This article contains affiliate links – but that doesn’t mean this piece is an ad.
All content is our honest take on the service/product and incorporates our
real thoughts and experience using it.
Strategic marketing is the linchpin of success in the realm of SaaS (Software as a Service).
However, one of the most perplexing questions that SaaS entrepreneurs often grapple with is – “How much do SaaS companies spend on marketing?”
Spoiler: The answer is 10% on average. But that doesn’t mean you get to stop reading here.
Knowing what other brands are doing could be an indicator of how much revenue you should allocate to your marketing schemes. But it’s not always the right answer.
Why? There are a ton of variables to take into account. Each one will affect your strategy a bit differently, depending on your unique situation.
This is why many companies use a benchmark called ARR – annual recurring revenue. And they further break that down into ARR per employee. We’ll look at this metric more in the next section.
Let’s get into the intricacies of SaaS marketing budget allocation and provide some insights into the industry standards.
Table of Contents
B2B Marketing Budget as a Percentage of Revenue – Understanding Industry Standards
Before diving into a B2B marketing budget as a percentage of revenue, it is essential to understand the industry standards.
According to a SaaS Capital, the median revenue per employee for SaaS companies is a little over $100,000 annually. So, at the rate of 10% we mentioned in the introduction, companies spend roughly $10,000 a year per employee on marketing.
Companies with ten employees are spending $100,000, and companies with 100 employees are spending $1 million.
Are you seeing the problem with basing numbers off what everyone else is doing yet?
What if you’re the only employee? What if you haven’t launched? Are you bootstrapping or VC-backed?
All these factors come into play when trying to figure out how much to spend on marketing.
Considerations for Making Informed Marketing Budget Decisions
There isn’t a one-size-fits-all approach when it comes to allocating budgets for marketing. Every organization has different benchmarks and statistics they look at to figure out solutions to this conundrum.
Each SaaS company has unique goals, target audience, and growth stage that require a tailored marketing strategy.
Therefore, it is crucial to consider the following factors when making SaaS marketing budget allocation decisions:
Company Size and Revenue
Big companies have more money. So they spend that money to make even more money.
It’s that simple.
If you’re a one-person SaaS army or a solopreneur, if you will, money is going to be tight. We’ll cover this more below.
But you can’t expect to have the marketing budget of an enterprise-level company. How could you? The better tactic would be to try and track down companies that are huge now that started where you are presently.
What did they do to achieve their current status? Maybe you should put your money there.
Marketing Goals
Driving leads and conversions is the ultimate objective of any marketing strategy.
Is your goal to increase brand awareness and reach a wider audience? You should invest more in channels like content marketing, social media advertising, and technical SEO for SaaS websites.
“I want to focus on generating leads and conversions”
Then you should allocate more budget towards channels like email marketing, paid search, and webinars.
Target Audience
Your target audience also plays a significant role in determining the allocation of your marketing budget.
For instance, if your product caters to a younger demographic, you may want to invest more in social media marketing and influencer marketing for SaaS.
“But I don’t have the budget for a team of influencers!”
Yeah…that’s why you start with one.
If your audience is on Twitter, then put your money into Twitter. Find the best possible influencer (for your budget) on the platform that resonates with your ideal audience and build on top of that.
Don’t try to do all the things at one time. Baby steps are the answer. So is intention.
Take intentional baby steps.
Competitor Analysis
Keeping an eye on your competitors’ marketing strategies and budget allocations is a good idea.
“But you said it’s not always the right answer in the intro. You’re a liar!”
Yes. It’s not always the right answer. It usually isn’t. Copy and pasting competitor schemes is not going to get you ahead.
But if you want to get ahead, you should be aware of what they are doing. Build something better. Get more creative. Be more clever.
Improve on what they’re doing and look for the gaps they’re leaving behind.
Overall, this tactic can give you a better understanding of what is working in the industry and allow you to make informed decisions about your budget allocation.
SaaS Marketing Budget Breakdown – Where the Money Goes
Now, we know more about the industry standards and considerations for marketing dollars.
Let’s take a closer look at the segments of various strategies with a SaaS marketing budget breakdown. The following is a general breakdown of allocating an average of 20% of your marketing budget:
- Content Marketing: The creation and distribution of valuable and relevant content. It has one purpose. And that’s to attract a clearly defined audience. This includes producing blog articles, whitepapers, ebooks, webinars, podcasts, etc.
- Paid Advertising: Paid advertising allows SaaS companies to reach a wider audience through channels like Google Ads, social media advertising, and sponsored content.
- Events and Sponsorships: Attending or sponsoring events related to your industry is an effective way to network and generate leads. This section is about brand identity and awareness more than lead generation and sales.
- SEO and SEM: Search Engine Optimization (SEO) and Search Engine Marketing (SEM) are crucial for attracting organic traffic to your website. Some companies spend a lot of cash here.
- Email Marketing: Email marketing is an effective way to nurture leads and keep existing customers engaged. There are a ton of freemium tools if you’re just starting and playing with building an email list.
How much should you spend on each category? That’s entirely up to you.
What are your goals? How big is your budget? Are you pre-launch or post-launch?
The biggest concern for you bootstrappers is going to be how long can your savings hold out. How long will you have to work a day job you hate before you can go full-time with your SaaS startup?
Unfortunately, those are close to impossible questions for us to answer.
SaaS Marketing Budget Allocation – How Much Do SaaS Companies Spend on Marketing?
Your SaaS marketing budget allocation should be 100% of your revenue. And you should spend it all on content!
Kidding. We do love our content, though.
So, how much do SaaS companies spend on SaaS digital marketing? Young companies, especially those in the pre-launch phase, are going to spend as close to 100% of their budget as they realistically can.
Think that sounds high?
Without marketing, you have no revenue. You need to take this early hit to build your brand, find your audience, and generate some income. It’s part of doing business.
None of that’s going to be free. Even as a penny-pincher, you’ll still be throwing money at marketing. But if you stand by your product and your company, then it will all be worth the investment..
As money starts to roll in, you can find where your marketing is having the most success. You then have two options:
- Put all your budget into what’s working
- Put some of your budget into the tools and resources to figure out why certain strategies are coming up short
Your company will eventually earn more revenue. You can spend less on marketing, or the same amount becomes a smaller percentage. That’s how you achieve the industry standard of a 10% allocation to marketing.
Each company’s optimal ratio may differ based on various factors. Ultimately, the goal is to achieve a balance between investing in marketing to drive growth while ensuring profitability for your SaaS business.
This milestone is unique to every SaaS business.
SaaS Marketing Budget Allocation – There Is No Right or Wrong Answer
How much do SaaS companies spend on marketing? The real question is how much should you spend on marketing for your business.
No specific percentage of revenue can be deemed as the “ideal” investment in SaaS marketing budget allocation.
However, understanding industry standards and considering key factors like:
- Company size
- Marketing goals
- Target audience
- And competitor analysis
Can help entrepreneurs make informed decisions on a B2B marketing budget as a percentage of revenue.
By continuously tracking and adjusting your SaaS marketing budget breakdown, you can achieve optimal results for your SaaS business.
Remember, your marketing budget is an investment in the growth and success of your company – so make sure to allocate it wisely!
Use this information to determine their marketing budgets and adjust accordingly based on their unique circumstances.
With a strategic and well-allocated marketing budget, SaaS companies can effectively reach their target audience, drive leads and conversions, and succeed in the competitive market.
If you have time for another, check out this post on our top must-have product marketing solutions.
Thanks for sharing. I read many of your blog posts, cool, your blog is very good.
It’s our pleasure, glad you find our blogs useful!
Your point of view caught my eye and was very interesting. Thanks. I have a question for you.
Glad to hear you find our content useful. You are welcome to direct any questions you may have to maddy@techtonic-marketing.com.
Your article helped me a lot, is there any more related content? Thanks!
It’s our pleasure, we are happy to hear you found this article useful! You should check out the SaaS marketing statistics and SaaS adoption rates articles.