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Hubspot

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by

Patrick Sims

on 1 April 2013

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Transcript of Hubspot

Adjust pricing to drive customer retention Hubspot builds web-based software products that help companies execute inbound marketing programs to replace traditional outbound programs.

Products focus on pulling prospective customers toward the business and products with captivating Web 2.0 tool such as blogs, searching engine optimization and social media marketing. HubSpot Background HubSpot Inbound Marketing Step 2: Step 1: Step 3:

Threats:
Falling revenue as a result of high churn rate.
Using traditional marketing strategies may undermine brand position.
Diverse customer base makes strategic planning more difficult.






Opportunities:
Improve closing time: currently 30-45 days from initial contact.
Customers with CMS web hosting have a lower churn rate and should be targeted.
Huge growth opportunities with small and medium sized businesses.
Charge more for upfront service.
Combine traditional marketing techniques with inbound marketing.

Weakness:
Marketing is not targeted (limits efficiency)
User intensive (10 hours per week to see results)
High churn rate.
Currently ignoring 50% of leads.
Diminishing returns in customer value.







Strengths:
Solid financial foundation –received $17MM
from venture capitalists
Software is easy to use compared to competition
They offer a unique marketing approach (inbound)
Strong search engine optimization
Highly acclaimed (won many awards) HubSpot SWOT ANALYSIS Recommendations 1.Continue to conduct business as usual
Positives:
Need less customer support.

Negatives:
Find many of HubSpot’s templates to be too rudimentary.

High churn rate. (6% per month) Possible Solutions 2.Only target Owner Ollie’s: 4.Only Target B2B: 3.Only target Marketer Mary’s: 5. Target B2C Customers: Positives:
Customers seem to derive a lot of value from inbound marketing especially from lead qualification.

B2B typically has a longer sales process and they are more selective about potential customers that they will target.

Low Churn Rate (3.2% per month)

Negatives:
Need more customer support Positives:
Likely to be more recession proof.
More interested in analytics and reports that HubSpot provides.
More loyal customer with a lower churn rate. (3.2% monthly)

Negatives:
Only represent a small portion of customer base.
Require advanced product solutions.
Larger acquisition costs. ($5,000)
More difficult to reach.
Longer selling cycle. $500 up-front consulting fee. Ongoing $500 per month. CLV: $11,125 Positives:
Currently account for 73% of total business.
Fairly easy to sell products to.
Owners are not likely to shop competitors pricing and would be able to absorb a price increase.
HubSpot has a larger overall impact on Owner Ollie’s business.
Low customer acquisition costs ($1,000)

Negatives:
Higher churn rate
Less likely to spend time using the actual products $500 up-front consulting fee. Ongoing $250 per month. CLV:$4,078 Only use inbound marketing

Cast a wide net (service all customer types)

This strategy would probably work, but not allow for large scale growth because of inherent inefficient, but would allow for a diverse customer mix Inbound Marketing and Web 2.0 "By creating relationships, inbound marketing compliments the decision making process and allows for the targeting and retention of attractive customers." Generate useful content that consumes are interested in. Distribute content via search engine optimization. Engage and analyze a community of followers who interact with the content. The Hubspot Product Exposure Optimization Content Design Lead Tracking
& Intelligence Content management system gives businesses the power to create a strong interactive web presence through a variety of services.

For Example: Website templates and hosting services that make online publishing easy. SEO Graders such as the keyword and link grader suggests keywords that should be used throughout the site and in the content to increase exposure and drive customers to the business. Visitors Prospects SALES! Leads Detailed usage analysis allows businesses to see where customers are coming from and how they interact with the content.

Qualifying users as Vistors, Prospects, Leads and Opportunities allows business to better guide their sales dollars toward visitors that will become customers. References: Steenburgh,T., Avery, J., & Dahod, N. (2011). Hobspot: Inbound Marketing and Web 2.0, Boston: Harvard Business School Publishing. Hubspot's Customers The diverse customer base consists of professionals, B2B B2C, small business owners, marketing managers of large firms in the health care, real estate, construction industries. B2B Customers:
Have limited experience with Web 2.0 marketing.
No exposure to marketing consultants.
Require more attention and a have steep learning curve.
Get the best results from inbound marketing.
Have a longer decision making process.
Derive most value from lead qualification services.
Have a churn rate of 3.3% and an average customers life of 15.37 months, with a CLV equal to $5,371 B2C customers:
Have a working knowledge of web 2.0 marketing.
Require sophisticated website designs.
Maintain highly performing websites and social media presence.
Had experience with consultants prior to contact with Hub Spot.
Have a churn rate of 6% and an average customer life of 8.84 months, with a CLV=$3,301 Owner Ollie:
Represent 73% of customers.
Very busy managing their businesses often wearing multiple hats.
Employees: 1-25
No dedicated marketing department.
Minimal historical marketing investment.
Want quick solutions with max results.
Costs for this customer $1,000
Derive value from lead generation services.
High churn rate.
Customer average life: 14.31 months, CLV: $4,078. Break Even Point: 2 months. Marketer Mary's
Represent 27 % of customers.
Employees: 26-100
Has a dedicated marketing group.
Derive value from analytics/reporting.
More money to spend on marketing activities
Must justify expense to management resulting in longer closing time.
Costs for this customer $5,000
Customer average life: 21.25 months. CLV: $11,125. Break Even Point: 9 Months Core Competencies:
Need Based Marketing

Driving web traffic
Attract large number of prospective customers,

Analyzing and qualifying leads
Assess the potential brought in by the lead generation programs and convert the prospects into buying customers Hubspot's Competition Driving Web Traffic Analyzing Qualifying leads Traction Web Position Nielsen's Buzz Metrics Marketo Eloqua Coremetrics Ektron Marketing Sherpa Lack of Customer Focus:
The company has 1,000 diverse customers.
Current inbound marketing does not target a specific type of customer and ignores 50% of leads
Each segment has its own needs and service requirements making it difficult to gain economies of scale.
Diverse customer base makes strategic planning difficult and causes challenges for pricing. HubSpot’s Dilemmas Current SaaS pricing model effectiveness:
Recent trends show that customers value products initially and cancel service after first several months
Should there be a higher charge up front or a longer subscription requirement? Analysis of the Current Situation Limitations of the inbound marketing strategy: Some employees, in sales especially, want to use traditional outbound marketing instead of waiting on leads to be brought to them.

HubSpot must be committed to inbound marketing internally in order to promote out externally to customers.

Most businesses use a mix of inbound and outbound marketing strategies. Should HubSpot incorporate traditional marketing into the mix? CLV:$5,371 CLV: $3,301 Reduce Churn Rate:
Increase switching costs by forcing clients to subscribe to Content Management System Hosting service.

Space payments to take advantage of the sunk cost effect.
Reduce monthly fee and add an additional an anniversary fee

Increase initial start up fees to increase inbound marketing usage. 6. Adjust pricing to drive customer retention: Positive:
Inbound marketing is only one tool in the marketing mix.

Traditional marketing activities can reach B2B & Owner Ollie’s as they are not knowledgeable of Web 2.0.

Hubspot could implement “lukewarm” calling to revise the customer funnel.

Negative:
potential brand disillusion 7. Incorporate Traditional Marketing Mix Recommendation 1: Only target Owner Ollie’s with a heavy focus on B2B
Rational:

Focusing on one segment will allow for HubSpot to maximize their efficiencies as they will only need to support one type of customer.

HubSpot will be able to spend more time analyzing how to effectively meet the needs of Owner Ollie’s and can realize an opportunity to be the market leader in lead generation through inbound marketing for this segment.

The B2B Owner Ollie segment will derive the most amount of value from HubSpot’s products.

There is a huge pool of potential Owner Ollie business that is currently untapped.

Owner Ollie’s are easier to acquire.
Shorter sales cycle.
Less up-front costs $1,000 compared to $5,000.
The lower monthly customer fee $250 vs. $500 will be made up with sales volume. Recommendation 3: Implement “Lukewarm” Calling to Revise the Customer Funnel

Rationale:
Outbound technique should be limited. Continue with current inbound marketing strategy. “Lukewarm calling” refers to reaching out to potential clients who have expressed interest but ended up opting out.

Hubspot already has a relationship with these people and therefore has greater permission to contact them. Find out the reason why those companies opted out. This strategy will not hurt brand image since it differs from true outbound marketing.
Recommendation 4: Change pricing to a bundling structure
Rationale:

Increase CLTV by increasing price or reducing churn through pricing segmentation, CMS for Owner Ollie's, and third party integration.

Higher churn rate can be minimized by:
Increasing switching costs:
Focus on B2B customers
Encourage customers to use HubSpot’s CMS
Customers that use CMS have a churn rate of 2.1%
Customers that don’t use CMS have a churn rate of 5.5%
Payment Spacing:
Reduce monthly fee and add an additional an anniversary fee
Increase initial start up fees to increase inbound marketing usage.

NewTactics:
Limit options for non-CMS with new Owner Ollies.

Entice customers to transfer web hosting service.
Recommendation 2: Introduce Third Party Applications:
Rationale:

Third Party Integration will Increase CLTV
Third party integration of services should improve convenience and be of of high value to Owner Ollies. They will create a marketplace for online marketing firms where content production and SEO can be managed.

Reduce long-term costs and creates potential for affiliate revenue streams (like they have experience already with Salesforce.com). Hubspot also benefits from a greater amount resources to help them focus on the company’s core offering while positioning them as the central platform for inbound marketing in the industry.
MKT 640- Team Case

Team Members:
Jaslyn Hutley
Steven Jones
Maziar Mottaghian
Patrick Sims THE END
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