Remember when your SaaS company was on fire — users surging and revenue booming? 

Now, the market’s flipped, and budget cuts are the new reality. 

You feel tons of pressure to slash marketing spending while still achieving the growth you want.

Here’s the reality: Focusing only on immediate returns is a recipe for stunted long-term growth. It’s better to take a more holistic approach to your marketing budget. 

In this article, I’ll first unpack why ROI obsession cripples your marketing. After, we’ll look at industry benchmarks and the top tactics for optimizing your SaaS marketing budget in 2024.

The ROI Mirage: Why Short-Term Thinking Leads You Astray

In the face of shrinking budgets, the knee-jerk reaction might be to prioritize activities with immediate ROI and alternately, to cut those that don’t seem to net instant ROI. 

An over-reliance on ROI can overshadow vital aspects of business growth, like:

• Brand Building: A well-established brand fosters trust, recognition, and loyalty, influencing customer behavior. 
• Customer Lifetime Value (CLTV): CLTV takes a long-term perspective, considering the total revenue a customer generates throughout their relationship with your company. Investing in strategies that enhance customer satisfaction and loyalty can significantly boost CLTV, leading to sustainable business growth.

Let’s now talk about the major issue of accurately measuring ROI.

It’s a truly complex pursuit — particularly when it comes to B2B. 

This report by Tomasz Tunguz found that the sales cycles of B2B SaaS startups increased by 36% between early 2022 to 2023, coinciding with the economic downturn.

Now, the average B2B startup has an 80-day sales cycle. So, it’s easy to understand from the get-go that revenue significantly trails marketing efforts when it comes to B2B. 

But that’s not all!

There’s a fundamental flaw in measuring your marketing success based on immediate ROI — the 95:5 rule.

This well-established rule in marketing states that only 5% of potential buyers are “in-market” at a given time. 

So, if you focus solely on immediate conversions, you will neglect the 95% who are not yet ready to purchase but who can be nurtured into leads.  

This is where brand awareness and relationship building come in. For example, consider:

• Thought leadership content:  Establish yourself as an industry expert by creating valuable content that positions you as a trusted resource — Webinars, blog posts, and insightful social media interactions all contribute to building brand awareness and thought leadership
• Brand awareness campaigns:  Targeted campaigns can get your brand in front of the right audience, keeping you "top-of-mind" for when they're ready to make a purchase decision

Imagine customers are faced with two equally priced SaaS options. They inevitably will choose the brand they recognize and trust. 

That’s the power of brand awareness! 

Investing in brand awareness might not translate to immediate ROI on a spreadsheet, but the long-term value for sustainable growth can't be underestimated.

Industry Benchmarks: Where Does Your SaaS Marketing Budget Stand? 

If you are wondering how much you should be spending on marketing, it's natural to look to industry standards for guidance. 

It's crucial to remember that these figures shouldn't be rigid guidelines, but taken rather as reference points.

There are many factors that influence the size of a company’s marketing budget, namely: 

• Company size and growth stage: A bootstrapped startup has very different marketing needs compared an industry leader or even a company that’s just secured a significant round of funding (Series F). 
• Industry: Marketing strategies for a financial services company will differ vastly from those of a gaming platform, for example.
• Specific goals: Are you aiming for brand awareness, user acquisition, or customer retention? Your goals will influence how you allocate your budget.

But if you’ve come here for hard numbers, I’m not going to keep you waiting.  

SaaS Capital's 2023 report provides valuable insights into marketing spending for private B2B SaaS companies. 

First, their report highlights a key difference between bootstrapped and equity-backed companies. 

They found that bootstrapped companies spend a median of 11% of ARR on marketing while equity-backed companies spend a median of 8.5%.

This suggests bootstrapped companies might prioritize customer acquisition through marketing, while equity-backed companies might invest in other areas for growth besides marketing. 

And now by company size, here is a breakdown of median marketing spend by ARR range:

How To Optimize Your SaaS Marketing Budget in 2024

Want some good news? 

While budget cuts have been the norm in recent years, research and advisory company, Forrester, paints a slightly more optimistic picture looking forward. 

Their 2024 planning report contains valuable insights for B2B marketers. Here, we’ll look at some key takeaways on how you can best optimize your SaaS marketing budget. 

1. Budget and Growth

B2B marketers can expect budget increases in the next 12 months.

Concretely, what does this mean? 

Well, this signifies that marketers can slowly move away from the cost-reduction mindset. The focus will be on:

• Programs: Investing in new marketing tools and initiatives.
• Personnel: Expanding marketing teams with skilled professionals.
• Technology: Leveraging cutting-edge marketing technologies for better reach and analysis.

The focus should be on initiatives directly fueling business growth, such as:

• Lifecycle revenue marketing: Strategies that nurture long-term customer relationships, maximizing the value each customer brings to your business in the long run.
• Integrated campaigns: Ensuring consistent messaging across all marketing channels (website, social media, email marketing, etc.) This creates a smooth customer journey and allows data-driven optimization to further refine your approach.

2. Marketing Transformation

Companies should stop thinking of marketing as an expense and embrace its true potential as a powerful growth engine. This transformation requires a multipronged approach. 

Unified Voice and Message

Consistency is key. Maintaining a consistent brand voice and messaging across all marketing channels creates a seamless and recognizable experience for customers, fostering trust and brand recognition.

Holistic Customer Journey 

Think beyond individual marketing efforts. Integrate various partners and channels to ensure a smooth and cohesive experience for customers throughout their entire interaction with your brand.

Artificial Intelligence

A powerful tool, but with clear boundaries: while AI offers exciting possibilities in marketing, it’s important to use it responsibly. Developing clear guidelines for using AI tools ensures ethical and effective utilization, maximizing the benefits while avoiding potential misuse.

3. Focus and Prioritization

When laying out your SaaS marketing budget, prioritization is key. 

After defining your company’s growth strategies, focus your marketing efforts on two or three at most, eliminating the marketing programs that don't align with your chosen strategies.

Lastly, shift your focus from product-centric campaigns to audience-based campaigns that address customer needs. 

4. Experimentation for Growth

An experimentation and flexible mindset is crucial for optimizing your marketing budget. This means adopting an Evidence-Based Marketing approach, where you can continuously measure and analyze the effectiveness of your marketing strategies. 

You can think of your marketing budget like a portfolio investment strategy. Allocate a portion of it, ideally 10 to 20%, towards experimenting with new ideas and approaches.

This allows you to explore uncharted territory and potentially discover innovative strategies that drive growth. 

Here are some key consideration when it comes to experimentation: 

• Track and analyze results: The core principle of Evidence-Based Marketing is to measure and analyze the performance of your experiments. This data will guide you in determining which strategies are yielding the best results and warrant further investment.
• Prepare for the unexpected: Don't just focus on planned experiments. Develop scenario plans to address unforeseen events that could disrupt your marketing strategy. This proactive approach ensures you can adapt to changing circumstances and maintain momentum.
• Explore generative AI: Experiment with the potential of AI tools for content creation and customer engagement. This technology has the potential to increase the efficiency and effectiveness in various aspects of your marketing efforts.

Metrics that Matter: Measuring Success Beyond Sales

Before diving into specific metrics, I want to introduce the golden rule: always define clear marketing goals before launching any campaign. 

For example, are you aiming to: 

• Increase brand awareness,
• Generate leads,
• Or boost customer engagement?

Having well-defined goals allows you to select appropriate metrics to track your success. 

While ROI is crucial, it shouldn’t be the sole indicator. Let’s look at some ways to measure success beyond sales figures. 

Gauging Brand Awareness

Does your brand stick in customers minds? Are you becoming an industry reference? Measuring brand awareness allows you to understand just how well your target audience recognizes and remembers your brand. Here are some specific metrics you can measure to gauge brand awareness:

1. Website Traffic

An increase in website traffic, particularly from your targeted demographics, signifies that your brand awareness efforts are attracting the right audience. This indicates that your brand is becoming more visible to your ideal customers.

2. Social Media Engagement

Likes, comments, shares, and mentions on social media platforms act as signals of brand awareness and audience interest. A rise in these interactions suggests that your brand is resonating with your target audience and sparking conversations.

3. Brand Mentions

Tracking how often your brand is mentioned online, both on social media and in industry publications, indicates brand recognition and growing awareness. This demonstrates that your brand is entering the public consciousness and establishing itself within your industry.

Understanding Customer Engagement

Beyond brand awareness, ideally you want to foster a deeper connection with your audience once they become customers. I’m talking about customer engagement — here are the metrics that reveal how effectively your brand interacts with and retains your customer base:

1. Website Visits

Beyond pure web traffic, monitor the frequency and depth of website visits. A higher number of returning visitors and increased time spent on the site indicate a deeper level of engagement with your brand and its offerings.

2. Product Usage Data

Track how users interact with your product. Analyze features used, frequency of use, and completion rates. This data provides valuable insights into engagement levels and helps you understand how effectively users are interacting with your product's functionalities.

3. Customer Support Interactions 

Analyze the nature and volume of customer support interactions. A positive trend of supportive interactions and a decrease in support tickets can signify high customer engagement and product satisfaction.

This suggests that your customers are finding value in your product and experiencing a positive user journey.

Wrapping Up On Your SaaS Marketing Budget 

Shifting your mindset from cost-cutting to embracing marketing as a powerful growth engine can go a long way in helping you devise your SaaS marketing budget. 

By prioritizing brand awareness and customer engagement, you cultivate a loyal customer base and position your business for sustainable growth.

Here's a quick recap of key takeaways mentioned in this article:

• The 95:5 rule: Only 5% of potential buyers are actively seeking a solution at any given time, so neglecting brand awareness efforts leaves a significant portion of your market untapped.
• Investing in brand building: Thought leadership content, targeted brand awareness campaigns – these strategies nurture long-term customer relationships and establish your brand as a trusted resource.
• Industry benchmarks: While budget allocation varies, SaaS companies typically allocate a median of 6-13% of ARR towards marketing.
• Outsourcing: Leverage marketing agencies for flexibility, especially in a changing economy.
• Optimizing your budget: Prioritize initiatives that maximize customer value, and do not embrace experimentation in marketing.

Remember, a successful marketing strategy goes beyond immediate sales.

By nurturing brand awareness, fostering deeper customer connections, and continuously refining your approach through an experimental approach, you can construct a SaaS marketing budget that will lead to sustainable success!

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