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HubSpot Growth Playbook: Going From Startup to Scale-up
May 12, 2022 Edwin Kooistra
From the early years of HubSpot, they were an open book, always opting for openness over secrecy and encouraging more large enterprises to do likewise, and here goes their “Playbook for Going From Startup to Scale-up.”
Spending over six years in startup mode to get through product fit, market fit, and work out their customer economics, Brian Halligan – CEO of HubSpot, has a lot to decode about the move to a scaleup mode, especially in a market with barriers to entry. Read on to discover the key takeaways shared in their playbook.
To begin with, Haligan identifies the 4 stages of the S Curve, which startups usually go through:
- Getting Product Market Fit — Can you build something useful that can pull in some money in some way?
- Getting the Math to Work — Can you acquire customers for X and get at least 3X in return?
- Getting the Math to Scale — Can you pour lots more money into the top of your machine and keep that at least 3x ratio?
- Getting Saturated — You are running out of potential customers in your market or being disrupted.
It took HubSpot about six years to get through stage 2 because the relatively low retention rate made it challenging to increase their customers’ total lifetime value. Today, we explain how HubSpot got through these stages and the three major decisions that pushed them into phase 3.
Decision 1: The Mary Decision
Initially, HubSpot focused on growing the market by serving both B2B and B2C clients in many different industries and by trying to deliver value to both, which has made them fall short on both. Not only was it difficult on the strategic planning side, but also it wasn’t cost-effective either.
They later realized the need to laser focus on a single persona to succeed in providing proper value to their target customer. Picking “Mary” over “Ollie” means catering to Mary’s unique needs, building mutually-satisfying long-term relationships that will earn and retain business.
The Mary decision highlights the importance of understanding, communicating, and delivering on the value of your product by zooming in on one target segment.
Decision 2: The MOFU Decision
Driven by the concept of tailoring the efforts to the buyer’s journey, HubSpot took an in-depth look at the data and noticed that customers who used low-end MOFU tools had better retention rates than customers who used their really good TOFU tools. And here is where it clicked.
The MOFU stage is where relationships are made, and it is where leads seek expert advice and technical content to fix the problem themselves or compare providers. Providing them with the tools to help them try to figure out the solution means trust is being established nonetheless.
HubSpot redirected their attention from TOFU tools to high-end MOFU tools that really meet the needs of their target, and the result of focusing on the “makers” where the real growth was at has highly impacted their retention rates, a great example of a successful product-led growth strategy.
Decision 3: The Monetization Decision
Inspired by Sequoia’s Pat Grady, HubSpot realized the flaws in its pricing model, which relied on only one pricing axis, especially when most software companies had two, three, or four pricing axes. The multiple axes provide products with more than one way to monetize successful customers.
The result of the above trio decisions has worked wonders for HubSpot and its goal to scale up. Today, the company has reached 56% growth last quarter with 18 points of margin improvement, and the major player in this success was the Mary-MOFU-Monetization they put in place back in 2012.