Marketing and Customer Base

Topics: Marketing, Target market, Churn rate Pages: 3 (859 words) Published: January 26, 2013
Case: HubSpot
Team No. 8

HubSpot is faced with the problem of whether they should cast a wide net to attract a diverse customer base or whether they should narrow their focus to a particular target market. We recommend HubSpot target both Owner Ollie (OO) and Marketer Mary (MM) market segments, rather than focusing on a single segment, in order to accelerate growth rate and increase profitability. We approached this problem holistically by blending our financial analysis with HubSpot’s proven success in increasing market share and providing quality service to both customer bases. We recommend this broad strategy in contrast to focusing on one segment, as suggested by Mr. Roberge, as we found no convincing evidence to support relinquishing command of such a diverse customer base. Our recommendation is based on our quantitative comparison between OOs and MMs, evaluating break-even time, customer lifetime value in relation to acquisition costs, and projected growth. Comparison of break-even time favors OOs (3 months) over MMs (11 months; Exhibit 1). However, customer lifetime value (CLV) heavily favors MMs ($11,125) over OOs ($5,314; Exhibit 2). Our analysis finds that OOs produce positive cash flow faster while MMs produce higher long-term profitability. Furthermore, the aggregate CLV of the current customer base shows comparable values for both groups (Exhibit 2). Although MMs cost more to acquire, they are projected to grow at a higher rate (Exhibit 3). Therefore, we cannot assume that either target group is more profitable, nor will pursuing a single target group increase HubSpot’s revenue or growth.

While targeting a single segment allows HubSpot to offer a more customized product to a niche market, we believe both OOs and MMs to be integral components. A failure to serve one would adversely affect the other. The constant revenue OOs generate provides HubSpot with the ability to support the time intensive but extremely profitable MMs. Furthermore,...
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