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# Hubspot Case Presentation - First Place

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Each year, Tulane's Freeman School of Business has each senior enter a case competition as part of the capstone course. Our group,Team Orion, won first place in the fall of 2011 with our analysis of …

Each year, Tulane's Freeman School of Business has each senior enter a case competition as part of the capstone course. Our group,Team Orion, won first place in the fall of 2011 with our analysis of Hubspot.

Group members: Evan Nicoll, Jessica Lange, Connor Dismer (me), and Lloyd Walker

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• @aduaks Good luck with the template, and thanks for checking this out.

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• @cdismer I'm working towards an MBA and I was looking up inbound marketing as an alternative/supplement to traditional outbound marketing for my intro marketing class; Hubspot came up - then came CLTV - slideshare - your presentation. :]. I came across quite a few excel templates/toolkits that let you calculate CLTV. I'm now working on putting together a template of my own. It's going to be modelled something like this:

Cheers.

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• @aduaks Working back from the CLTV given, you simply add back the acquisition cost, subtract the \$500 initiation fee, and then divide out the monthly fee for the average lifespan.

The given formula (1/churn rate) is an acceptable way to estimate lifespan. The method I used approaches that as the maximum time interval approaches infinity. However, in this case, I wanted to be a little more conservative with the numbers when possible. Hubspot had not been around for more than a few years, so estimates beyond 3 years with the data would not likely be accurate. (As a side note: these numbers made a lot of conservative assumptions, and the finance member of our team still wouldn't believe the trajectory.)

You are welcome, and thanks for noticing this presentation. Just out of curiosity, how did you come across this anyway?

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• Very well designed and well presented case. Congratulations to the Orion Consulting group on winning the first prize in the case competition.

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• @cdismer Thank you Connor. It was very kind of you to take the time and explain your work. I now understand how you derived the CLTV. However, I tried solving for the lifespan with no success. I can see how important knowing the average expected customer lifetime can be and I was doing a little research. You could check the link http://www.dbmarketing.com/wp-content/uploads/2010/03/The-lifetime-value-of-a-Land-Line-Phone-Subscriber.pdf .Scroll down to the bottom of page 2 and the article suggests that the lifespan is simply 1/churn rate. Any thoughts? Also could you kindly explain how you get 14.94 months with a little more detail. Thanks again!

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### Transcript

• 1. HubSpotInbound Marketing and Web 2.0 OrionEvan NicollJessica Lange Consulting, LLCConnor DismerLloyd Walker
• 2. Agenda &#x2022; Introduction &#x2022; Core Competencies &#x2022; Goals (General and Specific) &#x2022; Concluding Remarks and QuestionsNicoll Lange Dismer Walker
• 3. Core Competencies &#x2022; Funnel Optimization &#x2022; Customer Service &#x2022; Content ManagementNicoll Lange Dismer Walker
• 4. Goals &#x2022; General &#x2022; Growth &#x2022; Increase Profitability &#x2022; Exit Strategy &#x2022; Specific &#x2022; Outbound Marketing and Segmentation Decisions &#x2022; Increasing Customer Lifetime Value &#x2022; Organization StructureNicoll Lange Dismer Walker
• 5. Outbound Marketing and Segmentation Decisions &#x2022; Outbound Marketing Decision &#x2022; Add Limited Outbound Technique &#x2022; Customer SegmentationNicoll Lange Dismer Walker
• 6. Outbound Marketing Decision Increase Hurt Growth Brand Rate ImageNicoll Lange Dismer Walker
• 7. Add Limited Outbound Technique &#x2022; Continue with current inbound marketing strategy &#x2022; Introduce &#x201C;lukewarm calling&#x201D; - Call those who have expressed interest but opted out - Already have a relationship with them - Permission to contact them &#x2022; Discover why companies opted out of HubSpot &#x2022; Should not hurt brand image since it is not true outbound marketingNicoll Lange Dismer Walker
• 8. Customer Segmentation &#x2022; Growing faster and lower Marketer churn rate &#x2022; Tailor product to pull more Marys Marys in &#x2022; Focus on Ollies that sell Owner high involvement products &#x2022; Offer slimmed down Ollies productNicoll Lange Dismer Walker
• 9. Increasing Customer Lifetime Value &#x2022; Current Customer Lifetime Value &#x2022; Pricing Segmentation &#x2022; CMS for Owner Ollies &#x2022; Third Party IntegrationNicoll Lange Dismer Walker
• 10. Current Customer Lifetime Value Owner Ollies Marketer MarysMonthly Fees \$250 per month \$500 per monthAcquisition Cost \$1000 \$5000Break-even 3.5 months 9 monthsChurn Rate 4.3% 3.2%CLTV (3 year max) \$3920 \$5935 Two ways to improve these figures &#x2022; Increase price &#x2022; Reduce churn Nicoll Lange Dismer Walker
• 11. Pricing Segmentation Percent of 30% 40% 30% 10% Customers Owner Ollie \$200 \$300 \$400 \$500 Price Point Original Price \$250 Weighted \$350 Average Marketer \$400 \$600 \$800 \$1000 Mary Price Original Price \$500 Weighted \$700 Average &#x2022; Raises average monthly revenue per customer by \$100 and \$200 &#x2022; Should not negatively affect churn rateNicoll Lange Dismer Walker
• 12. CMS and Owner Ollies Non-CMS Ollies CMS Ollies Marketer MarysChurn Rate 5.5% 2.1% 4.3%Average Customer 14.9 months 24.9 months 20.9 monthsLifetimeCLTV (3 year max) \$3235 \$5726 \$5934 Key Takeaways &#x2022; CMS increases CLTV by over \$2000 &#x2022; Website transfer costs \$500 &#x2022; Transfer makes sense to offer for free New Tactics &#x2022; Limit options for non-CMS with new Owner Ollies &#x2022; Entice old customers to transfer &#x2022; Could earn up to \$1.6 million in revenue over 3 years if all existing Owner Ollies transfer Nicoll Lange Dismer Walker
• 13. Third Party Integration - Services&#x2022; Improve Convenience&#x2022; Valued Highly by Owner Ollies &#x2022; Less expertise &#x2022; Limited time&#x2022; Create a marketplace for Online Marketing Firms &#x2022; SEO management &#x2022; Content Production&#x2022; Added Bonus: We get a cut of the revenueNicoll Lange Dismer Walker
• 14. Third Party Integration - Applications &#x2022; Offer more functions &#x2022; Valued by Marketer Marys &#x2022; Meets demand for more features &#x2022; Reduces churn &#x2022; Integrate with third party applications &#x2022; Reduces long-term costs &#x2022; Already the case with Salesforce.com &#x2022; Potential for affiliate revenue &#x2022; Added Bonuses &#x2022; More resources to focus on core offerings &#x2022; Positions HubSpot as central platform for inbound marketingNicoll Lange Dismer Walker
• 15. Organizational Structure The Objectives 1. Operational efficiency and effectiveness 2. Financial Accountability 3. Legal compliance Relevant Controls Over Financial Reporting General Controls Access Controls a) Hot Site Backup Facility a) Password Protection b) Firewall b) Device Authorization c) Audit Trail Table (Reasonableness Check) c) Systems Access Log d) Dispute Finder d) Callback e) TrackbackNicoll Lange Dismer Walker
• 16. Organizational Structure Investment Center (limited staff) Database Programming Administrator Marketing Marketing (Owner Ollies) (Marketing Marys) CMS Consultants Consultants 24/7 Customer Help Desk SupportNicoll Lange Dismer Walker
• 17. Performance Analysis Real EBITDA\$35,000,000.00\$30,000,000.00 \$29.9 mill\$25,000,000.00 \$23.4 mill\$20,000,000.00 \$18.3 mill\$15,000,000.00 \$14.3 mill Real EBITDA\$10,000,000.00 \$11.2 mill \$8.8 mill \$6.9 mill \$5,000,000.00 \$4.8 mill \$2.7 mill \$- \$.4 mill 1 2 3 4 5 6 7 8 9 10 Annualized Growth100 80 85.04 60 73.95 66.43 61.01 56.92 *IRR 74.29 53.72 40 Annualized Growth 20 0 1 2 3 4 5 6 7 8 9 10Nicoll Lange Dismer Walker
• 18. Hedonic Pricing Components Market Share Prime Premium Network Externalities Mindshare Software Price Benefits TrialabilityPercentage of Percentage ofCustomers 0.3 0.4 0.3 0.1 Customers 0.3 0.4 0.3 0.1 Weighted WeightedPrice 200 300 400 500 Average Price Price 400 600 800 1000 Average Price 60 120 120 50 350 120 240 240 100 700 Nicoll Lange Dismer Walker
• 19. Concluding Remarks and Questions &#x2022; Implement &#x201C;Lukewarm&#x201D; Calling to Revise the Funnel &#x2022; Third Party Integration to Increase CLTV &#x2022; Management Assertions for ExitNicoll Lange Dismer Walker