HubSpot is a prime example of an effective company that maintains very tight overlap between its business and operating models. The company coined the term “inbound marketing” to describe marketing techniques that pull prospective customers towards its service offerings. Over the last decade, the company has worked hard to evangelize corporate America that the rules of marketing have changed and that a new approach is needed to appeal to the way customers shop and explore online. Today, HubSpot serves over 11,000 customers and 1,500 agency partners in over 65 countries.
The organization’s business model is centered around providing a service that attracts customers, not interrupts them. They have developed a suite of tools and applications to assist customers to transform their marketing initiatives with blogging, search engine optimization and social media efforts. These initiatives are meant to supplement or replace the company’s traditional outbound marketing programs like email blasts and ads. HubSpot’s business model is made successful by their comprehensive service offering and intuitive pricing structure.
HubSpot offers three pricing tiers based on the usage intensity of the end consumer. The Basic platform targets SMEs that require limited analytics, content marketing and email marketing capabilities. The Pro platform offers more extensive analytics capabilities and integrates into more third party software systems like SalesForce. The Enterprise platform offers a complete suite of inbound marketing tools that include A/B testing and predictive lead scoring. The pricing for these three tiers range from as low as $200 to as high as $2,400 per month. In effect, these pricing levels provide an solution for a wide spectrum of customers and lowers the barrier to adoption. This low barrier enables businesses to experience the power of inbound marketing with little financial risk. The system also enables the customer to easily upgrade their package as more functionality is needed.
The Company’s operating model is focused on acquiring the “right” customers and promoting the doctrine of inbound marketing. In the early years of the company, as many as 50% of their leads were deemed low-quality and turned away. After determining that the unit economics of acquiring and serving a small business owner was higher than that of marketing professional, HubSpot was able to actively target the SME customer base. This attention has enabled HubSpot to more closely align its business model and pricing structure to serve their core consumer.
In order to “practice what they preach,” the company has never executed outbound marketing. Instead, the company uses its own software to attract new customers. This process allows them to fully understand the strengths and weaknesses of their software and methodology. If challenges arise, the Company can quickly engage their engineers to create a solution. It also builds credibility in the community by providing a high profile example where inbound marketing has been successful. Prospective customers that are brought in through HubSpot’s inbound channel immediately understand the value-add and use cases for their products. Existing customers can model their efforts after HubSpot’s strategies and may even be encouraged to upgrade their software to have access to more functionality.
Furthermore, the company’s operating process enables them to retain a higher percentage of their customers and prevent customer churn from inhibiting growth. Every new customer that is brought on board is required to pay an onboarding fee as well as participate in training for the various products. This investment of time and money helps to weed out companies that are not serious about making the commitment to utilize inbound marketing. As a result, the employees can focus on building a stronger and more constructive relationship with the companies that truly want to develop an inbound marketing channel. The result has been a more successful cohort of companies employing inbound marketing, which has led to more up-selling opportunities for HubSpot. It also helps to encourage more companies to consider inbound marketing as a potential alternative. When the new prospects investigate the space further, HubSpot’s position at the center of the trade show, blogging and content marketing ecosystems pull these prospects to their service offering. This feedback loop provides a compelling competitive advantage that continues to grow over time for the Company.