A Tale of How HubSpot Changed Its Pricing Metrics 3 Times.
And That's Okay!

(Part 1)

I'm trying my hand at longreads.
I decided to start with HubSpot.

HubSpot is a large CRM/CDP platform with 275K clients in 135 countries.

The story of how its logic of "what we charge clients for" transformed is, in my opinion, a great example that changing a product's pricing architecture is possible and necessary.

So I'll try to reconstruct the main chain of events to understand why and how HubSpot spent time and effort analyzing and adjusting its pricing metrics.

I think it will be useful
(if you read carefully)

Point Zero: When the Grass Was Greener

By the end of 2010, HubSpot had existed for 4 years. It had completed 4 investment rounds totaling $33 million, was actively growing, and was preparing for new investments from Google Ventures and Salesforce.

But there was a problem...

Their anchor segment (small businesses) was steadily churning. The Net Revenue Retention (NRR) rate in 2010 dropped to 70-75%. That's very, very bad.

With such numbers, just to "stay in place" (not lose revenue), they needed to attract a huge number of new clients every year. CAC skyrockets, and no marketing budget can handle such a "leaky bucket" in the funnel.

Everyone understood that this would hardly play in their favor in negotiations with investors. Plus, they themselves wanted to break through the current revenue ceiling. So they started digging.

First, they looked into segments.

They found that most clients were micro-teams (2 salespeople). For such teams to send simple newsletters to their client base at least 1-2 times a month, they had to pay for 2 modules at once (Sales + Marketing).

That would be fine, but the catch is that each such module by default included a minimum of 5 available users.

So essentially, 2 salespeople were paying for 8 extra people they didn't actually have (read: paying for air).

And they had to pay $1000-$1500 / month.

Moreover, each new step in each module meant an additional +5 users.

You now have 6 salespeople? Congratulations! Pay for 10!


Unsurprisingly, as soon as these small businesses found alternatives, they left for competitors.

And larger teams (4-5 people) did their best to stay on the minimum package and use only 1 module.

The conclusion was obvious: the pricing metric "pay per module" needed to change.


First Turn: The Era of Paying per Contact

While analyzing segments, HubSpot noticed another interesting thing: the more contacts their clients added to the system, the more attached they became to HubSpot, and the lower the likelihood of switching to other solutions.

And in 2011, HubSpot made a bold move—it changed its pricing metric, switching to paying for the number of contacts in the database.


The idea was simple: if the number of contacts in the database grows, it means the client is growing, and along with them, HubSpot's payments will grow.

Logical. Fair. Clear.

And it worked!

The 2014 New Year's corporate party found the HubSpot team with these results:

+49% revenue growth year-over-year
+35% client base growth
+15% upsell growth

NRR approached 100%
IPO was exemplary successful


Most importantly, the company's pricing policy became attractive to mid-sized businesses. That meant a completely different size of databases in terms of contacts. And new frontiers for HubSpot's revenue growth.

It was time to drink champagne... every day.

But, as always, success created a new problem.

(to be continued...)

How do you like the format?

#pricing_metrics