Name: Piyush Kumar Singh Section: G PGID: 61410800

MKDM ASSIGNMENT 2 (HUBSPOT CASE)

Advantages in serving Owner Ollies: Owner Ollies were relatively easier to sell comapared to Marketer Marys Cost of acquisition is less ($ 1,000). Derived greater value from Hubspot. 1.67 million potential customers (Pg-11, Table-C, considering small and very small businesses). With usage of CMS, tend to stay longer.

Disadvantages in serving Owner Ollies: Higher churn rate compared to Market Marys.

Advantages in serving Market Marys: Market Marys had more money to spend on product like Hubspot. They stayed longer than Owner Ollies (lower churn rates) They were familiar with the idea of inbound marketing, so less training time to be spent with them.

Disadvantages in serving Market Marys: Harder to reach and longer selling cycles. Cost of acquisition is more ($ 5,000).

Life time value calculation of present Hubspot customers Assume interest rate to be 5% annual Customer Monthly Margin Consulting Acquisition Percentage of Life time value type Churn rate per fee paid cost total customers (including month at joining consulting fee) Owner 4.3% $ 250 $ 500 $ 1000 73% $ 4800 Ollies Market 3.2% $ 500 $ 500 $ 5000 27% $ 13,325 Marys Total Life Time Value of present Hubspot customers = 1000 X (0.73X4800 + 0.27X13325) = 1000 X ( 3869 + 3597.75) = $ 7,466,750 In Hubspot customers, 73% were Owner Ollies and 27% were Marketer Marys. This data clearly represents Owner Ollies were more readily converted from leads to customers than Marketer Marys. Taknig this into account, LTV of Owner Ollies = 0.73X5300 = $ 3,869 LTV of Marketer Marys = 0.27 X 13325 = $ 3,598 Clearly, Owner Ollies are more profitable investment. Hence Hubspot should narrow their target by focussing exclusively on Owner Ollies. This way Hubspot would better serve its customers as it will have only one particular group to focus on and can make software meeting the needs of Owner Ollies. Hubspot can reduce Owner Ollies churn rate by encouraging the usage of CMS to them. Also, Hubspot at present is not having enough resources to scale up its businees by focussing on both customer types. Appendix shows LTV calculation of potential small and very small segments. Calculations clearly indicate grater profit in targetting small businesses customers.

Name: Piyush Kumar Singh Section: G PGID: 61410800 APPENDIX Life time value calculation of present Hubspot customers Assuming Hubspot targets potential small and very-small business customers (owner ollies) Assume interest rate to be 5% annual Customer type Monthly Churn rate Very small B2B 7.3% Very small B2C 7.8% Small B2B 1.4% Small B2C 4.1% No. of small businesses = 632,682 No. of very small businesses = 1,043,448 Value derived from small businesses = 632,682 X 0.5 X (13261 + 5035) = $ 5.79 billion Value derived from very small businesses = 1,043,448 X 0.5 X (2740 + 2543) = $ 2.75 billion

Margin per Acquisition month cost $ 250 $ 500 $ 250 $ 500 $ 250 $ 500 $ 250 $ 500

Percentage of total customers 50% of very small 50% of very small 50% of small 50% of small

Life time value $ 2740 $ 2543 $ 13,261 $ 5,035

Formula used for Life Time Value calculation LIFE TIME VALUE =
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M = Margin paid by customer in a year r = Retention rate / survival rate for year i = interest rate AC = Acquisition cost