Executive interview by Vinay Bhagat, CEO TrustRadius.
HubSpot’s stated market focus is companies from 10 to 2,000 employees, however we estimate that 75% of their customers are SMBs with <50 employees (using the 158 reviews on TrustRadius as a guide). In recent years, HubSpot has been increasingly focused on attracting and retaining larger clients through adding more powerful marketing features. For example, in 2011, they acquired Performable, an email centric marketing automation provider, and in 2013 they upgraded their content management system (COS). At first blush, entering the CRM category seems like a departure from this strategy as the likely initial market is smaller companies. It does however further reinforce their position with SMBs and allows them to ultimately earn a higher “share of wallet” among those customers, once they elect to charge for the offering. I caught up with Mike Volpe, CMO to ask about the move and learn more about their new offering.
What drove HubSpot to launch a CRM?
Our customers have been asking us to build a CRM for years--it’s been the #1 request by a large margin, so part of it is solving for our customers. But the second reason is that we really see a parallel between the shift that has transpired in marketing and what will happen in sales in the next few years. The way people shop and buy has fundamentally changed, and it’s not just marketers who need to adapt accordingly--sales needs to change too. There are a lot of sales acceleration tools available and a lot of CRMs available, but integrating them all to extract value can be a headache, so we designed the HubSpot Sales Platform to transform selling from interruptive to relevant, and created technology designed for the rep instead of just the sales manager. The result? A more relevant, targeted sales experience for your end consumer, and a sales team that can close leads faster, better, and smarter every day.
Note: A 2012 study by Dell of cloud business application adoption by companies with 50-499 employees indicated 69 percent prefer to purchase technology from a single, trusted vendor.
How large do you believe the market opportunity is?
We believe sales technology is in its early innings, particularly in the sales acceleration space. Today the majority of our customers do not use a CRM (~60%) so we believe this is a greenfield opportunity. We are not looking to convert people who already have a CRM they like, that works for their business. We just think that the millions of businesses worldwide not using a CRM (or using HubSpot’s marketing platform or Google docs as a de facto CRM) can do better.
Note: The same 2012 Dell study indicated that 55 percent of companies with 50-499 employees surveyed had already adopted a CRM. We have not found a similar study for companies <50 employees.
Of the 78k people using Sidekick/Signals, how many of them have a CRM?
Note: Sidekick is HubSpot’s browser extension which helps sales people track email opens.
We aren’t releasing specific breakdowns of Sidekick users, but this percentage is higher--as you might imagine, sales reps worldwide want all the information they can possibly get about their prospective buyer, so sales reps at companies of many different sizes are using Sidekick to give them a competitive advantage selling.
What is the initial intended target market?
Small to mid-sized companies who don’t currently leverage a CRM or who have tried implementing a CRM but been unsuccessful. The reality is that small businesses often struggle to make CRMs work for them, so the HubSpot CRM is designed with the sales rep in mind and to play well with existing systems (such as Salesforce or the HubSpot marketing platform) to make adoption significantly easier. As far as company size, we think about our target market as 10 to 2,000 employees. The CRM specifically will likely have huge agency adoption (we have 1,900 agency partners worldwide) and adoption throughout our existing customer base, and we believe over time it will attract net new HubSpot users as well.
How do you differentiate from other CRM solutions?
Because we are starting with companies that don’t currently use a CRM, I see it less as a feature battle with existing players and more as a value proposition for companies to get off the sidelines and into the game. But generally, I’d say a few things make our product different:
a) You get the benefits of using a CRM without feeling like you’re using a CRM--because the HubSpot CRM operates within your browser, sales reps no longer have to skip between countless screens and applications to connect and engage with prospects
b) Integration with HubSpot’s marketing platform: One of the reasons why CRM adoption falls short is that it’s incumbent upon reps to do it, and they are rarely incentivized to use CRMs unless their commissions are predicated upon its use. If your company is already using HubSpot for marketing, the integration power with the CRM starts day one, so it can help companies practice sales and marketing alignment in a meaningful way with truly integrated systems of record across marketing and sales departments.
c) The HubSpot CRM is built for today’s sales rep: all of your data is available via the HubSpot mobile app, and every tweet, email, and interaction an individual has had with your brand is logged seamlessly all in one location.
The product is currently positioned as designed more for the sales person versus the manager. Are there truly no managerial tools or is the distinction more one of current emphasis?
We think about that point a bit differently than you phrased it--currently most CRM systems work just fine for managers--they can track deals and opportunities and see what their pipeline looks like, but the only thing it does for the rep is create work. The average sales rep can spend hours logging calls and tracking each of their deals in a CRM, but with little payoff (except for their commission payout and compliance). We thought we could do better: why not create a CRM that transform the buying experience for your end customer that doesn’t create work for your sales rep?
On the manager side, keep in mind that our system was designed not to displace existing CRMs, but rather to get more companies off the sidelines and into the sales technology game. So the comparison really should be to Google Docs or Excel or nothing at all. At many businesses worldwide, “managers” wear multiple hats (from sales and marketing to everything operations related), so having a single system of record across sales and marketing with sales functionality that helps your rep sell better, faster, and smarter is a huge asset.
Can you elaborate on the “free” pricing offer – are there any restrictions?
The HubSpot CRM is currently in beta, and it’s free--we are currently in the process of rolling it out to existing HubSpot marketing platform customers, and will roll it out to additional users in 2015. The product is completely free, and we are going to get a better sense of how, when, and where people use it and revisit its packaging and usage from there. But right now, it’s completely free with no restrictions, which is why people should sign up for the waiting list ASAP.
Does it share a common database with HubSpot marketing or is it a separate database?
It’s the exact same database, so there’s even more incentive to adopt HubSpot’s sales and marketing platforms together.
Does your CRM only work with HubSpot’s marketing platform, or will it integrate with other online marketing tools?
Right now the CRM integrates with both Sidekick and the HubSpot marketing platform--once we launch, we’ll revisit additional integrations.
It looks like you’re positioning it as part of a larger sales platform along with Sidekick. What’s your vision?
Our vision is to transform sales in the same way that we’ve transformed marketing, helping companies sell more effectively and empowering reps to prospect and connect in relevant ways instead of relying upon outdated tactics and technology that don’t resonate. Sidekick is CRM agnostic, freemium, and incredibly easy to use, so, while I think every rep in the world should use it, I also believe you don’t have to be a sales person to benefit from Sidekick--every single person on our team uses it, so it’s not restricted to sales reps in terms of value.
How does this announcement impact moving up-market? Is there anything you can share with respect to what you’re doing specifically to further serve the marketing needs of upper-mid market companies?
We aren’t moving up-market, we’re in the mid-market, which is unique in our space. We serve businesses primarily in the 10 employees to 2000 employee range, and that’s been consistent the past several years. Sidekick as I mentioned is effective for companies of any size, while the HubSpot CRM and HubSpot Marketing Platform are both designed specifically for the needs of mid-market companies.