How to Build a SaaS Marketing Budget (+ How Much SaaS Companies Spend)

SaaS businesses should dedicate around 10% of their budget to marketing to maintain current growth and revenue levels. But if you’re looking to grow, lean closer to 25%. Here’s how to calculate a healthy SaaS marketing budget.

Here, you’ll find:

• What is the average marketing budget for SaaS?
• How to build a SaaS marketing budget: 5 steps
• What should a SaaS marketing strategy include?
• B2B vs. B2C vs. startup SaaS budgets: Differences to consider
• How much of your SaaS marketing budget should go toward PPC and SEO?
• Why SaaS companies need a marketing budget

We spoke with Sam Yadegar, CEO of HawkSEM and expert digital marketer, to get his insight on building a SaaS marketing budget — and how to stand out in the current competitive market.

What is the average marketing budget for SaaS businesses?

Typically, 10% of revenue can be a sufficient amount to allocate toward a SaaS marketing budget, but it will likely only allow for current revenue and growth levels to be maintained.

To crank up the volume of lead generation and revenue? That will take closer to 25%.

How to build a SaaS marketing budget: 5 steps

A SaaS marketing budget can be a bit dynamic, changing depending on the results you see along the way. But these 5 steps help determine the percentage of revenue you should dedicate toward marketing to get started.

1. Define your goals
2. Pinpoint your target audience’s digital homebase
3. Calculate your customer lifetime value
4. Compare your CLV to your marketing acquisition cost
5. Allocate a percentage of the budget that feels comfortable

1. Define your goals

Some SaaS businesses may need to start by increasing their brand awareness, while others might need to focus on customer retention. Depending on the goals you set, your marketing plan (and budget) will take shape accordingly.

2. Pinpoint your target audience’s digital homebase

Meet your audience where they are before casting a wider marketing net. For many SaaS businesses, that means narrowing in on particular social channels, like LinkedIn or Reddit, and search engines, like Google.

Similarly, SaaS businesses really benefit from content marketing that educates their audience on their product and solutions. So consider investing in content up front.

3. Calculate your customer lifetime value

With your goals and marketing channels in mind, it’s time to start working the numbers.

“First, you need to determine your customer lifetime value,” says Yadegar.

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)

=

CLV

4. Compare your CLV to your marketing acquisition cost

Once you have a good idea of your CLV, Yadegar recommends that you “back that into a sustainable marketing acquisition cost” to ensure profitability.

He explains that, “Depending on how aggressively 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.”

5. Allocate a percentage of the budget that feels comfortable

Finally, determine what percentage of your revenue feels appropriate to direct toward marketing. Again, this number should be anywhere from 10% to 30% depending on whether you’re looking to maintain current levels or grow.

Don’t forget to leave room for testing, learning and optimization — and expect some potential changes according to your results along the way.

What should a SaaS marketing strategy include?

Our experts recommend directing your marketing budget toward:

1. Conversion rate optimization (CRO)
2. Content marketing
3. Email marketing
4. Social media marketing
5. Pay-per-click marketing
6. Search engine optimization (SEO)

1. Conversion rate optimization (CRO)

CRO is typically the first order of business with a good marketing plan. But keep in mind that it 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, and easy to navigate
• SaaS product pages with simple explanations of your product and benefits
• Clear calls to action (CTAs) and social proof
• Monthly 4XX error checks
• Images are high-resolution
• Heat mapping and call-tracking software
• User data gathering and research
• Landing page design
• Heat-mapping and scroll tracking
• User session recording
• Funnel analysis
• Form interaction and drop-off analysis
• A/B testing
• Conversion tracking review and 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!).

This includes:

• Educational videos
• Articles
• FAQs
• How-to guides
• Downloads
• Demos
• Webinars
• 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.

A solid paid social media marketing strategy includes:

• Facebook, LinkedIn, Twitter, Instagram, Reddit, Pinterest, and TikTok ads
• Copywriting
• Conversion tracking
• Facebook pixel and LinkedIn insights tag implementation
• Identification of key platforms and opportunities
• Audience builds based on demographic targeting, interest targeting, email marketing lists, and 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 and 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.

5. Pay-per-click (PPC) advertising

PPC is 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 and execution
• Keyword research and development
• Retargeting, display, and YouTube campaigns
• Shopping and 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 and production
• Keyword analysis and recommendations
• Backlink audit, cleanup and monitoring
• Page title and meta description optimization
• Google Search Console and Analytics setup
• 404 error identification, resolution and redirects
• Site architecture analysis
• Schema markup implementation
• Algorithm impact analysis and resolution
• Keyword research and competitor analysis
• Content creation calendar
• Technical SEO
• Backlinks

B2B vs. B2C vs. startup SaaS budgets: Differences to consider

While no two marketing plans (or budgets) are the same, there are key differences between the different types of SaaS companies to note.

Business-to-business (B2B)

Because B2B SaaS companies target other companies seeking software solutions, a B2B SaaS marketing plan needs to consider a longer sales cycle, multiple stakeholders, and touchpoints throughout their entire customer journey.

B2B SaaS business offerings, on the other hand, typically include a higher sticker price, so a solid strategy for top, middle, and bottom funnel is key. All of these factors impact a B2B SaaS marketing budget.

Business-to-consumer (B2C)

B2C SaaS companies target the customer directly (think Netflix and the millions of apps we can download to our phones).

The thing is, B2C sales cycles are much shorter. But competition is strong, which makes marketing extra important for this branch of SaaS.

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.

SaaS Startups

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 for SEO if you’re a small business. Keep in mind that your total spend should be proportionate to your company’s revenue.

The minimum budget for SaaS marketing

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.

Why SaaS companies need a marketing budget

SaaS businesses have a lot of benchmarks to hit.

And between a 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.

“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,” explains Yadegar. “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.

The takeaway

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.

But a higher revenue growth rate and a lower CAC are possible for SaaS businesses with the right budgeting plan.

And 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.

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).

Let’s connect.

This article has been updated and was originally published in February 2023.