Hubspot
Should HubSpot narrow their target by focusing exclusively on either Owner Ollies(OO) or Marketer Marys(MM)? Should they target both?
From Appendix, the Customer Lifetime Value (CLV) for OO is $4814, while the CLV for MM is $10,625. This can incorrectly lead to a conclusion that OO are less valuable than MM to HubSpot.
However, we need to factor in the market size and the number of customers that HubSpot has. OO make up the very small and the small company segment in the market (73% of the entire market). On the other hand, MM are employees of the medium and large companies, which only comprise of 27% of the entire market.
Comparing the overall market distribution (73% OO and 27% MM) to the percentage of customers that HubSpot acquires, HubSpot acquires customers at a proportion which is representative of the overall market (73% OO customers and 27% MM customers). Hence, we can say that the inbound marketing attracts customers from both segments evenly.
When we factor the market size into the equation, the adjusted CLV for OO is $3891 while that for MM is $2979. This is calculated by multiplying the CLV by the percent of market size each segment occupies (OO CLV x 73% and MM CLV x 27%)
CMS also has a significant effect the customer retention. Since the churn rate for CMS customers is 2.1% and for non-CMS customers is 5.5%, the churn rate for OO factoring CMS is 5.1%, while that for MM is 5.4%. Even in this case, the CLV for MM ($4715) is higher than that of OO ($4508), but when you factor in the market size and the number of customers available, the net CLV for OO ($3301) is markedly higher than that of MM ($1262).
Since the adjusted CLV for OO is higher than the CLV for MM in both cases, HubSpot should start focusing exclusively on the OO market.
What is the value of a customer to HubSpot?
The value of a customer to HubSpot can be discovered by using the CLV for OO and MM.
Using the weighted average of these CLV with the number of
From Appendix, the Customer Lifetime Value (CLV) for OO is $4814, while the CLV for MM is $10,625. This can incorrectly lead to a conclusion that OO are less valuable than MM to HubSpot.
However, we need to factor in the market size and the number of customers that HubSpot has. OO make up the very small and the small company segment in the market (73% of the entire market). On the other hand, MM are employees of the medium and large companies, which only comprise of 27% of the entire market.
Comparing the overall market distribution (73% OO and 27% MM) to the percentage of customers that HubSpot acquires, HubSpot acquires customers at a proportion which is representative of the overall market (73% OO customers and 27% MM customers). Hence, we can say that the inbound marketing attracts customers from both segments evenly.
When we factor the market size into the equation, the adjusted CLV for OO is $3891 while that for MM is $2979. This is calculated by multiplying the CLV by the percent of market size each segment occupies (OO CLV x 73% and MM CLV x 27%)
CMS also has a significant effect the customer retention. Since the churn rate for CMS customers is 2.1% and for non-CMS customers is 5.5%, the churn rate for OO factoring CMS is 5.1%, while that for MM is 5.4%. Even in this case, the CLV for MM ($4715) is higher than that of OO ($4508), but when you factor in the market size and the number of customers available, the net CLV for OO ($3301) is markedly higher than that of MM ($1262).
Since the adjusted CLV for OO is higher than the CLV for MM in both cases, HubSpot should start focusing exclusively on the OO market.
What is the value of a customer to HubSpot?
The value of a customer to HubSpot can be discovered by using the CLV for OO and MM.
Using the weighted average of these CLV with the number of