SaaS Marketing Budget Guide 2
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Stay Ahead of the Curve: How to Determine the Ideal Saas Marketing Budget

In the investor-packed world of Software as a Service (SaaS), determining the ideal SaaS marketing budget is non-negotiable. 

Allocating the right amount of resources to your marketing efforts can make the difference between being a market leader, or falling behind the competition in all of my previous campaigns. 

But how do you go about determining the ideal marketing budget for your SaaS product? 

As an experienced SaaS Marketer, with over 15 years of experience in almost all marketing disciplines (web dev, product marketing, copywriting, content, SEO, SEM, SMM, Design, Direct Mail, Email, Automation, and more), I’ve spent countless hours hashing this out over beers, coffee, donuts, and baklava, with CFOs, CEOs, CMOs, Boards and business partners.

I’m cutting the fluff and sharing the most important components you need to understand before you spend a single dime on that “evergreen ad campaign”.

This is for ANYONE considering funding, re-allocating current budget, or considering a new SaaS Marketing Plan or in the early strategy stages of a new SaaS idea.

CEOs, Investors, CMOs, and CFOs need to TRULY understand the costs of GROWTH (not just marketing) and ensure their teams are properly funded to keep the doors open. 

Why having an ideal Saas marketing budget is important

Having an ideal SaaS marketing budget is essential for several reasons. 

  1. A clearly-defined budget is essential to promote your product or service aggressively

The key word here is “aggressively”.

Without a well-defined budget, you may be underinvesting in strategies that could leave gaps in your marketing competitors can exploit. 

One of my major SaaS projects built a massive audience through Google and Linkedin Ads in 2020. 

However, due to poor bottom funnel conversions and low yield field marketing efforts, that budget was slashed indefinitely.

Within a few months, that traffic was quickly diverted to competitors who overtook our brand’s market share quickly due to inadequate budget for campaign reach. 

Furthermore, depending on the platform, you can barely play (in the pay to play model) if your budget falls below a certain daily spend. 

More on how to approach expensive impression costs with challenging budget constraints later in this guide.

  1. A well-planned marketing budget helps you make informed decisions about where to focus your efforts. 

I didn’t appreciate how important this was until later in my career, however it was the single most important career propelling skill I’d acquired from my finance days.

Just like a Financial Advisor or Investor, your job is to get the most yield from each dollar spent. And since SaaS buyers’ journeys often begin and end on digital, you can track most of your channel activities relatively accurately.

Often all you need is the right marketing tech stack or analytics tools and you can automate this in a few clicks. 

When you understand how much you can spend on each marketing channel, you can prioritize those that have the greatest potential for reaching and engaging your target audience. 

I’ve seen investors, company leaders, board members and team members light up with this illuminating dataset.

How valuable is it for a company to know how much it will cost for them to reach their monthly, quarterly, and yearly goals,… and then plan accordingly? Priceless.

Investors always appreciate a firm that spends with careful discernment. 

  1. Finally, having an ideal SaaS marketing budget allows you to track and measure the success of your marketing campaigns. 

This is key for determining campaign adjustments on the fly.

I’ve dealt with many marketers that are unsure of when it’s time to shut off a bad campaign.

Knowing how much you’re spending per impression, per engagement, per lead, per conversion is all you need, most of the time, to know when you’re running a poor campaign.

By setting specific goals and objectives, you can monitor your progress and call audibles when needed. 

This data-driven approach has helped me and other SaaS leaders with everything from optimizing budget, to outlining funding round requests, and positioning digital brand assets for sale.

6 Key Factors to Consider When Determining your SaaS Marketing Budget

When determining an accurate SaaS marketing budget, use these factors to properly outline your financial strategy.

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  1.  Understanding your target audience and industry

Before allocating any budget to your marketing efforts, it is crucial to have a deep understanding of your target audience and your industry trends. 

There is no one size fits all approach, of course. But there are some fundamentals you’ll always need to consider.

Who are your ideal customers?

  • This can mean everything from firmographic data, to the generational details of an economic buyer.
  • For example, if gen Z is your buyer and end-user, consider the cost of impressions on media channels gen Z frequents. If they’re gen X or Boomers, some traditional campaigns like event media, email (timeless), or direct marketing may have the greatest reach and impact. 

What are their pain points? 

How do their pain points affect the budget strategy? 

Great question! This has more to do with top funnel funding.

Pain is required for anyone to take meaningful action on a problem. This is key to any SaaS Marketing Strategy because some pains have standard solutions or buyers journey.

For example, the pain of not knowing an answer (or the burning desire to have a question answered) generally belongs to Search traffic – Google, Bing, Safari, etc) You’ll want to allocate adequate budget to SEO content, and case studies to help a buyer through Search-based buyers journey. 

What are their preferences and behaviors? 

The last thing you want to do is start a TikTok campaign when targeting Boomers. Boomers are notorious for avoiding this platform, despite how many other industries and products have found success on it. 

You also won’t find Gen Z on Facebook, since the whole platform is TLDR at this point.

By answering these questions, you can tailor your demand marketing strategies to resonate with your target audience’s media preferences and maximize your chances of success.

Additionally, gaining insights into your industry landscape is essential. Consider the following:

  • Are there any emerging trends or technologies that could impact your marketing efforts? 
  • What are your competitors doing? 

Conducting thorough market research and competitor analysis through paid and FREE platforms has helped me identify EASY opportunities consistently.

Some of the modern data platforms are making this super easy.

  1.  Setting marketing goals and objectives

It’s so important to establish MEANINGFUL goals and objectives. 

Think carefully about the following:

  • What do you want to achieve with your marketing efforts? 
  • Is increasing brand awareness and generating leads more important, or is it driving bottom-funnel conversions and retention? These don’t cost the same so you can’t skip this.

I was once hired to focus primarly on lead generation and growth. But on my first day of the job, I learned that lead flow was perfectly fine, it was the bottom funnel conversion efforts that were truly hurting the business.

Setting specific, measurable, achievable, relevant, and time-bound (SMART) goals will help you allocate your budget accordingly and track your progress effectively.

*IMPORTANT: Do this part with EVERYONE involved in the organization – all the way up to the board and investors. The last thing you want to do is dig in deep on marketing activities, reports, and initiatives that are mis-aligned with high level objectives. They won’t hesitate to pull the rug on projects they don’t understand, and you don’t want to feel that rug burn!

  1.  Prior Marketing and Sales Performance

Look at key performance indicators (KPIs), including:

  • Impressions: Organic, Social Media, Advertising – CPMs are crucial for understanding how much reach you can afford on a specific media platform like Google PPC or Social Media Advertising.
  • Engagement: Cost-Per-Click (CPC), Cost-Per-View (CPV), Open Rate/Click-through-rate/Click Rate for Email Campaigns. This is crucial for funnel projections and growth calculations.
  • Website traffic: Review Traffic from all channels here. It’s important to know that NOT ALL TRAFFIC is made EQUAL. This isn’t the US, it’s the internet. People can come to your site from all over the world for many different reasons and you may not want to get too hyped on that influx of Moscow traffic just yet.
  • Mid-Funnel Conversion Rates: Downloads, Landing Page submissions, Return Visitors, etc. all give you high level details of your warm lead activity, and captive audience size.  
  • Bottom Funnel : Conversion rates, and Customer acquisition costs (CAC) should be segmented as much as possible to gauge Sales and Marketing performance together.

The transition from Marketing Qualified Lead to Sales Qualified lead has always been the cause for debate in my previous campaign working in the middle of these two teams.

For best results, allow the Sales team to clearly define their Sales process first

Remember, the relationship between marketing and sales is like Quarterback to Receiver – you both need to agree unanimously on where to meet.

I’ve often found it easier for members of my Sales team to tell me who they like talking to, couple that customer data (who have we converted well?) to get the best clues on who’s best for our bottom funnel focus. 

By analyzing the data from your previous campaigns, you can empower more than just the marketing team. 

I’ve used this data set to help Sales, Finance, Customer success teams and even product teams make data-driven decisions with confidence.

Market research and competitor analysis

To create an ideal SaaS marketing budget, conducting market research and competitor analysis is vital. 

This usually involves gathering and analyzing data on your Total Addressable Market (TAM), industry trends, and competitive landscape. But this is bland. You’ll need to be smarter. 

Linkedin, Facebook, Instagram, and even Google give you full transparency on campaigns run by competitors. This will include key details on search behaviors on all platforms and even some demographic details (depending on the platform) of your target audience. 

You’ll want to use this data to not only understand customers’ needs, preferences, and behaviors, but craft relevant messaging, creative, design, and targeting strategies.

You’ll also want to differentiate your message from competitors

In a red ocean market, customers only need to know what you do DIFFERENTLY. If you notice gaps in your competitors messaging, you can use this to address niche markets or demand gaps categorically.

Differentiation Formula:

WE help X (Ideal Customer) Solve Y (Economic Problem/Pain) via Z (Key Differentiator)

By understanding your audiences pains/problems and completing proper competitor analysis, you can craft an accurate marketing strategy that’s designed to:

  • Exploit Competitor weaknesses
  • Address underserved market niches
  • Quickly Dominate Your Strongest Channels

Allocating Budget Across Marketing Channels

Once you have a clear understanding of your target audience, industry landscape, goals, and competitive positioning, it’s time to allocate your budget to the right marketing channels. 

This part is pure math so you need an excel sheet for best results. 

Channel CAC Model Censored SaaS Marketing Budget

This involves deciding how much to spend on various tactics such as content marketing, paid advertising, social media marketing, email marketing, and more.

The key here is to prioritize the channels that have the highest potential for reaching and engaging your target audience OR the HIGHEST conversion potential.  

For example, if your target audience is active on social media platforms, allocating a significant portion of your budget to social media marketing might be a wise choice. 

On the other hand, if your target audience is more likely to respond to email marketing campaigns, you might want to allocate more resources to content production and your offer stack to support this campaign strategy.

Your sales team may also be in a pinch for reaching specific quarterly goals.

  • Think final week of the quarter… when you put marketing juice into that high conversion funnel to ensure your unit production is adequate and your sales rep hit that target. (Just remember me during happy hour, Tom :)) 

It all depends on the scenario, but you need this data to be flexible enough to take calculated actions or risks.

Regularly reviewing and adjusting your allocation based on the performance of each channel will help you optimize your marketing efforts and maximize your return on investment.

Testing and optimizing your marketing campaigns

Never jump in with two feet!

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..dip a toe in first. 

To ensure that your marketing budget is being utilized effectively, it is crucial to test and optimize your marketing campaigns, correctly.

How to A/B Test Correctly: 

Many marketers run A/B tests by experimenting with different messaging and creatives, and analyzing the results to identify what works best for the target audience.

This strategy feels incomplete in a world of skim reading.

I’ve used various frameworks for testing and have found Russel Brunson’s (Marketing Secrets) Hook, Story, Offer Framework to be the most effective.

It breaks down the anatomy of a campaign by micro goals:

  • The Hook tells you the effectiveness of your scroll-stopper (the most important part of any creative) – Usually the big bold text in a newspaper ad, the main rich media (video or picture) used on social posts, or the subject line of an email. Testing this is crucial for increasing the initial engagement rate of your campaign. Remember, you can’t capture the king without a decent opener.
  • The Story builds value in you, your brand, and what you’re offering. It allows the audience to connect empathically to your mission, and ultimately informs your campaign manager if their demographic targeting strategy is accurate. 
  • The Offer informs the value (desireability) and relevance of your CTA. If they Open the email, Read the story but don’t click your offer, you know you’ll need to sweeten the deal just a bit more. Try reading $100M Offers by Alex Hormozi to learn how best to nail this in your nurture strategy.

By testing different strategies and tactics, you can gather valuable data and insights that will help you refine and optimize your marketing campaigns and create more confidence as you launch additional ads.

As we stated before, if you know how much you should be spending per impression, per click, and per conversion, you can leverage the Hook/Story/Offer framework to understand when it’s time to discontinue a bad ad set.

SaaS Marketing Budget Benchmarking 

  1. Find out your average CPL (Cost-per-lead) for all channels. 
  2. Use this value to determine your weekly testing limit. For example, If you know your CPL is historically $150 on an optimized campaign, set your campaign to $150 max for a 5 day test.
  3. Make this your threshold for determining success on a new campaign. You only need to convert one to validate the campaign.  
  4. Immediately STOP campaigns that exceed this amount by 10% or more and hit the drawing board.  

This iterative process allows you to make data-backed decisions and continually improve your marketing efforts and maximize your chances of success.

Measuring the ROI of your marketing efforts

Next is ensuring you can track activity from Top to Bottom. Nowadays this requires an integrated CRM, that the entire company uses as a single source of truth.

  • Pro-Tip: You will find it impossible to get an accurate estimate of marketing ROI with the doom of 3rd party cookies and increased privacy laws. You need a single source solution that seamlessly integrates data through native API. This is the best option to reduce budget inflation on marketing operations. 

Measuring the return on investment (ROI) of your marketing efforts is essential to determine the effectiveness of your budget allocation; and sometimes, save jobs.

By accurately tracking key metrics like customer acquisition costs (CAC), conversion rates(%), and customer lifetime value (LTV), you can calculate the ROI of each marketing channel and campaign individually.

Marketing Attribution

However, be wary of the many attribution reports available on the market. HubSpot promotes first touch, last touch, Linear, U-shaped, and all kinds of curves in between on their platform.

For marketing channel performance analytics, I suggest focusing solely on whatever costs are associated with acquiring a unit of contact information. 

In other words, how much did you pay for the email address you’re now going to use to communicate and upsell this contact?

The truth is you can get pretty funky with adding value to different funnel touches, content, Sales conversation stages etc, but the most important job of your SaaS Marketing Plan is to reach someone, and begin a relationship. 

The cost of those activities should be included in your ROI calculation. Investors and CFOs only want to know the cost of repeating a base level of success, in order to forecast future performance with some level of accuracy.

Adjusting and revising your SaaS marketing budget

Your SaaS marketing budget is not set in stone. It’s important to regularly review and adjust your budget based on the performance of your SaaS Marketing Plan.

You may also find your costs decreasing in certain channels as your campaigns are optimized. This is Christmas for a marketing team.

It’s like getting a random budget raise!! 

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Become familiar with your marketing budget numbers

This is essential for all future marketing decisions. You will be enticed with new software offers, lead lists, and random costly side projects along the way, many of which you’ll say “yes” to unfortunately.

By becoming familiar with the data and insights gathered from your marketing efforts, you will not only be informed, but be able to make lightning quick decisions about reallocating your resources. 

This flexibility allows you to adapt to market conditions, stay ahead of the competition, and quickly take action on real opportunities in your marketplace.

Tools and resources to help determine your ideal SaaS marketing budget

Determining your ideal SaaS marketing budget can be a complex process, but there are several tools and resources available to help you do this in an automated way. 

Best Tools to Help Manage Your SaaS Marketing Budget

From budgeting templates to marketing analytics platforms, these tools can streamline the process and provide valuable insights into your marketing performance.

Budgeting and Analytics Tools 

  • Google Analytics (GA4): Best for shorter funnels (ecommerce, info products, etc) 
  • HubSpot CRM: Best for mid to longer funnels. HubSpot leverages first party cookies to track multi-touch activities across key web assets to get a good view of your buyer’s journey in a single snapshot.  
  • SEMrush / AhRefs – Best used for SEO and Advertising analytics.  
  • Moz. – Social Media, PR SEO, and Top Funnel Traffic analysis.

These platforms offer a range of features and functionalities that can help you track and measure the success of your marketing campaigns, optimize your strategies, and make data-backed decisions.

Additionally, consulting SaaS Marketing Agencies, attending marketing conferences, and joining online communities can provide you with valuable insights and best practices for determining your ideal SaaS marketing budget.

Conclusion

Determining the ideal SaaS marketing budget is a crucial step towards staying ahead of the curve in the competitive SaaS industry. By considering factors such as understanding your target audience and industry, setting clear goals and objectives, evaluating previous marketing performance, conducting market research and competitor analysis, allocating budget to different marketing channels, testing and optimizing your campaigns, measuring the ROI of your efforts, and adjusting your budget as needed, you can create a marketing budget that maximizes your return on investment and positions your SaaS business for success.

With the assistance of a highly skilled assistant who specializes in copywriting, content writing, and digital marketing, you can navigate this complex process with confidence. Together, you can create a marketing budget that aligns with your goals, reaches your target audience effectively, and helps you leave your competitors in the dust. Stay ahead of the curve and take your SaaS business to new heights with a well-planned and optimized marketing budget.

How much should your SaaS marketing budget be?

According to a survey by G2 Crowd, SaaS companies on average spend 7-8% of their revenue on marketing. However, this number can be higher for companies in the early stages of growth, as they need to invest more heavily in building brand awareness and acquiring customers.

What is the benchmark for SaaS spend?

The general rule of thumb for spending in SaaS is 40/40/20. In other words, 40% of operating expense should be on R&D, 40% should be on sales and marketing, and 20% should be on G&A according to Linkedin

What are average SaaS Profit Margins?

A good SaaS gross margin is anywhere from 70% to 85%. However, one thing to keep in mind is that gross margins are typically lower in a company’s early stages than in its later stages according to ChargeBee.

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