From Startup to IPO: Lessons from the pricing trenches - Brad Coffey of HubSpot

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Transcript of From Startup to IPO: Lessons from the pricing trenches - Brad Coffey of HubSpot

  • From Startup to IPOLessons from the pricing trenches

    @BradfordCoffey

  • Brad CoffeyChief Strategy Officer @HubSpot

    started as HubSpots first intern

    Yes, I dated my wife in high school

  • 3

    Safe Harbor

    This presentation includes certain forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements concerning our cash flow and margin improvement expectations, our position to execute on our growth strategy in the mid-market, and our ability to expand our leadership position and market opportunity for our inbound platform. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press releasethat are not historical facts and statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" or words of similar meaning. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that the plans, intentions, expectations or strategies will be attained or achieved. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation, our history of losses, our ability to retain existing customers and add new customers, the continued growth of the market for an inbound platform; our ability to differentiate our platform from competing products and technologies; our ability to manage our growth effectively to maintain our high level of service; our ability to maintain and expand relationships with our marketing agency partners; our ability to successfully recruit and retain highly-qualified personnel; the price volatility of our common stock, and other risks set forth under the caption "Risk Factors" in our Quarterly Report on Form 10-Q filed on November 2, 2016and our other SEC filings. We assume no obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.

  • HubSpots journey

  • Product Market FitWell, we need to charge something, right?

    HubSpots journey

  • Product Market FitWell, we need to charge something, right?

    Math to WorkCan we even spell LTV:CAC?

    HubSpots journey

  • 10 seconds on CAC & LTV

    PROSPECTS

    LEADS

    DEMO

    CUSTOMER

    CACCost to Acquire a Customer

    LTVLifetime Total Value

  • 10 Seconds on CAC & LTV

    $

    For illustrative purposes

  • BEFORE

    Customer Retention 65%

    Revenue Retention 70%

    CAC $10k

    LTV $25k

    LTV:CAC 2.5

    Reps x

    As reported in HubSpot S1

  • Who are our best (and worst) customers?

    What is our stickiest (and least stick) apps?

  • Looking at retention

    PROBLEM

    Marketing to (some) non-sticky users

    Selling non-sticky features

    Onboarding poorly to sticky features

    No upsell for successful customers

  • Driving retention through pricing

    PROBLEM PRICING SOLUTION

    Marketing to (some) non-sticky users Add requirements to buyMinimum of 5 pages on existing websiteNo website redesign currently in flight

    Selling non-sticky features Adjusted sales compensationPersonal retention goals for promotion, Bonus on personal install base growth

    Onboarding poorly to sticky features Required paid services fee on new salesAnnual payment (moving us up market),Required 8 hours of paid training

    No upsell for successful customers Created contact tier pricingUpgrade based on size of contact list, not just edition

  • Contacts in HubSpot

  • BEFORE AFTER

    Customer Retention 65% ~82%

    Revenue Retention 70% ~100%

    CAC $10k $11k

    LTV $25k $52k

    LTV:CAC 2.5x 4.7x

    Reps x ~10x

    As reported in HubSpot S1

  • Advice on how to change prices

    1. Its easier to raise prices than lower them

    2. Be generous with your existing customers -- plan to grandfather them in to favorable pricing

    3. Focus on creating great new cohorts of customers

  • Product Market FitWell, we need to charge something, right?

    Math to WorkCan we even spell LTV:CAC?

    Scale the MathHow do we keep going?

    HubSpots journey

  • One Customer

    $

    For illustrative purposes

  • One Customer

    $

    For illustrative purposes

  • One Sales Rep

    $

    For illustrative purposes

  • MRR

    NEW

    CHURN

    MRR

    Y1 Y2

    Dependent on Sales Team size

    Dependent on Install Base size

  • MRR

    UPGRADE

    NEW

    CHURN

    MRR

    Y1 Y2

    Dependent on Install Base size

    Dependent on Sales Team size

  • HubSpot in 2014 ONE

    PlatformONE

    ExperienceONE

    Target

    Marketing Yes Yes Yes

  • HubSpot in 2015ONE

    PlatformONE

    ExperienceONE

    Target

    Marketing Yes Yes Yes

    CRM [new] Yes ehh kinda No (Ollie)

    Sidekick [new] No No No-ish (Anyone)

    Leadin [new] No No No (Solopreneur)

  • HubSpot in 2016+ONE

    PlatformONE

    ExperienceONE

    Target

    Marketing Yes Yes Yes

    CRM Yes Yes Yes

    Sales (Sidekick) Yes Yes Yes

    Mkt Free (Leadin) Yes Yes Yes

  • 100% FREE Starts at $0 Starts at $0

  • Thanks.

    @BradfordCoffey