When you’re in an industry that is constantly growing, one of the most difficult things to do is manage spending against your marketing needs.
Businesses need to stay ahead of the competition and take on more SaaS tools to optimize their services, which means they also have to market the new technologies, features, and functions that their new SaaS capabilities give them.
Companies spend about 10-13 percent of their revenue on marketing across all industries, and since 2014 we’ve seen that number steadily climb up each year. This poses an important question: What should your SaaS marketing budget look like?
Below we’ll cover everything you need to know about how much to spend on marketing and how to calculate your B2B SaaS marketing budget.
Best practices for SaaS marketing
Below are some best practices to the greatest SaaS marketing ROI.
Sales revenue to marketing pipeline
While companies across all industries spend about 10 percent of their revenue on marketing, that number looks a little different for SaaS companies.
SaaS companies will often spend significantly more on SaaS development and customer acquisition in the early days of their lifecycle or when they roll out innovative features. They try to increase subscriptions over a fixed period of time and hope to retain and renew enough clients/customers to get a ROI over time.
Some SaaS companies may spend as much as 100-150 percent of their ARR on sales and marketing, and after three years in business that number may drop down to 50 percent.
SaaS procurement solutions, like Sastrify, will evaluate your SaaS ecosystem and streamline a SaaS spend budget based on insights, projections, and analytics that fit your unique needs.
Determine your SaaS marketing budget
With so many different marketing avenues–pay-per-click advertising, social media presence, inbound marketing, content creation, and so on–how do companies determine their SaaS marketing budgets without going too big or too small?
One good rule of thumb is the 40 percent growth determinate. If your current revenue is $2 million, and your goal is to reach $4 million over a period of time, your growth determinate is $3 million. That means you need to be spending around $1.2 million on marketing.
Investing more in marketing = faster growth (sometimes)
Again, most new SaaS companies need to blitz the market in order to gain subscribers, contracts, and traction against competitors. This means they will often spend more than they earn on revenue in their earlier years.
This is partly because SaaS can be difficult to understand for customers. New technologies can be complex, and it’s up to you to communicate the functionality and use-value of your products in easy-to-digest marketing campaigns. Luckily, SaaS companies can get away with spending more in marketing because they don’t have high manufacturing or product-related costs.
Holistic approach to marketing budget
It’s not enough to look at how much you’re spending or future projections to set your SaaS marketing budget. While the largest SaaS businesses, like Salesforce and HubSpot, do spend 40-50 percent of their revenues on average, they also happen to be some of the most established companies out there.
For smaller and newer businesses, you have to take into account how competitive your particular market is as well as how much you spend on SaaS subscriptions. Gaining SaaS insights and key analytics will be imperative in understanding what features to market, who to market to, and whether you should be developing more content or increasing your social media presence.
SaaS marketing ROI
The most successful SaaS companies invest in a multichannel marketing experience with a focus on content. The idea is to develop easily-digestible and informative content on easy-to-find locations.
- Blog posts
- Social media campaigns
With the help of KPIs and specific, measurable goals, you can chart how successful some marketing channels are against others to determine your greatest ROI. Your SaaS marketing strategy is not a one-and-done process. It takes time to review and analyze what’s working, what isn’t, and to make adjustments when necessary.
Final thoughts on SaaS marketing planning
Creating a marketing budget starts with knowing what and what not to deliver to customers. It also requires a clear understanding of what your actual spending costs are vs how much you’re spending on SaaS waste, redundancies, inactive solutions, and other valuable insights.
You don’t want to invest any more than you need on marketing because of inaccurate forecasts and unnecessary SaaS spend; Sastrify can help you minimize costs and create accurate spending budgets that will bring your marketing capabilities to light.
Click here to learn more about how Sastrify can help you market smarter and more efficiently.