Changes in rules of Marketing The old rules of marketing are characterised by companies bombarding consumers with marketing tools, such as TV advertisements, direct mail, telemarketing, fliers and spam. David Meerman Scott author of “The New Rules of Marketing and PR” describes the old rules of Marketing and PR as ‘Buy your way in with advertising, Beg your way in with PR. ‘ HubSpot, although a pioneer, is not alone in the move to inbound marketing. Inbound marketing is a collection of marketing strategies and techniques focused on pulling prospects and customers towards a business and its products” when prospects are actively searching for particular products. (CASE) The new rules of marketing were that firms pulled leads “towards a business and its products, through the use of Web 2. 0 and applications like blogging, SEO and social media. ” (Case) It aimed to provide all relevant information for prospective customers searching for a brand or product and increase the sales/leads ratio.
It not only provided additional sources of information but also aimed to create “interesting content, so that people want to hear what you have to say and come find you”. (CASE) According to Mike Volpe, HubSpot’s VP of Marketing, this approach is more effective than engaging in traditional advertising. This effectiveness is down to significantly lower costs of lead generation and greater conversion rate of prospective customers. We partially agree that the rules of marketing have changed.
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While it is true that outbound marketing is becoming less effective because people have begun tuning out from the constant flow of promotions yielding less new business (Case), HubSpot itself has been having great troubles trying to operate with the use of just inbound marketing. “I am not allowed to cold call prospective customers because HubSpot’s been preaching inbound marketing…if someone then gets a cold call from someone on my team, that can hurt our brand” (Mark Roberge, VP Sales). Based on these facts, the old rules have not changed but rather have been complemented by new inbound marketing tools.
Market Segmentation HubSpot has evaluated the market and classified it into different segment profiles: Marketer Mary’s (MM’s) and Owner Ollies (OO’s) as well as B2B and B2C. The case highlights that B2B companies derive greater value from inbound marketing in comparison to B2C companies for a number of reasons. Firstly, B2B companies’ products are more complex and thus they require in-depth product specification and explanation, e. g. tutorials and blogs. In addition, since their customers have a longer decision making cycle, B2B companies are more selective about whom their sales forces focus on.
Thus B2B companies also benefit from the lead qualification analysis that HubSpot provides. Consequently, they have a much lower churn rate than B2C companies??? 3. 3% vs. 6. 0%. (Table A) HubSpot has also made a distinction between small business owners, the “Owner Ollie” (OO’s), and the marketing professionals for bigger firms ??? “Marketer Mary”(MM’s). OO’s are usually small businesses with 1-25 employees and account for 73% of the generated sales. Their demand is fairly simple – they want simple solutions that will not take much of their time, since they have to manage all the different areas of the company.
Also, OO’s have little knowledge regarding Web 2. 0 and thus inbound marketing can have a bigger initial impact on these businesses. 13 % of OO’s host their websites on the HubSpot Content Management System (CMS), whereas only 2% of MM’s do so. MM’s are marketing professionals working in firms of 26-100 people, and account for 27% of Hub’s customer portfolio. Their demand is more complex, since they are more familiar with Web 2. 0 ??? these companies have their own websites in which they have invested their time and money.
HubSpot aims to grow quickly in the market, increase its profitability and optimise its pricing strategy. Exhibit 10 shows that HubSpot’s market is expanding. Using customer churn rates, acquisition costs and monthly profit data, we found that the Customer Lifetime Value (CLV) of MM’s ($10,625) is much higher than OO’s ($4,814). Compared to OO’s, MM’s are larger in size – run more inbound marketing programs which means more business per customer -and have higher purchasing power, thus it can potentially charge higher price premiums (Exhibit 7).
Additionally, the Customer Lifetime in months is higher for MM’s (31. 3) than OO’s (23. 3) (Appendix), as MM’s derive greater value from the HubSpot’s analytical tools for a longer period of time. As such, they are more likely to invest more time in the software and maximise the benefits of the tools, increasing the lifetime in months. Also, MM’s are more stable businesses especially in times of recession when smaller companies have a higher risk of failure. Lastly, 67% of MM’s are B2B (Exhibit 5) where inbound marketing has been more effective as compared to B2C businesses.
Thus, HubSpot can maximise its total profits by focusing on this segment in a long term. Inbound vs. Outbound strategies for MM In order for HubSpot to effectively target MM’s, it is important for them to firstly develop an understanding of the segment’s behaviours and characteristics. As the case suggests, MM’s had extensive financial wealth to spend on marketing interfaces such as HubSpot; however, they were relatively difficult to reach and had a longer selling cycle as they often had to seek approval from top management. They also had a high acquisition cost of $5,000.
Further, MM’s are marketing professionals and had already developed relevant knowledge about HubSpot’s interface, Web 2. 0. In fact, they required more flexible, sophisticated inbound marketing tools that would provide extensive analytics and reports that are essential for top management decision-making. According to Solomon et al. (2012), when a firm places a focus on developing one or more products for a single segment, it utilises ‘concentrated targeting strategy’; we believe this is a relevant strategy to be used by HubSpot to reach MM’s.
To satisfy MM’s demand for sophisticated in-depth analysis tools and to deal with their high selectivity, we suggest that HubSpot firstly extend their product range and at the same time, place an emphasis on product and customer service quality. To do this, Hubspot could conduct a research to identify the wants and needs of MM’s so that they could effectively deliver those needs. As an example, they could choose to provide several fixed packages with different marketing tools e. g. lead grader, lead visit alerts and closed-loop marketing analytics.
This way, different clients could choose the most suitable package that will suit their unique requirements and marketing system, allowing them to maximise their benefits. Alternatively, HubSpot could also offer customised packages by letting clients choose particular marketing tools that are relevant to their needs. However, we realise that this would require HubSpot to invest significant resources into R&D; thus they should firstly consider whether the benefits would outweigh the costs.
With regards to pricing strategy, HubSpot currently classifies its buyers into three different categories: basic (for small businesses), professional (mid-sized businesses) and enterprise (large businesses), and there are different price rates within those categories based on the number of leads. When targeting MM’s specifically, HubSpot should firstly investigate their price sensitivity by detecting and analysing changes in post-purchase customer retention and new customer acquisition data resulting from variations in price.
When they have gained sufficient evidence, they then could then employ the best pricing strategy that works for the segment. According to Lopin, HubSpot’s exclusive use of inbound marketing has impeded the potential growth of the company. We believe that outbound marketing techniques would be a useful tool that would help Hubspot grow more quickly. However, to maintain its brand image and credibility, HubSpot should continue to restrict its marketing strategy to inbound marketing. Having said that, HubSpot should further develop their use of Internet search, online blogs and social media applications.
For example, HubSpot could encourage past clients to post online reviews or feedbacks by offering special benefits such as free marketing tool and discount rates, thus increasing HubSpot’s online visibility and allowing HubSpot to capture more potential customers. This tactic may further benefit HubSpot by an effective spread of good word of mouth. However, as they would not have a direct control over these reviews and word of mouth, HubSpot needs to employ strict quality control for their products and customer service to continuously enhance their reputation. Furthermore, they could create a viral advertisement i. . by creating an interesting video advertisement that could be reposted by viewers onto social network appliances such as Facebook and YouTube. Bibliography Solomon, M. , Marshall, G. , & Stuart, E. , (2012). Marketing 7E: Real People Real Choices. Pearson Education, Prentice Hall, U. S. A. Appendix 1. Calculations CLV = Monthly Profit * Customer Lifetime in Months ??? Acquisition Costs Customer Lifetime in Months = 1/Churn Rate B2BB2CMMOO CLV106254813. 953 Customer lifetime in Months30. 3030316. 6666731. 2523. 25581 Monthly profit500250 Acquisition cost50001000