SaaS Interviews with CEOs, Startups, Founders
962 Why Hubspot Spent 1000's+ Hours On Pricing
13 Mar 2018
Chapter 1: What is the main focus of HubSpot's pricing strategy?
This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn. Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple of hundred thousand dollars to 2.7 million. I had no money when I started the company.
It was $160 million, which is the size of many IPOs.
We're a bit strapped. We have like 22,000 customers. With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everyone. My guest today is Brian Halligan.
He's the co-founder and CEO of HubSpot, and he's co-authored two books, Inbound Marketing, Get Found Using Google, Social Media, and Blogs, along with Marketing Lessons from the Grateful Dead. Recently, he's been writing about how to turn your startup into a scale-up. Top 10 highest-rated CEO by Glassdoor in 2014, 2015, and 2017.
He was named an Ernst & Young Entrepreneur of the Year in 2011 by Inc., Founders 40 in 2016, and And Brian is now a senior lecturer at MIT Sloan School of Management. His favorite charity is Camp Harbor View. Brian, are you ready to take us to the top?
Yes.
And we have a guest today, Romeo. Pan your camera down real quick. Let's talk to your dog.
How we doing, Rome?
Romeo's excited. All right. Brian, HubSpot. Let's talk everything HubSpot. So I'm going to just jump right in because I think and we'll talk about kind of what you do as you go along.
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Chapter 2: How does HubSpot maximize experimentation in its operations?
Well, we worked on some of that together, the commission rates and all that stuff. But he basically ran an experiment to try to figure out how to sell HubSpot through agency partner programs. He ran it for two, three months. And we're like, well, this works and let's formalize it. And, you know, 10 years later, it's 40% of our business. So he did a fabulous job.
But that was one of our early experiments that just worked. This is one of the reasons I like experiments.
And how many people now are our partners?
I think we have like 3,500 or so.
Our partners, yeah. Amazing. Let's go back now from a product perspective. So you really started obviously as a kind of a single mousetrap and then that grew and it got a little more complex. And now you have really three different current platforms with a fourth on the way in the form of a customer hub next year.
Break down those platforms for us in terms of when they launched and maybe why you launched. Let's just talk about the free CRM aspect.
Okay.
Yeah.
When I think about HubSpot inside my head, I think of it as kind of in these chapters. In the first eight years of HubSpot was chapter one, we were an apps company. We built a marketing app. It was a really good app and marketing departments would buy it and enjoy it. Around three years ago, we said, you know, we ought to get into the sales business. The way people are buying is changing a lot.
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Chapter 3: What role do agency partners play in HubSpot's revenue model?
What I like about pricing models like that is our incentives are aligned. The better our customers do, the more they pass. And so that's our marketing product. And then we come up with a sales product. And we're like, all right, you can't charge on contacts for sales guys because it's so random how many contacts they'll have. And we don't want them spamming people out of the CRM system.
So we use seats as a close enough proxy. And so we have a marketing product based on contacts and a sales product based on seats. That is not ideal, by the way, because you have to think about it. You don't want people to think about your pricing model. at this point that we're sticking with that.
Generally, would you recommend a new entrepreneurs to focus on one of those value drivers or generally speaking, the more axes you have per product, the better to upsell people?
I think the simpler, the better. So when we first started HubSpot, it was like, it was like a model T, uh, I don't care what color you want it. As long as it's black. Um, we had a product called HubSpot, not basic pro enterprise. It was $250 a month. And that was it for the first five years of HubSpot. And then we got really bold and we came out with HubSpot Basic, Pro, and Enterprise.
And that was it for like three or four years. Then we raised our round from Sequoia. And this guy named Pat Grady at Sequoia, who is an expert on pricing, and he was the one who schooled us on this kind of two-axis pricing. It's like you need a second axis around something like contacts or seats. If you don't create that second axis, you won't get that uplift.
When we did our round with Sequoia, our customer retention rate was something like 70%.
Logo or revenue?
What's that?
Logo or revenue?
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