As mentioned in the case, HubSpot believes that the rules of marketing have changed. However, I would be of the opinion that the rules of marketing have “evolved”. With the emergence of technology and the increasing presence of internet or Web 2.0, there is strong increased competition among different channels of media to attract the attention of consumers as a platform to get information. According to a recent research conducted by Forrester Research in 2012, the average consumer of internet in the U.S. spends as much time on the internet as he or she watches TV offline.
HubSpot noticed this change in rules of marketing and the marketing opportunity and developed a suite of marketing software to initiate and measure inbound marketing strategies for customers. HubSpot took the initiative and through Web 2.0, coined a term “inbound marketing”, which refers to marketing strategies and practices that “pull” prospective customers towards the products and services of a business, through the use of Web 2.0 application and tools, including search engine optimization, blogging, and social media. This trend shows that inbound marketing provides the best alternative to the evolution in the rules of marketing. With the increasing number of consumers resorting to the internet as a source of information, inbound marketing provides an extremely effective and cost effective means of attracting potential customers and generating more revenue.
HubSpot realized the need to challenge the traditional marketing world by introducing new rules using a new age platform. The rules of marketing have changed over the recent past decades. Traditional marketing strategies, such as direct mail, advertising, and telemarketing are now becoming obsolete and less effective (Smith & Zook, 2011). Customers have become more sophisticated, are blocking sales messages, and have the ability to evaluate the products and services they need on their own. As such, new businesses need to find new ways to stand out, get found, engage, influence customers, and sell more. In order to generate a lead generation strategy, businesses must first focus on customer insight. In order to get noticed, businesses are resorting to social media, search engine optimization, blogs, podcasts, and social network sites like Facebook and Twitter. Other strategies include content marketing, email marketing, mobile marketing, and telemarketing.
How does inbound marketing work in this new landscape?
Traditional methods of marketing concentrated on mostly on print ads, television commercials, and exhibitions. Inbound marketing focuses on the idea that customers with the need of a product or service would probably conduct an information search through the available sources of information to find out the best out of the available sources. This platform is the internet, and all that firms need to do is to make their presence felt through web. Inbound marketing strategy “pulls” prospective customers by availing relevant information and disseminating databases on the search process used by customers (Kelly, 2012). Instead of searching for customers and interfering with their daily life through direct selling and telemarketing, HubSpot noticed the effectiveness of being there for customer to notice you. HubSpot create blogs with interesting content that attracts the attention of consumers to visit the website for more information.
Inbound marketing provides an interactive platform that engage consumers actively with the company as well as its products and services. HubSpot realized unique advantage providing what they promised. The firm created entertainment You Tube videos like “Cold calling is for loser” to attract the attention of customers. The video received 35,000 hits within a very short period. This does not only point to the fact that it received a large following, but this strategy was effective in measuring audience exposure. This number only included interested viewers rather than disinterested viewers viewing an advertisement interrupting their favorite program. The resulting online buzz created an interaction between HubSpot and its consumers.
Inbound marketing is also feedback oriented. HubSpot created a community that allowed consumers using their products to give their comments on their experience with HubSpot software. HubSpot was able to earn credibility in the minds of consumers regarding the usability and reliability of its products.
Should the company continue to focus on all customers or decide between owners and marketers?
HubSpot identified two different customer segments, including small business owner customer (“Owner Ollie”) and marketing professional customers (“Market Mary”). The small business owners comprise of entrepreneurs owning business with no more than 25 employees. The cost of acquiring these customers was $1000 and their main objective was to create maximum leads for their business. OOs are occupied with other functions and lack a defined marketing department. Additionally, they lack adequate knowledge of Web 2.0 and have not invested on training that comes along with the software tools. They constitute 73% of HubSpot’s customer portfolio. Table A shows that the churn rate is 4.3% per month, which implies serving this segment is not sustainable despite having great usage potential.
The Market Mary (MM) comprises of trained marketing professionals working for companies with central management. This segment of customers has knowledge about marketing tools including inbound marketing. MM is only interested in the reports and analytics provides by HubSpot. This group has a potential to invest heavily in HubSpot’s products and services because they do not only have the need to develop tools required to construct a robust inbound marketing programs, but also the financial investment. Compared to OOs, MM have a lower churn rate of 3.2%. However, it has a longer selling cycle compared to OOs. MM accounts for 31% of HubSpot’s customers.
CLV (Customer Lifetime Value)
CLV = [(monthly profit) * (customer lifetime in months)] (acquisition costs)
Customer lifetime in months = 1/monthly churn rate
Analysis
Considering the differences between these groups, HubSpot has accordingly developed a diverse product portfolio that meets the needs of each of the segment. The pricing strategy used by HubSpot, include price differentiation for each customer segment. Since the cost of acquiring OO is one-fifth of acquiring a MM, HubSpot could easily manage to reduce the monthly fee difference to $250 for OO compared to $500 for MM. Additionally, since the OO consumers comprises of larger percentage of HubSpot’s sales, the reduction in monthly prices could be accounted to by economies of scale. As such, HubSpot has appropriately identified its customer segments, and serves them according to the expected returns.
B2B customers vs. B2c customers
B2B customers do not have adequate experience with Web 2.0 technology. Consequently, they require the products and services offered by HubSpot. B2B companies offer complicated products and services to their customers and this makes it essential for their customers to have a thorough knowledge of their products before investing in them. This makes HubSpot products and services a perfect solution to the needs of B2B customers. In addition, B2B customers need technical and software support from HubSpot during the start-up and throughout the business’s life cycle as well.
On the other hand, B2C customers found the contents and templates of HubSpot too basic to meet their needs. They seemed to derive less utility form HubSpot’s products and services compared to B2C customers. Additionally, B2C customers dealt with products and services that already required them to establish a strong online presence. Majority of them had already engaged Web 2.0 agencies and consultants to serve their marketing needs.
Analysis
HubSpot should consider placing more emphasis on acquiring and retaining B2B customers. Additionally, the churn rate of B2B customers is almost half of that of B2B (Table A). The B2C customers have low utility to HubSpot’s products and services. As such, HubSpot should focus more on catering for the needs of B2B customers as it will enable the firm maximize its profits.
Should the company consider traditional outbound marketing?
The main issue affecting the firm’s current marketing strategy is that, since they “pull” customers to their firm, it becomes difficult to determine the correct strategy they should implement before identifying the segment of customers they finally attract. This creates a situation where knowing the strategy to implement depends on the knowledge of what particular segment to target. With this in mind, outbound marketing has significant advantages compared to inbound marketing because strategies are formulated and implemented following identification of the target market. Outbound traditional marketing also has the probability of reaching and attracting a large and diverse set of customers. The weakness of HubSpot’s current marketing strategy filters out customers with greater potential to purchase and narrows their focus to target them. This eliminated approximately 50% of customers from the top of the customer funnel.
However, HubSpot has the potential to pertinently, address the above concerns. As Volpe comments, the current modern is very large and their product is small. Table C shows the potential for small and medium businesses. From the table, almost all these are OO, with half of them being B2B, which constitutes greatest customer base for HubSpot. For that reason, the firm has immense potential for profit maximization. HubSpot should continue using inbound marketing because it is a creative method of marketing, which generates measurable results and enhance optimal use of financial resources.
References:
Kelly, A. (2012). Business patterns for software developers. New Jersey: John Wiley & Sons.
Smith, P.P. & Zook, Z. (2011). Marketing communications (5th ed.). Philadelphia: Kogan Page Publishers.
Steenburgh, T., Avery, J. & Dahod, N. (2011). HubSpot: Inbound marketing and Web 2.0. Harvard Business Schools.
