SaaS Marketing Budget: The Complete Guide for 2023
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How important is a SaaS (Software-as-a-Service) business to have a structured marketing budget? Aside from ensuring that your marketing resources don’t go to waste, your SaaS marketing budget covers many bases. It’s not just your sales or marketing teams involved; you also have to consider other departments, such as the IT (Information Technology) unit that provides technical support to your marketing initiatives.
Of course, that’s just one example of why having a detailed plan for your SaaS marketing budget is essential. In a nutshell, you lose a clear direction in your progress when you don’t have a solid budget. Without budget restrictions, you tend to lose focus and become careless with your decisions.
Overspending is a classic mistake that SaaS businesses make. The allure of expanding your customer base is always there, especially with the heightened availability of marketing platforms today. There’s also the problem of underspending, which early-stage startups commit.
To give you an overview, here are some of the benefits of a structured SaaS marketing budget:
- It helps you pinpoint the most effective components of your SaaS marketing strategy
- Allows you to optimize your efforts, leading to a good ROI (Return On Investment)
- It enables you to make decisions on diving into a new venture or investment
Most importantly, your SaaS marketing budget aligns with your short-term and long-term goals. Are you trying to diversify your customer base or reach more people in your current niche? Your budget plan is tied to your answer to this question, so you must optimize it to move in your desired direction.
Key Considerations When Building a SaaS Marketing Budget
It’s no secret that SaaS companies devote a significant portion of their revenue to their marketing budgets. This is especially true for early-stage and growth-stage startups that must increase their brand visibility and awareness. However, it’s not just these growing startups; even bigger companies allocate up to 25% of their profits to sales and marketing efforts.
This tells us that marketing is a crucial success indicator in SaaS companies, so you need to plan your marketing budget accordingly. However, there is a prerequisite in building your SaaS marketing budget: you need to determine your business’s unique needs and goals first.
You need to identify measurable and achievable objectives when plotting your SaaS business goals. You can’t go for the home run right away, as this does not always work, especially if you don’t have a big budget. So make sure you’re going after realistic goals for which you can realistically allot a budget. You can’t achieve your goals without the proper funding, and you can’t allocate your budget to goals you can’t reach.
Having said all this, reviewing historical data and current market research could help you align your SaaS marketing budget with specific business goals. This will help you recognize patterns that indicate feasible budget-goal relationships, which you could use when planning your B2B SaaS marketing budget.
Determining Your SaaS Marketing Budget Allocation
If you want to develop a more efficient SaaS marketing budget, there is no harm in taking advice from previous thriving programs. If you have data on industry benchmarks and examples, you should look into these reports and pattern your marketing budget plan similarly to these successful SaaS companies.
Of course, the SaaS industry is an ever-changing landscape. Marketing budget plans that were effective a year ago may be less efficient today. When planning your SaaS marketing budget, continuously conducting market research is essential. Always examine customer trends, technological trends, and competitors’ movements.
Doing all these things will help you allocate a budget for each marketing channel, including digital content and advertising platforms. Content is still king in the marketing landscape, so your budget should align with your content marketing strategy. As a SaaS business, you’re not just doing marketing to promote your product; your priority should be to address the current pain points of your customers.
That said, your SaaS marketing budget should also be optimized for each marketing funnel stage. You should reserve specific resources for generating leads and then allocate a different budget for nurturing leads or re-engaging with your existing customers. It’s essential that you don’t overspend (or heavily underspend) your budget because each stage of the marketing funnel is as important as the other.
Strategies for Calculating Your SaaS Marketing Budget
Along with the industry-related considerations that you need to factor in, calculating your SaaS marketing budget depends on the method that best suits your business. To crunch the numbers for your budget, you can use either percentage of revenue or objective-based processes.
Arguably the most popular method among growing SMBs (Small To Medium-Sized Businesses), the percentage of revenue method allows you to calculate your SaaS marketing budget. As the name suggests, your marketing budget becomes proportional to your business’s revenue. This means that if you accumulate higher income, your marketing budget also increases.
This method is popular among growing businesses because they can flex their marketing budget. Since it is tied up with your revenue, you’re not spending over what you earn as a company. Another method of calculating your SaaS marketing budget is for new businesses that are still very careful with how they’re shelling out resources.
Named the objective-based method, this marketing budget approach focuses more on the team’s short-term goals. Each marketing goal has a fixed budget, whether increasing your follower count on social media platforms, collaborating with influencers in your niche, or funneling your efforts into reaching a specific geographical location.
If you want to look up the numbers, spending 6-10% of your revenue is the industry standard for a SaaS marketing budget. If you want to increase your activity and aim for a faster growth track, you might want to invest 35-40% of your ARR (Annual Recurring Revenue). The key here is to ensure you have clear-cut goals before spending a single penny, especially if you’re still in the early growth stages.
Cost Considerations for SaaS Marketing
As discussed in the previous sections, your SaaS marketing budget traverses different departments, not just your dedicated sales and marketing teams. Even within your marketing team, you must distribute your resources to personnel, tools, advertising, and content creation.
Take, for example, how you will shell out resources for personnel and tools. Will you dive deeper into automation and invest in SaaS marketing tools? Many marketing automation tools are out there, with HubSpot, Salesforce, Zapier, and Hotjar as prime examples. However, these tools can’t put up the human touch in content creation, so you still need to bring in more people.
On top of that, you also need to have a contingency fund if you need to suddenly make an investment or make up for a strategy that went awry. This contingency fund is for urgent unforeseen circumstances only, so make sure that you don’t tap into it unless you need some emergency cash.
Consider the product, price, place, and promotion when planning your SaaS marketing budget. The most important thing is to funnel all these into a customer-driven direction and continuously study the market to optimize your budget.
Conclusion
Planning your SaaS marketing budget is a crucial growth driver, as this is one way to ensure you’re traversing the right path. Since the SaaS landscape constantly evolves, it’s easy to be swayed by trends and lucrative investment opportunities that could harm your business in the long run. Adhering to a structured marketing budget plan will keep you in check.
A SaaS marketing budget is not just used for shelling out your resources; you can also use this to plot your course moving forward. As long as your marketing budget is aligned with customer-centric trends and your own business goals, there’s no doubt that you’re headed in the right direction. Contact us and let’s make that strategy for you, so your business would thrive.
