Inbound Marketing Case Study
- Joseph Gerke, PE
- Mar 30, 2020
- 5 min read
Introduction
Marketing has undergone a massive shift in the 21st century, and new companies using new strategies have emerged to lead the way. This case study examines HubSpot, and is based on the article HubSpot: Inbound Marketing and Web 2.0 by Steenburgh, Avery, and Dahod (2011). The key problems which need to be addressed at this time are as follows: a decision of who to serve of their diverse customer base, churn rates and the effect on pricing, and the existential challenge of whether HubSpot’s philosophy will be used as the company attempts to scale.
HubSpot had an influential voice in the new marketing space, and their innovative use of technology improved customer’s relationship with brands. As Steenburgh et al. summarized, “Instead of driving their message into a crowd over and over again like a sledgehammer, they attract highly qualified customers to their business like a magnet” (2011). This innovation came with interesting challenges and layers of complexity.
HubSpot is a revolutionary company, but needs to keep focusing on relational methods to grow and truly serve their clients in better ways. Adjusting their pricing strategy will solve the churn problem, repositioning their service will help with diversity, and continuing to refine their internal model of marketing will help deliver greater value to their customers. In this paper I will continue by sharing more background about HubSpot, conduct a SWOT analysis, discuss alternatives and my analysis of the challenges, share my proposed solution and supporting arguments and finally share recommendations.
Background
Hubspot was started in 2006 by two MIT students, Brian Halligan and Dharmesh Shah. They were early believers in the power of the internet to transform business, especially small businesses. They founded HubSpot with the help of two venture capital firms near MIT in Cambridge, Massachusetts. After 3 years of steady growth, they had acquired 1000 customers and had some major decisions to make if they wanted to become the market leader over their competition.
SWOT Analysis
Alternatives/Analysis
HubSpot has a wide range of customers, but the biggest breakdown is between two groups that they have named Owner Ollie (73% of their portfolio) and Marketing Mary (27%). Small business owners use HubSpot to begin or improve their presence on the internet, and have found large gains in their leads after the first few months of using the software. But bigger business where Mary worked already had an existing marketing strategy, but wanted HubSpot’s analytics tools and reports to help them justify their value and track progress for their company.
HubSpot’s problem came with the churn rates of Owner Ollie: once Ollie was satisfied by a boost in leads generated, he would stop using the software service 34% faster than Marketing Mary. See the chart below on slide 3 for a summary of the profits from each group, as well as the growth of the customer base.
So
HubSpot’s first option in the marketing dilemma is to continue as usual. They have achieved some success and are selling their software as a service to make profit. But in order to be the best, and to prove to their customers that their philosophy is successful, they must adjust their strategy to reach even more people.
Their second option is to adopt traditional marketing principles. They could create outbound TV and radio commercials, rent billboards, use newspaper ads, and make cold calls to try to reach people who are not using them right now. The data quoted in the article indicated that there were almost 2.3 million small to medium sized businesses in the United States alone; some of these could be reached by traditional marketing methods. But HubSpot’s VP of marketing estimated that a lead generated by outbound marketing cost 5 to 7 times more than a lead generated by the new inbound strategies. If HubSpot stopped practicing what they preached, this would also cause embarrassment and could potentially damage their image.
The third option is to continue to refine their model and provide more value to the customer. If they can continue to refine their customer funnel and optimize their pricing, then they can continue to create more loyal customers who will spread the word about their great services. This strategy will not deliver instantaneous growth, but the steady growth rates indicate a positive trend, and that the core software is valuable.
Proposed Solution
I believe that HubSpot should continue to serve both Ollie and Mary. Each customer provides about $1000 a month of profit, and if the churn rate of Owner Ollie can be adjusted through better offerings, then it can be just as important to have 700 or more consistent Ollies using HubSpot’s services. One potential fix to this solution that I noticed on Yemi Adejumo’s SlideShare is to incentivize Ollie to migrate their websites to HubSpot’s Content Management System (CMS). The data shows that those who use the CMS are more likely to stay with HubSpot then those that don’t!
HubSpot has already done the hard work of building relationships with their customers, and this is one of their main advantages. If they stop nurturing these customers, they will eventually drift off. Every decision should be analyzed through the lenses of customer impact: if a billboard or media sponsorship will make existing customers proud and strengthen the partnership, do it. But if not, the short term gains that may come with more exposure would likely be wiped away by the damage done to HubSpot’s image.
Support In class we have talked about the Segmentation, Targeting, and Positioning (STP) model. HubSpot has already done some segmentation and targeting with Ollie and Mary, but it could improve how it positions itself as discussed above.
For class I have also been reading the book Lean Impact by Ann Mei Chang (2019). She talks about trimming the fat out of business processes, and points out that making your organization as lean as possible may include reaching as many people as possible. If a process can be adjusted to serve more people with the same amount of work, it will have greater impact.
This topic also reminds me of an iconic bible verse, Matthew 7:6 from the New International Version, which says, “Do not give dogs what is sacred; do not throw your pearls to pigs. If you do, they may trample them under their feet, and turn and tear you to pieces.” While it may seem logical to spend millions of dollars trying to reach more people with traditional marketing techniques, many of these interruptive marketing tools can have adverse effects. They have become so common place now that people devalue the efforts and will turn and criticize the companies who make greedy overtures.
Recommendations
HubSpot needs to keep focusing on relational methods to grow and truly serve their clients in better ways. This is the core idea of their business, so if they change who they are, their clients will notice. By continuing to serve their clients and incentivizing them to harness the power of outbound marketing, HubSpot will become the market leader in their industry.
References
Adejumo, Y., Malley, B., McSweeney, S., Grant, J., & Cao, Y. (2013, October 28). Hubspot Case Analysis. Retrieved March 21, 2020, from https://www.slideshare.net/YemiAdejumo/hubspot-case-analysis/3
Chang, A. M. (2019). Lean impact: how to innovate for radically greater social good. Hoboken, NJ: John Wiley & Sons, Inc.
Denis. (2019, November 29). STP Marketing Model - Segmenting, Targeting, Positioning. Retrieved March 21, 2020, from https://expertprogrammanagement.com/2019/11/stp-marketing-model/
Steenburgh, T. J., Avery, J., & Dahod, N. (2011). HubSpot: inbound marketing and Web 2.0. Boston, MA: Harvard Business School Publishing.
Personal Research into HubSpot’s Freeware:
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