Customer Lifetime Value MM B2B B2C 3.3% Churn Rate Consumer Lifetime 23.67 months $5000 $500 $10.
Exhibit 4 New Customer Acquisition Exhibit 5 Current Age of Customers .
Exhibit 6 AIDA model for HubSpot Promotion and AIDA 6 5 Effectiveness 4 3 IM IM & OM 2 1 0 Awareness Interest Desire Action .
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