SaaS marketing budgets making you sweat? This guide will walk you through how much you need to spend to maintain, grow, or get started with your SaaS company’s marketing efforts.
Here, you’ll find:
- How to start the budgeting process
- The rule of thumb for SaaS marketing budgets
- The differences between B2B, B2C, & startup SaaS marketing budgets
- How much of a marketing budget should be allocated to PPC and SEO
Building a marketing budget can feel like pulling numbers out of thin air. This is especially true for software-as-a-service (SaaS) businesses.
After all, SaaS marketing strategies are highly specialized. From an extra involved sales cycle to nurturing existing customers, the unique nature of SaaS digital marketing makes budgeting a little extra complicated, too.
Instead of pulling numbers out of thin air, we pulled in insight from the experts to help SaaS businesses of all kinds determine what their marketing spend should look like — no matter the company size.
Ready to build a SaaS marketing budget that makes sense? Let’s do this.
What are SaaS marketing budgets?
A SaaS marketing budget is a predetermined allocation of expenses set aside for the company’s outbound and inbound marketing efforts.
This can include content marketing, social media marketing, paid advertising, and email marketing (more on this later).
Why SaaS companies need a marketing budget
SaaS businesses have a lot of benchmarks to hit.
And between your mega-long sales cycle to an extremely savvy audience, certain qualities about the SaaS business model make marketing campaigns tough.
For example, the need to grow annual recurring revenue (ARR) pushes SaaS businesses to invest heavily in customer acquisition costs (CAC).
Ideally, these investments pay for themselves over the lifetime relationship with those customers (something that can be determined by your CAC ratio); however, this relies entirely on a budget-friendly marketing strategy.
CEO of HawkSEM, Sam Yadegar, explains that “SaaS businesses need to invest more into nurturing, both from turning a lead into a customer — and also retaining that customer months and years post-sale. Churn rate is a big concern, so marketing doesn’t end after the sale is made.”
To keep up with those goal metrics without wasting precious resources, you need a marketing plan backed by a clearly defined budget.
A higher revenue growth rate and a lower customer acquisition cost are possible…with the right budgeting plan.
Where do I start? How to begin the SaaS marketing budget process
If you’re sitting at your desk staring at an Excel sheet, hit the pause button.
Yadegar explains how to get started with your budget (and beyond):
“First, you need to determine your customer lifetime value.”
Your customer lifetime value (CLV) is the value of a single customer over the course of their relationship with your brand. And to calculate it, you need to consider:
- How much is the average purchase from a customer?
- How often do customers make purchases? (I.e. monthly subscriptions or annual contract renewals.)
- What’s the average length of time a customer stays with your business?
From here, there are two ways to calculate your average CLV:
Historical data: Review your past customer purchases within a set period of time (the last year, for example). Divide your total revenue by the number of customers during that time, the result is the average revenue per user.
Predictive method formula: This formula uses a customer’s transactional behavior to determine future actions and looks like this:
(Average purchase value) x (number of times the customer makes a purchase each year) x (average amount of years the customer relationship lasts)
Do you have a good idea of your CLV? Next, Yadegar recommends that you “back that into a sustainable marketing acquisition cost.”
He explains that, “Depending on how aggressive a brand wants to grow, we try to position marketing acquisition costs to be anywhere from 5% to 40% of year one revenue from a customer.”
Don’t forget to leave room for testing, learning and optimization.
What should your marketing strategy include?
To understand what goes into a marketing budget, it’s important to first run through the foundation of a solid marketing plan for SaaS businesses.
1. Conversion rate optimization
Conversion rate optimization (CRO) is typically the first order of business with a good marketing plan. But keep in mind that CRO should continue to be a pillar in your ongoing strategy, too.
CRO is the practice of optimizing the messaging and user experience on your website, including:
- Making sure your site is fast, mobile-friendly, & easy to navigate
- SaaS product pages with simple explanations of your product and benefits
- Clear calls to action (CTAs) & social proof
- Monthly 4XX error checks
- Images are high-resolution
- Heat mapping & call-tracking software
- User data gathering & research
- Landing page design
- Heat-mapping & scroll tracking
- User session recording
- Funnel analysis
- Form interaction & drop-off analysis
- A/B testing
- Conversion tracking review & setup
2. Content marketing
Content creation is non-negotiable for SaaS businesses, as your audience is highly educated, savvy, and requires ongoing value and education to convert (and stick around!).
- Educational videos
- How-to guides
- Case studies
3. Email marketing
Did we mention how important it is to nurture leads and current customers for SaaS companies?
Whether a user signed up for a webinar, downloaded a lead magnet, or is an existing customer, email is a wildly effective way to connect with your audience and keep them engaged.
Email marketing for SaaS companies looks like:
- Drip campaigns for leads that offer further education (case studies, tools, and demos)
- New customer email nurtures
- Existing customer check-ins, support, and ongoing value offers
4. Social media marketing
Ahh, social media. Love it or hate it, paid and organic social is an important feature of any SaaS digital marketing plan (yes, even for B2B!).
Why? Brand authority and direct communication with your audience is extra important in the SaaS space, and social media covers those bases for you.
So whether you just stick with LinkedIn or choose to populate many social media channels, being where your users are builds trust.
Here’s what a solid paid social media marketing strategy should include:
- Facebook, LinkedIn, Twitter, Instagram, Pinterest, & TikTok ads
- Conversion tracking
- Facebook pixel and LinkedIn insights tag implementation
- Identification of key platforms & opportunities
- Audience builds based on demographic targeting, interest targeting, email marketing lists, & previous site visitor remarketing
- A/B and ad format testing (video vs. single image vs. carousel)
- Placement testing (messenger vs. stories vs.feed)
- Bidding strategy & optimization
Pro tip: Don’t forget to prioritize organic social media content. A good social media strategy should include images of your team and your SaaS product, reposting educational content, reviews, announcements, and case studies.
Pay-per-click (PPC) advertising
Paid search or pay-per-click (PPC) advertising is effective.
Like, really effective.
In fact, no other marketing method allows you to get right in front of your target audience at the exact moment they consider purchasing a SaaS product like yours.
And with the power of retargeting, you can re-engage consumers who already showed an interest in your brand and just need a little nudge along the way.
But here’s the thing:
PPC for SaaS takes more money up front. And before setting up those paid ads that direct users to your website, it’s extra important to ensure your CRO and content are locked in.
That’s why Yadegar urges SaaS companies to consider marketing qualified leads (MQLs), sales qualified leads (SQLs), and revenue when determining which marketing channels to utilize in your plan.
Once you’re ready, a PPC strategy includes:
- Campaign strategy & execution
- Keyword research & development
- Retargeting, display, & YouTube campaigns
- Shopping & feed management
- Ad copy creation
- A/B testing
- Conversion tracking setup
- Revenue modeling and forecasts
6. Search engine optimization (SEO)
It all comes back to SEO.
Without a website that ranks highly in the search engine results page (SERP) that is chock-full of content to educate your audience, the rest of your marketing efforts will struggle.
A solid SEO strategy includes:
- Organic traffic goal assessment
- Content analysis & production
- Keyword analysis & recommendations
- Backlink audit, cleanup & monitoring
- Page title & meta description optimization
- Google Search Console & Analytics setup
- 404 error identification, resolution & redirects
- Site architecture analysis
- Schema markup implementation
- Algorithm impact analysis & resolution
- Keyword research & competitor analysis
- Content creation calendar
- Technical SEO
SaaS marketing budgets: What’s the rule of thumb?
Hey, we all want an easy answer.
And many sources claim that SaaS companies should typically dedicate around 10% of their total budget on marketing. But the reality is it depends.
Mostly, budgets will vary based on whether a brand is looking to sustain or grow.
To sustain, spending 10% of revenue on marketing is a great start; but if you’re looking to grow, lean closer to 25%.
Different Types of SaaS Companies: B2B vs. B2C vs. Startup
While no two marketing plans (or budgets) are the same, there are key differences between the different types of SaaS companies to note:
B2B SaaS companies target other companies seeking software solutions (HubSpot and Slack, for example).
That means a B2B SaaS marketing plan needs to consider a longer sales cycle, multiple stakeholders, and touch points throughout their entire customer’s journey.
And because B2B SaaS business offerings typically include a higher sticker price, a solid strategy for top, middle, and bottom funnel is key. All of these factors impact a B2B SaaS marketing budget.
Let’s shift our focus to B2C.
These SaaS companies target the customer directly (think Netflix and the millions of apps we can download to our phones).
The thing is, B2C sales cycle is much shorter. But competition is strong, which makes marketing extra important for this branch of SaaS.
So, Yadegar offers a little advice for B2C SaaS marketing plans: “Because most offerings tend to be self-service, in our experience, offering a free demo creates a nice lifting conversion rate.”
Another tip? “Utilizing remarketing to push referrals and grow net new customers,” he adds.
Launching a startup SaaS business is no easy feat. And building a digital marketing plan for startups is just as tricky.
Before investing in advertising, “work hard to nail your ideal customer profile, industries and verticals to target, and have specific messaging that resonates with each,” suggests Yadegar.
How much of your SaaS marketing budget should go toward PPC and SEO?
If 10-25% of your total budget should be dedicated to digital marketing, what does marketing channel allocation look like? Yadegar explains:
“Of the total marketing budget, about 25-75% of that can go to SEM; we’ve seen brands even do 100% toward SEM — but again, it depends.”
Search engine marketing costs, of course, will vary as well.
Yadegar suggests allocating at least $3,000 for PPC and approximately $3,000 on SEO if you’re a small business. Keeping in mind that your total spend should be proportionate to your company’s revenue.
The bare minimum budget
We get it.
Some companies in the SaaS industry are going to be on a lower budget, even with a solid product and business plan.
If you’re in the early stages of your marketing efforts, the “bare minimum” you could spend would be around $3,000-$5,000 a month.
And, to make the most of your limited budget, we recommend directing that toward a mix of PPC and SEO.
While 10% of revenue can be a sufficient amount to allocate toward your digital marketing budget, this will probably only allow you to maintain your current revenue and growth levels.
In order to crank up the volume of lead generation and revenue? That will take closer to 25%.
After determining your operation expenses, annual revenue, and customer lifetime value, you should be able to narrow in on what your budget should look like going forward.
From there? It’s time to find a marketing agency that can provide the marketing services you’re looking for within your budget.
But remember, while it’s important to stay within your budget — it’s also key to work with a marketing team that has proven results working with other SaaS companies. Choosing the lowest cost agency could end up costing you more in the end.
At HawkSEM, we’re no stranger to award-winning results in the SaaS industry.
With a proprietary marketing platform of our own, ConversionIQ, we are fully invested in the power of SaaS. From our long list of SaaS-specific case studies, our Google Premier Partnership, and a 98% retention rate, we can help you achieve those benchmarks that are within reach (and your budget).