Hubspot: Inbound Marketing Essay

HubSpot is an online marketing software company that utilizes inbound marketing, a system which pulls prospective customers to a business and its products. Although inbound marketing has been highly successful and the company has reached its milestone of 1,000 customers, HubSpot is now faced with the dilemma of which direction to steer towards, while considering the viability of inbound marketing at a larger scale. HubSpot must decide whether to target the Marketing Marys (MM) segment, the Owner Ollies (OO) segment or both. We recommend that HubSpot focus on the OO segment. Our strategy is to actively grow this market segment, lower the churn rate and increase the retention rate. By targeting this segment, it will help HubSpot further its goal of becoming an industry leader in the Leads, Analyze and Qualify Traffic sectors of the inbound marketing industry. Our recommendation is based on quantitative analysis which showed that the OO segment is more profitable than the MM segment. Considering the $1000 acquisition cost of OOs and their current pricing, the breakeven for this segment is 2 months. In addition, the lifetime revenue for the OOs is estimated to be $1. M (Exhibit B). In contrast, the breakeven time calculated for the MMs is 9 months with an estimated lifetime revenue of $1. 6M. In addition to quantitative analysis, we also considered qualitative factors in determining our recommendation. We determined that inbound marketing should remain the primary marketing system because it is a user-friendly and a cost efficient product and most importantly, it is HubSpot’s guiding philosophy. Inbound Marketing, a core value and strength, will continue to differentiate HubSpot from its competitors as it grows. In choosing to target the OO segment, we are assuming that OOs will continue to migrate to HubSpot’s hosted content management system at the same rate. The plan is to foster the OOs through retention programs and an improved quality customer service department. The company can lock the customer into a one-year contract at a discount or offer initial free consulting services. In addition within this timeframe, HubSpot’s salesforce will promote the advantages of migrating to the CMS system. We considered alternatives such as targeting both OO and MM segments or focusing solely on the MM segment. However, according to the company product timeline, it takes more than 3 months to develop new products and processes so the alternative of targeting both segments was rejected. As a new company, HubSpot has limited resources to service the diverse client base, which will cause product growth to lag behind servicing customers’ needs. In the long run, this will put the company at a less competitive position in the industry. Additionally, we also considered targeting only the MMs because this segment realized the most growth during the last four months of 2008, perhaps indicating long term growth potential. We rejected this strategy as a result of our expense breakeven analysis: it takes 4 ? times longer to breakeven with MM customers than it does with OO clients (Exhibit B). Finally, while we realize that the shift in focus could potentially lead to loss of market share within the MM segment, we believe that the gain in OO segment will offset the loss in the long run. In conclusion, we recommend that HubSpot target the OO segment. We identified HubSpot’s goals as growth within the OO segment, a lower churn rate and an increased retention rate. HubSpot can accomplish these objectives by promoting the CMS system and implementing a new customer contract initiative. As the company moves towards accomplishing these goals, it will no doubt become a market leader in the online software marketing industry.