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What percentage of revenue should you spend on marketing?
How much should your SaaS company invest back into marketing? Look at these stats from successful tech companies and up your game.
Business owners and marketing managers are often likely to ask this question at some point, but the answer depends on a number of factors. There isn't a set amount that every business should direct toward marketing, making it important to determine which marketing budget is right for you, specifically.
Why marketing is important
Marketing is crucial for your company’s success – you have to spend money to make money. If you’re not marketing your business, you’re not making progress – it’s as simple as that. Without it, your company won’t get the exposure it needs to build customer relationships, make sales, and make a profit.
You might still be wondering, how does a company determine how much of their budget to spend on marketing? If you want to maintain your current position, you should spend around 5% of your total revenue. If you want to grow (as most businesses do), the general rule of thumb is to spend around 10%. According to data from Deloitte, companies invested most in web optimisation, digital media and search, and digital marketing in 2020. Specifically, 73%, 65%, and 57% of companies invested in each category, respectively, with these trends expected to continue.
If you're curious to know how to determine the ideal marketing budget for your business, there are some items to consider.
Marketing budgets as a percentage of revenue
You may want to establish your marketing budget as a percentage of revenue earned, depending on the type of business you own.
According to the U.S. Small Business Administration, small businesses generally want to spend between 7-8% of their revenue on marketing, provided their businesses have 10-12% profit margins. This may also depend on whether you're in a particular B2B or B2C industry. Deloitte found that both B2B product and B2C service industries spend around 10% of their budget on marketing. In comparison, B2C product and B2B service industries spent as much as 15-18% on their marketing.
Marketing budgets based on industry
Apart from revenue, you'll also want to consider your industry separately as a gauge of how much you should spend toward your marketing budget. Again, this will largely depend on whether you're in a B2B or B2C industry.
Deloitte concluded that B2B product companies tend to spend around 9.4% of their budget on marketing, while B2B service companies spend 11.4%. Meanwhile, B2C product companies spend an average of 15.9% of their budget on marketing, and B2C service companies spend slightly less, at 12%.
Some specific industries within these sectors also spend more than others. For example, businesses in the education industry spend around 19.4% of their overall budget. Conversely, the energy industry only spends an average of 4%. You can look at your industry's average to help figure out how much you should spend based on what competitors are spending.
The different marketing budget categories
Marketing consists of many aspects you need to consider, which may influence your budget based on what you require. Some potential marketing categories to consider allocating your budget toward include:
Do you want to promote a particular product or product line? Consider how much you would want to spend on this channel.
Effective marketing requires plenty of high-quality content, including everything from text on your webpages and blogs to image and video content on various platforms.
Google Ads and other paid advertising campaigns are also integral to successful marketing efforts.
To help build and maintain your company's reputation, your business will require good PR to effectively communicate with the public.
Branding and Creative
It's important for your business to have a high-quality and recognisable brand. This requires strong branding and creative that helps you stand apart.
For any type of event, you should have enough of a marketing budget to both promote and hold the event.
You may also require a budget for other types of marketing, including social media, direct mail, and more.
By accurately calculating your ideal marketing budget, you'll be able to develop highly effective campaigns while generating positive ROI from your efforts.
Traditional tech companies like Microsoft, Apple, and Intel had to evolve and incorporate SaaS into their strategy to keep up with the changing times. Since we’re living in the age of technology, these companies thrive and can afford to invest more in their sales and marketing. And since they’re so established, they’re not looking for the same exposure as smaller companies – but this doesn’t mean they should stop investing in marketing completely.
SaaS sales and marketing
Software as a Service (SaaS) companies like Salesforce, Marketo, and Constant Contact are in the business of marketing and sales management software, so they know the power of marketing and sales.
Many companies are reallocating marketing budgets towards inbound marketing, and according to the Content Marketing Institute, effective B2B marketers spend 39% of their marketing budgets on content. Companies may wonder how much they can expect to receive in return for their marketing investment; as you’ve seen above, it differs for everyone. That said, if you want to see proper growth in your company, you shouldn’t be spending less than 10% of your revenue.
To get even better results from your marketing budget and campaigns, connect with us today.