Should Hubspot Use Outbound Marketing Along with Its Current Inbound Marketing Efforts

Key Question: Should HubSpot use Outbound Marketing along with its current Inbound Marketing efforts?

1. The key problems currently faced by HubSpot

a. Resource limitations: namely the ability of its engineering staff to build products and the right features at the right time to match market needs;

b. A diverse customer base: makes strategic planning difficult as different customers value different features, making prioritizing items in the long list of software updates a major challenge;

i. Also drives layers of complexity and cost to sales and customer service;

c. Higher churn rates in Owner Ollies: the larger base of customers (and larger pool of potential businesses)

2. Who should HubSpot target:

1. (a) “Marketer Marys” or “Owner Ollies”;

• HubSpot should target Owner Ollies.

• Pros:

o This group comprises the core of HubSpot’s business (73%) and stands to benefit most from being educated in Web 2.0 (a core deliverable of the inbound marketing model).

o This group also can benefit from both Creating Traffic and Analyzing and Qualifying Leads, which is the area where HubSpot wants to focus building its leadership strengths.

o Owner Ollies also are one-fifth the cost to acquire and have a lower focus on marketing, which can enable HubSpot to leverage more of its capabilities to act as a de facto marketing department;

• Cons:

o With higher risks due to many potentially poor business models and higher macroeconomic risks and concerns, Owner Ollies carry a fair level of risk. However, HubSpot can double down to focus on evaluation criteria of its own to properly qualify leads from Owner Ollies based on characteristics of higher probability of business success.

o Owner Ollies also pose higher churn rates. However, HubSpot can combat this on two fronts: first by revising its pricing to lock them in for longer contracts; and second by designing the business to bring more into HubSpot’s CMS.

o Assuming churn typically occurs after 3 months of service, if HubSpot can reduce churn to the average of Marketer Mary’s (by 1.1%), on the 2008 full year new Ollie customer count of 116 and monthly ongoing fee of $250, Hubspot can improve revenue by ~$2,800 (9 months). While apparently small, this helps cover cost of new acquisition and helps to protect the customer base through growth. Any further reductions in Churn to the CMS level will double this revenue improvement.

o Further, by encouraging more HubSpot customer usage through simplification of the solution, Ollies in the bottom 55% of light to moderate users could potentially perceive even greater benefits over time;

2. (b) “B2C” or “B2B” firms? Why?

• Hubspot should target B2B.

• Pros:

o B2B users are the core of HubSpot (68%). Further, they have much lower churn rates vs. B2C (3.3% vs. 6.0%);

o B2B users perceive their highest value in the arena of Lead Qualification, the key core competency where HubSpot wants to build its sustainable competitive advantage;

o B2B users also perceive inbound marketing as higher value add compared to B2C, as many B2B have more complex products/services and buyer decision-making cycles;

o B2B also tend to be less experienced with Web 2.0, and can serve to benefit from leveraging HubSpot’s resources for education and development of effective marketing campaigns;

• Cons:

o The main con is that B2B tend to require more attention from Lopin’s team at HubSpot both during start-up and over the lives of customers. This implies additional cost, which could be mitigated by modifying the pricing model. However, a core long-term reward from focusing on B2B can be achieved through gaining expertise in how to coach B2B companies (and potentially particular industry segments) in a more effective, efficient, and expert manner;

3. (c) What product and pricing strategy should they use?

• Product Strategy:

o Focus on the front end (Create Traffic, Analyze and Qualify Leads) to become the market leader;

o Partner with Salesforce.com (or an unknown firm) for a HubSpot co-branded Sales Closure platform that can be integrated or purchased as a stand-alone solution;

 Key analytics engine, critical for