Hubspot Defeats Churn

A story about how Hubspot dealt with severe customer churn in their early days, as told by Sam Parr from his conversations with Hubspot founders.

"I went back to Dharmesh and Kip from Hubspot to ask about their early days. Their net revenue retention now is about 105%, meaning for every dollar someone spends at Hubspot, the next year they're going to spend a dollar and five cents.

But at first, their churn was terrible - beyond bad. They were losing 30% of customers on an annual basis. It took about 5 years to get it to a good place.

When I asked what they did to fix it, Dharmesh said their goal was not to make customers happy, it was to make happy customers. Everything from branding, pitch, marketing, sales, and service had to be thought out in a process where the outcome was a happy customer.

Marketing needed to reach better-fit customers who were less likely to churn. Sales shouldn't oversell and needed to qualify customers who would likely succeed. Product teams needed to make sure they didn't just build new features, but built features that reduced churn and got adopted.

They realized churn reduction is a team sport, and there's a power law where 90% of stickiness will be driven by 10% of the product and company features. Instead of adding 100 features, they found the ones that worked and doubled down on those."