Group Coursework Submission Form Specialist Masters Programme Marker's Comments (if not being marked on-line): SMM485 Strategy for Delivering Value 1

SMM485 Strategy for Delivering Value

Group Coursework Submission Form

Specialist Masters ProgrammePlease list all names of group members:(Surname, first name)1. Abdullah, Omar2. Boshoff, Cornelia3. Hoang, Anh

4. Kopachev, Genrikh5. Taepaisitphongse, Nachaya6.7. GROUP NUMBER:

MSc in: Global Supply Chain Management

Module Code: SMM 485

Module Title: Strategy for Delivering Value

Lecturer: Dr. Irene Scopelliti Submission Date: 12 December 2014

Declaration:

By submitting this work, we declare that this work is entirely our own except those parts duly identified and referenced in my submission. It complies with any specified word limits and the requirements and regulations detailed in the coursework instructions and any other relevant programme and module documentation. In submitting this work we acknowledge that we have read and understood the regulations and code regarding academic misconduct, including that relating to plagiarism, as specified in the Programme Handbook. We also acknowledge that this work will be subject to a variety of checks for academic misconduct.

We acknowledge that work submitted late without a granted extension will be subject to penalties, asoutlined in the Programme Handbook. Penalties will be applied for a maximum of five days lateness, after which a mark of zero will be awarded.

Marker’s Comments (if not being marked on-line):

1Group C: Anh Hoang Tu, Cornelia Boshoff, Genrikh Kopachev, Omar Abdullah, Nachaya Taepaisitphongs

C


Deduction for Late Submission: Final Mark:

Group: C

Students:

1) Abdullah, Omar

2) Boshoff, Cornelia

3) Hoang, Anh

4) Kopachev, Genrikh

COURSEWORK


Introduction to Marketing

Lecturer: Dr Irene Scopelliti


%


Question 1: According to HubSpot, the “rules of marketing” have

changed. What do they mean by that? Do you agree?

The era of advanced technology has changed the way consumers

interact and behave. The growth of social marketing will require

marketers to consider investing in adding a new kind of value to

information technology (Lord, 2013). This dramatic change in technology

raises questions to marketers about traditional rules of marketing such

as outbound marketing. Outbound marketing has been commonly referred to

as interruptive marketing as it advertises a product to consumers

regardless of the customer’s desire to receive it (Goodwin, 2013).

Outbound marketing is expensive due to the cost of delivery and

ineffectiveness at targeting mass audiences (Goodwin, 2013). This is due

to mass audiences becoming overwhelmed with daily commercial messages and

in turn not being receptive to the information anymore (Steenburgh et al,

2011: 2).

While advertisement is the most commonly used marketing tool for outbound

marketing, it has been labelled as being interruptive to people’s lives.

As a result, further advancements in technology have helped consumers to

skip advertisements. For example, most email servers are enhanced with

spam filtering functions, which can detect and sort out spam mails

instantly.



In contrast, inbound marketing is defined as “a collection of

marketing strategies and techniques focused on pulling relevant prospects

and customers toward a business and its product” (Steenburgh et al, 2011:

3). Instead of seeking attention by interrupting people, inbound

marketers provide useful information, which helps the products to be

found by customers (Steenburgh et al, 2011: 3). Founded in 2006, HubSpot

has emerged as a market leader in inbound marketing with more than 1, 000

customers that have benefitted from this strategy (Steenburgh et al,

2011: 1).

Different from outbound marketing, inbound marketing reaches out to

a broader segment in the market through various online channels like

websites, blogs and search engines. Central to inbound marketing is

customer-oriented strategy (Tan, 2014). For instance, a company blog is

created to engage with customers through online conversations. By

exchanging information, the company learns to better serve its customer,

improve customer relations, and understand the market needs.

The disadvantages of inbound marketing are firstly that it ignores

need recognition, the first step in customer buying decision-making

process, as it provides product information but does not help a customer

to recognise a need for the product (Perreau, 2013). In contrast to

outbound marketing, which had a predetermined target market, inbound

marketing requires more time and effort to determine their target market

as it is based on their overall customer base (Steenburgh et al, 2011:

11). Moreover, inbound marketing has proven to be less effective as a

stand-alone strategy. ‘Smarketing’, a combination of sales and marketing

strategy shows that firms with strong sales and marketing alignment can

achieve at least 20% annual revenue growth (The Power of Smarketing,

2014).

In conclusion, the rules of marketing have changed. Firms are now

more aware of inbound marketing; its use and its potential in gaining

market efficiencies and cost savings. Even though traditional outbound



marketing accounts for a large market share, the new rules of marketing

can be defined as more engaging and aligned with customer needs.



Question 2: What are the possible segments that HubSpot could

target (make sure to describe them)? Which one(s) should they target and

why?

Success in innovation is often dependent on the market segmentation

a company conducts in order to identify groups of customers who have

unique sets of unmet needs (Needs-Based Segmentation That Works, 2014).

Currently, HubSpot is targeting two market segments: Owner Ollies

(Ollies) and Marketer Marys (Marys) (Steenburgh et al, 2011: 8).

Table 1 summarises the major differences

between Ollies and Marys where the

acquisition costs of Ollies for HubSpot are

considerably cheaper. This could be due to

the fact that marketing professionals dealing

with HubSpot face managerial bureaucracies in the approval process

(Steenburgh et al, 2011:8). Furthermore, Marys already have marketing

professionals; whereas Ollies are unable to afford them thus they are

more likely to outsource marketing expertise. Consequently, this

illustrates a greater demand for HubSpot services from smaller companies

as compared to larger, established companies. Moreover, Ollies utilise

HubSpot’s products and services to generate more leads for their company

and require quick, simple solutions to help them succeed in this goal

(Steenburgh et al, 2011:8). Marys were more interested in the analytics

and reports HubSpot offers them (Steenburgh et al, 2011: 11). This

illustrates that these two segments have diverse requirements from

HubSpot products and services.

Rather than focusing on mass marketing, which is perceived to be

the most efficient plan as it sells one product to all customers (Solomon

et al, 2009: 214), HubSpot should focus on one segment as different

customers have different needs, which could make mass marketing

ineffective (Solomon et al, 2009: 214). Due to this, HubSpot should focus

on small businesses- Ollies. Firstly, firmographics is analysed using



some key aspects. In terms of size Ollies have captured 73% of the market

(Table 2), which is further supported by Table 3, illustrating that there

is a larger proportion of very small and small companies to target

(Steenburgh et al, 2011:11). In reference to the financial aspect, it was

found that principal ratio, Ollies lifetime value (CLV), is bigger by

about 20% than Marys, which indicates that the net profit attributed to

future relations with Ollies is considerably greater for HubSpot (Table

4). Additionally and related to customer characteristics, the B2B market

has a greater value than B2C in terms of both the percentage of customers

and churn rate (Table 5). Hence, it is recommended to focus on a more

prospective B2B market as Ollies also derive greater opportunities from

inbound marketing (Steenburgh et al, 2011:9).

In conclusion, it will be more profitable for HubSpot to target

less sophisticated needs of Ollies as they can effectively mold Ollies

into future Marys who will require reports analysing their figures

(Steenburgh et al, 2011:18). This provides HubSpot the opportunity for

process optimisation through partial standardisation, which is feasible

because doing business with a large amount of small companies may require

provision of similar services and hence opportunities for optimisation.

As a result, Ollie’s objective aligns with HubSpot core competence of

“pulling” prospective customers toward a business.

Question 3: Given what you have decided in question 2, how should HubSpot

target the segment(s) you selected?

Aligning the content a company publishes with consumer interests is

instrumental when HubSpot is targeting the segment – Owner Ollies

(HubSpot, 2014). Therefore, HubSpot would follow a concentrated targeting

strategy by focusing its efforts on a single segment and creating

products to target them directly by utilising the marketing mix (Solomon

et al, 2009).

Pricing



The main problem HubSpot is facing when targeting Owner Ollies is

the cancellation of their subscriptions within the first few months

because they derived all the value they needed from HubSpot (Steenburgh

et al, 2011: 9). Going forward, HubSpot would have to ensure the churn

rate of Owner Ollies are reduced, this will be supported by the product

strategy proposed below along with an incentive/penalty programme (Table

6). Currently, the software-as-a-service (SaaS) monthly pricing model is

being utilised; however, this strategy is not retaining customers. It is

recommended that a retention strategy is put in place to incentivise new

CMS Owner Ollies to utilise the free consultancy service. The reasons

are: 1) if Owner Ollies go through the 12-hour recommended consultancy

service, they will understand their ROI (return on investment) through

the direct impact it will have on their business, 2) following from point

1, it is very unlikely that they will cancel their subscription and

therefore HubSpot will reduce the cancellation rate and increase their

client base for future offerings.

Product

The main purpose of Owner Ollies utilising the services of HubSpot

is to generate more leads for their businesses; therefore, HubSpot should

focus on this aspect when creating products (Steenburgh et al, 2011: 8).

Currently, 13% of Owner Ollies are utilising the Content Management

System (CMS) HubSpot is offering. HubSpot would need to be more proactive

in their approach to customers migrating to CMS and explaining the

benefits of using their consultancy services. This could possibly be done

by either having their marketing department speaking directly with the

migrating customer and showing success/failure rates of using their

consultancy or by forcing the client to use their consultancy service for

a minimum of x number of hours before the service is turned on as a

benefit to the client to ensure that they are maximising their use of CMS

(Table 6).

Promotion and Place



As E-Commerce continues to skyrocket, traditional methods of

consumption are being challenged (Good, 2013). As stated by Halligan and

Shah, they will have to increase their exposure to achieve their long-

term goals, as a result it has been suggested that outbound marketing

should be utilised to advertise (Steenburgh et al, 2011: 12). However,

this runs the risk to confuse prospective customers because if they are

utilising HubSpot’s service for inbound marketing, then HubSpot should

also only utilise inbound marketing themselves. Furthermore, HubSpot

built their brand image on being an innovator of inbound marketing;

therefore, introducing outbound marketing strategies could cannibalise

the brand image that HubSpot has worked so hard for.

Question 4: Should they continue to practice what they preach and engage

in inbound marketing alone?

HubSpot has been preaching and engaging in inbound marketing since

2006 through Halligan and Shah developing novel and innovative ground-

breaking methods in the upcoming digital market (Steenburgh et al, 2011:

2). The challenge was to tie client evolution with overall company and

industry growth. However, since 2009, company leaders have doubted the

strategy to focus solely on inbound marketing (Steenburgh et al,

2011:11).

Halligan and Shah encountered some new challenges that were looming

over the company’s long-term sustainability with companies like Eloqua

benefiting through the traditional way of outbound marketing to large

enterprises (Steenburgh et al, 2011:5). As a result, HubSpot was

considering modifying their approach. Nonetheless, while inbound

marketing has come under scrutiny by the employees of HubSpot, it is

important to acknowledge the immediate effects and fundamental aspects

that resulted in HubSpot’s success in the first place. Distinctive

characteristics of inbound marketing have created ‘market efficiencies’

for the company. The firm has been the provider of captivating content

for its customers. It has customers’ closer to the products or services



as information was pursued by the customer and not received. Furthermore,

well-distributed content has been the selling point of inbound marketing,

which attracted businesses to HubSpot for their companies to get

identified in the Web 2.0 world. Additionally, interactive and engaging

material has brought credibility to businesses through HubSpot’s

methodology. Consequently, a traditional way of marketing would dismantle

the foundation of HubSpot’s philosophy (Steenburgh et al, 2011:3).

Numerous companies are using a mix of inbound and outbound

marketing in today’s day and age (Steenburgh et al, 2011:12). Therefore,

it is tempting to amend the business model of HubSpot to ensure longevity

in the market. However, aiming at telemarketing and traditional marketing

could bring in some stability and profitability for various businesses.

Although, with Hubspot being a start-up, it has been able to match its

product to the market needs. Furthermore, with just a handful of

engineers and a small business unit, it is difficult for the firm to keep

up with market demands. Hence, for a sustainable future it is essential

to be consistent in the application of inbound marketing. Therefore, with

considerable effort invested into the business model of inbound

marketing, it would be hypocritical and a mistake to switch to an

outbound marketing approach. The company was built based on the idea of

over-taking and mocking the traditional method of outbound marketing. The

growth of the company has been immense with over a 1,000 customers in

merely three years and a market of approximately 2.2 million businesses

(Table 3) (Steenburgh et al, 2011:11). This vast and sustainable growth

allows the company to approach new and innovative ideas within the norms

of inbound marketing. Moreover, according to the company, preaching

inbound marketing ring fences the brand and their standing in the

marketplace (Steenburgh et al, 2011:12). Additionally, it would be a step

backwards for HubSpot to incorporate outbound marketing as it could

disorientate the existing customers and bring in more competition, making

it a bigger challenge for the firm. Therefore, it is important for



HubSpot to preach and engage in inbound marketing and resist the

temptation of traditional approaches (Steenburgh et al, 2011:11).



Appendix

Table 2- HubSpot customer portfolio in December 2008 (Steenburgh et al,2011: 17).

Table 3- Market Potential: Small and Medium-Sized Businesses (Steenburgh

et al, 2011: 11).Table 4- Percent difference in CLV

Table 5- Comparison of B2B and B2C markets



Table 6- Incentive and penalty structure



References

Good, S. (2014) ‘The Evolution of the Marketing Mix (And What Inbound Has

to Do With It)’. [Online] Available at:

http://savvypanda.com/blog/intermediate-level/inbound-marketing-mix.html

(Accessed: 5 Dec. 2014).

Goodwin, T. (2013) ‘Inbound Marketing vs Outbound Marketing:

Understanding the Differences’. [Online] Available at:

http://boldthinkcreative.com/inbound-marketing-vs-outbound-marketing-

whats-the-difference/ (Accessed: 9 December 2014).

Halligan, B. and Shah, D. (2010). Inbound marketing. Hoboken, N.J.:

Wiley.

Lord, J. (2013) ‘10 Online Marketing Trends for 2013’. [Online] Available

at: http://www.entrepreneur.com/article/225392 (Accessed: 8 December

2014).

Needs-Based Segmentation That Works (2014). Available at:

http://strategyn.com/market-segmentation/needs-based-segmentation/

(Accessed: 3 December 2014).

Perreau, F. (2013) ‘The 5 stages of Consumer Buying Decision Process’.

[Online] Available at: http://theconsumerfactor.com/en/5-stages-consumer-

buying-decision-process/ (Accessed: 9 December 2014).

Solomon, M., Marshall, G. and Stuart, E. (2006) Marketing Real People, Real

Decisions. Upper Saddle River, N.J.: Pearson Prentice Hall.

Steenburgh, T., Avery, J. and Dahod, N. (2011) ‘HubSpot: Inbound

Marketing and Web 2.0’. Harvard Business School, 9-509-049, 1-21.



Tan, M. (2014) ‘3 Ways Inbound Marketing Can Benefit Your Business’.

[Online] Available at: http://www.poweredbysearch.com/3-ways-inbound-

marketing-can-benefit-business/ (Accessed: 5 December 2014).

The Power of Smarketing (2014). Available at:

http://cdn2.hubspot.net/hub/137828/file-713227937-pdf/Certification_Files

/IC2014/The_Power_of_Smarketing_2014.pdf (Accessed: 5 December 2014).


Group Coursework Submission Form Specialist Masters Programme Marker's Comments (if not being marked on-line): SMM485 Strategy for Delivering Value 1

Documents