#19: HubSpot's Product-Market Fit Journey: 'Finding the Core'
‘Find the core’ is a great mindset for all product builders specially in current macro-economic scenario where going back to your business fundamentals is prime. And if you’re a product builder in a company that knows its core, you would learn about finding ‘adjacent cores’ to grow your product. We would learn both concepts through the HubSpot story.
Welcome to case study #19 on Productify. This time we focus on the HubSpot’s journey to product market fit (PMF) with different customer segments, focusing on two key concepts for product builders:
1) PMF journey to find the core (in case of HubSpot i.e small businesses)
2) Finding adjacent segments to the core (translating success with small businesses to other segments such as enterprise)
Before we dive-in, reminder that we start 🚀‘Productify Originals’ series in two weeks, open to paid subscribers only. Free subscribers would continue to get access to rest of the Productify content such as case studies and articles as always 😊
The Originals#1 would feature Erin Young, Founder of Slide UX , a UX agency that worked with clients like Atlassian, AT&T, Indeed and many more. If you’re a Product Leader and work closely with UX or vice-versa, this upcoming originals would be deeply insightful and full of deep nuggets around Product & UX collaboration, UX role in Product Growth and also how to manage organizational expectations when it comes to UX outcomes.
🚀 To receive Productify Originals, consider becoming a paid subscriber and support Productify which is a 100% reader supported newsletter
Why did HubSpot start?
With the rise of social media and search engines, it meant that customers were increasingly turning to the internet to find products and services.
In 2006, when HubSpot started -it wanted to solve this problem by providing a platform for businesses to engage in inbound marketing, which is all about creating content and experiences that attract customers to your brand, rather than interrupting them with unwanted messages. HubSpot's software suite included tools for blogging, social media management, email marketing, lead nurturing, and more, all designed to help businesses create a seamless customer journey and build lasting relationships with their audience.
For the uninitiated, HubSpot (at >$1.3 Billion in revenue) is now a popular inbound marketing and sales software that helps businesses attract, engage, and delight customers. With its suite of tools for marketing automation, CRM, social media management, and more, HubSpot aims to simplify and streamline the customer journey from start to finish. HubSpot is trusted by thousands of businesses worldwide, from small startups to large enterprises.
HubSpot’s Journey to find product-market fit with small businesses was full of twists and turns
Initially, HubSpot tried to sell its marketing automation software (blogging, social media management, email marketing, lead management etc.) directly to small businesses with limited success. As HubSpot was leading the ‘inbound marketing is the next big thing’ game, it applied its own medicine on its wounds.
🥳Hence, the company pivoted to offering educational content and training programs, which helped it build a loyal following among small business owners and marketers. This approach was successful in building awareness and establishing HubSpot as a thought leader in the industry.
🥳 In order to make sure businesses not only get attracted to HubSpot’s offerings but also can try it out too, HubSpot decided to offer a freemium model, where users can access some features of its marketing and sales software for free, was also successful in attracting small business customers. This helped HubSpot build a large user base and allowed businesses to try the software before committing to a paid subscription.
With gaining traction on marketing automation software, HubSpot then attempted to enter the CRM market with its HubSpot CRM product was initially met with skepticism from some small business customers who already had established CRM systems in place. However, the company adopted the Product-Led Growth mindset (Read Case Study on Product-Led Growth 4 signals) and was able to differentiate its product by offering a more user-friendly and intuitive interface, which has helped it gain traction among small businesses.
🥳However, HubSpot needed to acquire a deeper small business and startup base to further expand the adoption of its offerings. HubSpot's acquisition of The Hustle, a media company that produces business and tech news content, was seen as a risky move by some industry observers. However, the acquisition has helped HubSpot expand its content offerings and reach new audiences, particularly among small businesses and startups.
😕On the other hand, HubSpot's attempt to launch its own social media network, called "Inbound.org," failed to gain traction and was eventually shut down.
😕The company also struggled with its HubSpot Sales product, which was designed to help small businesses manage their sales processes. Despite initial hype, the product failed to gain widespread adoption among small business customers.
In summary, HubSpot's journey to find product-market fit with small businesses has been marked by several successes and failures. The company's pivot to offering educational content and its freemium model were successful in attracting small business customers, while its attempts to launch its own social media network and its HubSpot Sales product were less successful. HubSpot's ability to differentiate its products and build a loyal following among small business customers has been key to its success in this market.
HubSpot found the core: Small businesses and marketing agencies
For every product company, finding its core is extremely important. For HubSpot, the sweet spot was small businesses and marketing agencies. And to know how to find your product company’s core and use that with HubSpot example, there are 5 signals if a product or a segment is core:
Profitable customer base: Small businesses and marketing agencies are highly profitable customer segments for Hubspot. These businesses often have limited resources and need an affordable, all-in-one solution for their marketing and sales needs. Hubspot's platform is well-suited to these needs, making it a popular choice for small businesses and marketing agencies.
Includes critical products: Hubspot's platform includes critical products that are essential for small businesses and marketing agencies. These products include tools for email marketing, social media management, content creation, lead generation, and customer relationship management. For these businesses, having access to these critical products in a single platform is a significant advantage.
Owns critical channels: Hubspot owns critical channels that are important for small businesses and marketing agencies. The company's inbound marketing methodology, which emphasizes creating valuable content to attract and retain customers, is well-suited to the needs of these businesses. Additionally, Hubspot's focus on search engine optimization (SEO) and social media marketing helps these businesses to reach their target audiences effectively.
Has strategic assets: Hubspot has several strategic assets that are important for small businesses and marketing agencies. These assets include a strong brand reputation, a large and active user community, and a focus on innovation and product development. These assets help to differentiate Hubspot from its competitors and make it a preferred choice for these businesses.
Strategic differentiation: Hubspot has a strategic differentiation in the market. Its inbound marketing methodology is unique and effective, and it is a leader in the marketing automation space. This strategic differentiation makes it an attractive choice for small businesses and marketing agencies who are looking for a fresh approach to their marketing and sales needs.
Adjacent cores to find growth momentum
The concept of ‘adjacent’ businesses has been most prominantly mentioned in the book ‘Profit at the core’ by Chris Zook (Bain and Co.).
As per the book, core businesses are those that provide the primary value proposition of the company and generate the majority of its profits. Adjacent businesses are those that are related to the core business, but may have different customers, products, or distribution channels. Zook argues that businesses should focus on their core business and invest in adjacent businesses that are closely aligned with the core, rather than branching out into completely unrelated areas. This allows businesses to leverage their strengths and create more value for customers and shareholders.
Now, let us see how does the landscape of core and adjacent looks for HubSpot now:
Nonprofits: Hubspot has made efforts to reach out to the nonprofit sector, but it has faced some challenges in this market. Nonprofits often have limited resources and may not have the same priorities as for-profit businesses. However, Hubspot has made some progress in this segment by offering discounted pricing and partnering with nonprofit organizations.
Educational Institutions: Hubspot has had some success in the education market, particularly in higher education. The company has partnered with universities to offer inbound marketing certifications and training programs. However, this market is highly competitive, and Hubspot faces stiff competition from established players such as Blackboard and Moodle.
Government Agencies: Hubspot has made some efforts to reach out to government agencies, but it is still a relatively new market for the company. Government agencies have unique needs and requirements, and Hubspot will need to tailor its offerings to meet those needs. However, the company's focus on inbound marketing and customer relationship management may make its platform appealing to some government agencies.
Struggle at Enterprise Product-Market Fit
One of the primary challenges that Hubspot faces in the enterprise segment is the perception that the platform is better suited for small businesses and marketing agencies. This perception is due in part to the company's early focus on these segments and the features that were included in the platform. As a result, some enterprise businesses may view Hubspot as a lightweight solution that does not offer the functionality and scalability that they need.
To overcome this perception, Hubspot has focused on expanding its product offerings to include features that are better suited to the needs of enterprise businesses. For example, the company has added advanced analytics and reporting capabilities, as well as integrations with third-party platforms such as Salesforce and Microsoft Dynamics. These features have helped to make Hubspot a more viable solution for enterprise businesses, but the company still has work to do to fully capture this market.
Another challenge that Hubspot faces in the enterprise segment is the competition from established players such as Salesforce and Marketo. These companies have been serving the enterprise market for many years and have established a strong foothold in the industry. As a result, Hubspot must work harder to convince enterprise businesses that its platform is a viable alternative to these established players.
To overcome this challenge, Hubspot has focused on differentiating itself from its competitors by emphasizing its ease of use and focus on user experience. The company has also focused on providing a more personalized and human approach to customer service and support, which has helped to set it apart from its competitors.
While Hubspot's success in the enterprise segment has been mixed, the company has made significant strides in recent years to improve its offering for enterprise businesses. By focusing on expanding its product offerings and differentiating itself from its competitors, Hubspot has positioned itself as a viable alternative to established players in the industry. While there is still work to be done, there are several reasons to be optimistic about Hubspot's future in the enterprise segment.
The Takeaway for Product Builders
It's important to avoid the temptation to stray too far from your core product and/or business or pursue unrelated opportunities, as this can dilute your focus and stretch your resources too thin. Instead, focus on building a strong core business and investing in adjacent areas that can complement and enhance your existing strengths. By doing so, you can create a more cohesive and sustainable product portfolio that delivers maximum value to your customers and stakeholders.