Marketing Budgets & Spend in the SaaS Industry: 2018 - 2019 Report
For technology and software-as-a-service (SaaS) companies, marketing is one of the key drivers to growth. Between raising awareness of new products, producing thought leadership content, and generating sales leads, technology companies spend billions of dollars a year trying to find the right marketing mix.
But what’s the state of tech industry marketing spend in 2018, and how is it likely to change in the years to come?
Marketing in the technology industry, whether it’s B2C consumer apps or B2B enterprise platforms, is unique from other industries in many key respects. Complex products, lengthy sales cycles, and reaching multiple stakeholders within an organization make things a lot harder than other industries like pharmaceuticals and consumer goods. Currently, tech software companies spend around 15 percent of their annual budgets on marketing, only second to the consumer goods and consumer services industry.
The evolution of marketing technologies like automation platforms and social listening has also made tech marketer’s jobs that much more challenging when it comes to deciding where to allocate budgets and resources. That’s why Insivia has created our 2018 SaaS Marketing Report, to take a deep dive into the data about what’s important to tech marketers, what channels and technology they’re spending money on, and what quantifiable results they hope to achieve.
First, we’ll examine the key challenges in 2018 that enterprise software and SaaS organizations are seeking to address with marketing, and the return on investment (ROI) case for various marketing technologies and platforms. We’ll analyze where tech marketing budgets are now, how marketing spend is being allocated, and how these trends are likely to lead in 2019 and beyond.
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Marketing Goals & Challenges in SAAS
Today, the technology and SaaS industry has grown from a $5.5 billion industry in 2008, to the $116.4 billion industry that it is today in 2018. But according to recent data from McKinsey, if a software company grows only 20 percent, it faces a 92 percent chance that it will not even exist within 3 years.
Originally, the technology and SaaS industries evolved as purely product development and innovation but in today’s hyper-competitive landscape, having a best-of-breed product or solution doesn’t necessarily guarantee the user or customer growth for a company to survive over the long run. Having a app, software, or product with tremendous value and a great experience is still an extremely important part of the equation but marketing is required to achieve the growth needed for sustainability..
"if a software company grows only 20 percent, it faces a 92 percent chance that it will not even exist within 3 years"
That’s why technology companies have become increasingly focused on marketing strategy and investment. Marketing (when done properly and systematically) guarantees a steady stream of industry visibility, sales leads, and revenue growth. Technology companies both big and small have recognized this fact, and now marketing has become a cornerstone of business strategy for SaaS and tech companies.
For example, in their first five years, SaaS companies have invested around 80 percent of their revenue on average in sales and marketing efforts. This number may seem significant, but in the world of investor-driven growth requirements it is necessary to meet objectives.
But it’s not just the initial growth phase that tech companies use a ton of marketing muscle to overcome. After SaaS and tech companies get past the start-up phase, those that rely mostly on internet sales devote 65 percent of the median customer acquisition cost (CAC) budget to marketing efforts and tactics.
What specific challenges each organization is seeking to address, or goals that they’re looking to achieve depends upon their product, industry, and target market. But here are some the common, core issues that tech and SaaS companies are spending marketing budgets to address in 2018:
To grow at a predictable rate, technology companies need a consistent, sustainable way to generate sales leads that might eventually turn into customers.
Many SaaS products are complex, expensive, and require lengthy sales cycles. Thought leadership marketing is key to helping prospects overcome barriers as early as possible.
How prospects (and even current customers) interact with digital marketing efforts can yield insights that can be used in multiple areas of the business. Companies are recognizing the value of marketing data more than ever.
Especially in the technology industry, sales is the proverbial customer of marketing. SaaS organizations are investing in marketing tactics and technologies that will facilitate better collaboration between the two.
Simply Google the word “Circle,” and the first result brings you to a fintech company instead of the actual shape. It’s just one example of how SaaS companies are pushing to get even higher search rankings than ever.
The internet is a crowded place for technology buyers, and technology companies are becoming acutely aware that they need to dedicate marketing budgets that will help them reach the target audience in the right places.
According to recent figures, there are currently over 5,000 various marketing software and technologies on the market. Choosing which platforms are worth the investment has become more challenging than ever for tech marketers.
Adjusting to B2C
Even B2B SaaS buyers are consumers themselves, and they’re increasingly influenced by those B2C marketing experiences. Marketers are now thinking about how they can connect with their audiences in similar ways.
As tech leaders continually place marketing, sales, and services under the umbrella of Customer Experience (CX), any investment that can link marketing strategically with other CX areas is of potentially of great value.
No matter what industry your market serves, odds are you’re facing some (if not most) of the above issues and challenges. How you decide to allocate your marketing budget will obviously depend on your situation.
When deciding how to allocate your budget, it’s important to prioritize your goals and challenges and work with a marketing partner to identify which strategies, tactics, and technologies are most appropriate. No matter what, you should do the following:
Build A Solid Brand
A brand is not just a logo. You should clearly define your value propositions (what makes you different), positioning statements, key messages, and brand voice to create a clear and consistent marketing as well as sales approach.
Understand Your Audience
One of the most important aspects of sales and marketing is to prioritize audiences and develop detailed personas to understand customers. Starting with pains, drivers, and buying factors is the minimum that every SaaS company should have written down.
Create A Marketing Strategy
A strategy is different than a plan. A strategy needs to align audiences with tactics in an intelligent measurable approach. Any smart marketing strategy is about small targeted campaigns combined with valuable brand awareness.
Never get trapped in trying to guess or just do marketing randomly - this is a sure failure.
Have A Plan
A stratgey is not a plan and a plan is its own entity. Define specific tactics, messages, budgets, calendars, KPIs, and other elements that make a smart strategy actionable.
Measure & Optimize
We exist in a world that allows us to track everything and produce intelligent reports on activity. Measurement, testing, and optimization must be a constant activity built into our marketing plans.
A regular assessment of your brand, website, and marketing should be a required process for any company that is looking to scale.
The ROI of Marketing in SaaS
Technology and SaaS companies engage in a broad variety of marketing tactics, depending on the industry and customer base they serve. This typically includes (but is not limited to):
- Search Engine Optimization (SEO)
- Whitepapers, Customer Testimonials
- Social Media
But before deciding where to invest and allocate budgets, how do technology marketers approach analyzing which tactics and channels will yield the highest ROI?
According to recent data, statistics, and research, here is how technology industry marketers are approaching the measurement of marketing ROI in 2018:
The rate at which marketing leads convert to sales is one of the most important metrics.
It’s not just how many marketing leads convert, it’s about how rapidly they move through the sales cycle towards becoming actual customers.
Tech companies are constantly creating content, so any marketing technology or tactic that helps streamline this process in terms of either cost or time provides significant ROI.
Many marketers aim for a 5:1 revenue-to-cost ratio, meaning that for every one dollar spent on marketing, five dollars worth of sales should be directly or indirectly generated.
Around 80 percent of marketers say that they value technologies like marketing automation, as they improve the overall efficiency of their marketing efforts.
Customer Acquisition Cost
One of the most important marketing (and overall) metrics for technology companies. The goal is to optimize how much marketing muscle is needed to acquire each additional customer.
A longstanding but still effective, measure of marketing ROI for tech companies. Whether it’s social media campaigns or live events, driving to-of-funnel web traffic is still a top priority, and one of the key ROI metrics used by tech companies.
Lifetime Customer Value
In tech and SaaS, companies want to grow with their customers. That could mean selling additional licenses, services, or add-ons. Tech companies now aim part of their marketing at current customers, so that their lifetime value will increase steadily over time.
According to other data, 68 percent of B2B marketers say that email is the digital marketing channel for which they are seeing the highest ROI. Upwards of 30 percent of the same marketers say they plan on increasing email marketing spend due to the ROI, and overall 82 percent of B2B marketers say that leads and sales are their core metric for success.
68 percent of B2B marketers say that email is the digital marketing channel for which they are seeing the highest ROI
While we’ll discuss email in relation to other tactics like social and content marketing, the main takeaway is that for tech companies, it’s all about marketing efforts that are low cost, but the highest impact in terms of bolstering the sales pipeline.
B2B Marketers Spotlight
They're loading up on eMail.
30% plan to increase spending during the next year.
eMail is seeing the most ROI.
68% said it is their most effective digital channel.
Hard dollars are everything.
82% focus on sales and leads as their primary metrics.
They could be scaling more efficiently.
Only 40% are using eMail Automation.
The Current Marketing Spend Landscape
So how exactly are technology companies spending their money today?
As we previously alluded to, SaaS and tech organizations are spending more money, time, and resources year over year on marketing to help address their key goals and challenges. Just take a look at how one of the biggest and most important tech giants, Microsoft, has been steadily increasing their sales and marketing expenditures since 2006.
Microsoft’s trend represents a much broader one, as technology and software marketing budgets are also expected to increase by 15.2 percent over the next twelve months. This ranks well ahead of other large industries such a consumer packaged goods, telecommunications, and finance.
Much of this is driven by the fact that SaaS and technology companies sell sophisticated products to high-level business leaders. It’s not just about generating awareness with a TV ad or social media post, it’s about meeting the right target buyer personas through the right channels, and investing establishing yourself as a thought leader with deep domain expertise in the industry you’re selling to.
Expected Percent Change In Marketing Budgets Over The Next 12 Months
Tech marketing budgets will increase by 15.2% in the next 12 months.
Tech and SaaS companies are also seeking to strike a marketing balance between how much they engage new prospects, or existing customers for the purposes of satisfaction, retention, and lifetime customer value. It’s why in 2018 we’ve also seen a marked increase in tech companies that invest heavily in content marketing. Having a resource hub with whitepapers, blogging about industry topics, or hosting webinars can oftentimes address both segments.
Current customers want to know about “what’s new and hot” in the industry (and feel more comfortable that you’re ahead of the conversation). New prospects will discover that you have a wealth of information and knowledge, and a clear idea of how your solution might fit in with their business model.
Do You Currently Spend More Time And Resources Acquiring Prospects Customers or Retaining Customers
Most SAAS companies report it's 50/50.
SAAS Marketing Allocation
Now that we know the reasons why marketing is on the uptick for technology and SaaS companies, let’s dig into how specifically they’re allocating their budgets, time, and resources. First, it’s important to understand some specifics of the customers they’re selling to.
When selecting a new vendor or partner, the most (44 percent) of prospects said that pricing information was the most important marketing tactic for making their selection.However, several key marketing tactics also played a big role, such as Product Spec Sheets, Free Trials, Videos, and ROI calculators. With that in mind, technology companies are challenged to find the right marketing mix to get the most bang for their buck.
With all that being said, it’s clear that Content Development is where companies are spending the majority of their marketing budgets (66% of companies said so), closely followed by SEO (62%) and social media marketing (42%).
All three of these areas represent “top of funnel” activities, mostly designed to generate leads, awareness, and thought leadership. To move these leads along the sales pipeline, tech companies are also investing a substantial part of their budgets in Marketing Automation (39%) and Email Marketing (37%). Having a process to nurture leads, and re-market to them via email is highly valuable in the SaaS and technology space, as some leads may take weeks, months, or even years to finally mature and be ready for a sales cycle.
Live Event Marketing and Webinars aren’t going anywhere just yet, with 34 percent of companies saying it’s their biggest budgeted marketing channel. If your industry has many trade shows or conferences throughout the year, it may be a good investment to meet prospects face-to-face and get them into the sales funnel much more easily.
In terms of specific digital marketing channel, some recent data indicates that companies see the most ROI from email marketing, followed by social media and display ads. Email marketing, if done correctly and combined with the right technology, can be highly cost-effective simply because, well, it costs almost nothing (monetarily) to send out personal emails, nurture emails, or mass email blasts. It’s part of the reason that 25 percent of marketers say they plan to increase email marketing spend in 2018.
As far as content marketing budgets go, SaaS CMOs in 2018 are investing in diversified content marketing campaigns. Smart brands understand that a diverse content marketing approach captures different buyer personas and verticals, as well as building brand recognition on a wider front. Today, SaaS companies have a wider adoption of content marketing solutions than most other industries.
The Content Marketing Institute found that 80% of businesses polled across industries maintain a blog, while another recent study from Cobloom (a SaaS marketing agency) found that 89% of the world’s biggest SaaS companies maintain a blog.
Here are some of the key content marketing areas that SaaS companies are spending on in 2018:
Content marketing campaigns are a multi-functioning part of a marketing campaign. They offer information about the values and feel of the company, as well as information about the product itself. This includes a company’s blog, email and social media content, and downloadable content, such as ebooks and whitepapers.
While text-based content continues to be an important part of the content marketing ecosystem, more users are consuming digital content than ever before. As a result, many SaaS brands are taking advantage. For instance, nearly one-fifth of the biggest SaaS companies have their own podcast.
While podcasts are an expensive investment, they hold the promise quality time with your target audience. According to Digiday, branded podcasts are “bucking the trend” of a historically low rate of branded content renewals. SaaS companies are now recognizing that podcasts and live streaming can easily complement existing video content such as webinars, tutorials, and testimonials.
People are consuming video at much higher rates in 2018 than in previous years. Cisco predicts that by 2021, 82% of all consumer Internet traffic will be video traffic. This is up from 73% in 2016.
In general, ignoring content in all forms (video, podcasts and the like) is a costly SaaS marketing mistake.
Finally, technology and B2B companies are shifting some marketing investment to help build out internal competencies through continuous training and knowledge building. Spending on developing knowledge about how to do marketing is set to increase by around five percent, with an over four percent increase in marketing training.
It points to how important it is for technology companies to have competent internal marketing staff, not so they can necessarily do all of the heavy lifting, but can work more effectively with agencies, technology partners, and the like.
How each technology or SaaS company decides to allocate their budget per asset, channel, or other specific marketing tactic will all depend on your product and target market. But in terms of broader trends, SaaS companies are allocating more and more towards content marketing, while building out the back-end technology infrastructure (email marketing, marketing automation, etc.) to generate leads over time.
By investing in internal expertise and training, they’re developing brand storytellers that have the marketing chops to develop multiple types of content, work with different technologies, and interface better with digital agencies.
Investing in Marketing Technology
But with all of this increased investment, how are technology and SaaS companies using technology internally to grow and scale? As we mentioned before, navigating the plethora of marketing technology, platforms, tools, and software can be tricky.
However, compared with most other industries, the adoption of major marketing automation platforms (such as Eloqua, Marketo, HubSpot, and Pardot) remains well above any other major industry. This includes sales-heavy verticals such as financial services and real estate.
The same data also indicates that companies who use Eloqua and Marketo spend the highest amounts on Google AdWords campaigns.
And according to the Gartner CMO Spend Survey 2017-2018, SaaS CMOs said they’ve increased overall marketing budget allocation on marketing technology (MarTech) through 2018. Gartner found that SaaS CMOs spend between 30 and 35 percent of annual revenues on MarTech, and even more for some of the highest performing SaaS companies. There are two primary drivers for this trend. First, the cloud market itself has been in a perpetual growth phase as more companies look to public cloud offerings to streamline operations, boost productivity, and conserve resources. Second, MarTech makes a strong ROI case.
SaaS companies make tech their business, meaning an investment in a new platform or solution is a direct investment in the development of the organization. Plus, it’s more cost-effective to implement and utilize MarTech software, as SaaS companies already have built-in technology capabilities and expertise.
Technology C-level execs are also increasing their overall spending this year on Marketing, Service and SAales-related technology projects while CRM is leading all budget growth priorities in 2018, technology executives continue to place a high priority for innovation on front-office applications, particularly Sales & Marketing, with the goal of digitally transforming their businesses to sharpen the focus on top-line revenue growth strategies and plans.
CRM is leading all budget growth priorities in 2018
Digital Marketing and eCommerce technology initiatives are expected to increase in 2018 by upwards of 7-8 percent compared to the same time in 2017.
Furthermore, we expect continued investments in integrating MarTech and other technology platforms and stacks to increased efficiency. This is especially true as more tech companies adopt cloud-based software for marketing and other critical business functions. Upwards of 46 percent of mainstream tech companies say they have a fragmented approach and inconsistent integration between technologies, with only nine percent saying they have a highly integrated cloud-based technology stack.
On the flip side, only 26 percent of top-performing companies have a fragmented technology stack, and 25 percent saying their cloud ecosystem is highly integrated. Look for many of the mainstream tech companies (as well as startups) to find ways to allocate MarTech budgets in such a way that their software interfaces with other systems like CRM, customer service, and sales.
Only 26 percent of top-performing companies have a fragmented technology stack while 25 percent saying their cloud ecosystem is highly integrated.
What describes your approach to marketing and customer experience technology?
Top-Performing Companies Vs Mainstream
What’s clear is that SaaS and technology companies, at virtually any stage in the game, should expect to ramp up their MarTech spend for 2018 like most others are doing.
Software for functions like marketing automation and email marketing are getting more sophisticated, and SaaS companies should carefully evaluate which technologies will yield the highest ROI in 2018 beyond.
Only three percent of B2B companies say that they use common enterprise marketing automation software. (HubSpot, Oracle, etc.). Overall, less than eight percent use any kind of marketing automation, with adoption rates being higher at companies with more than 1,000 employees.
Future Trends in Marketing Spend
In 2018, the data indicates that SaaS and technology companies are focused on allocating budgets to initiatives in the areas of Content Marketing, Marketing Automation, and Internal Training. But as we quickly approach 2019, what are some areas that are likely to see increased interest, budget allocation, and investment for SaaS and technology companies?
A recent survey of mainly technology industry executives found that, among the marketing initiatives they are most excited about over the next three years, include:
- Delivering personalized experiences in real-time.
- Using AI and bots to drive campaigns.
- Marketing through augmented or virtual reality.
Meanwhile, other data suggests that in the near term, tech marketers are more likely to invest increasingly in Live Video as a marketing channel. With the rise of live streaming on multiple channels and platforms such as YouTube, Periscope, and Twitch, SaaS companies can deliver live content such as webinars or event coverage to both sales prospects and current customers.
While only about 5 percent say they plan to invest in any kind of AI marketing initiative, this number will undoubtedly increase beyond 2019 as more sophisticated, user-friendly MarTech products emerge in the AI space.
Only about 5 percent say they plan to invest in any kind of Artificial Intelliagenc ( AI ) Marketing initiative.
In fact, if we analyze recent search data on both SaaS and AI marketing, one can see a positive correlation between the two. While it’s not a clear predictor that SaaS marketers will significantly ramp up their MarTech budgets in relation to AI, tech companies of all shapes and sizes should keep AI marketing on their radar for future budgetary allocations.
This could take the form of dynamic pricing, automated A/B testing, intelligent chatbots or predictive analysis.
Data management and analytics, as well as omnichannel marketing, are growing priorities for SaaS companies.These technologies are likely to merge with AI and machine learning, and in the future allowing more targeted, personalized, automated messaging to sales prospects.
Over the next few years, technology marketers say they expect to further emphasize customer journey optimization, messaging consistency, training, and mobile marketing. Moving customers down the sales funnel even more rapidly by analyzing sticking points at each stop in the customer journey, and combining that with mobile (and even AR or VR potentially), should be one of the main drivers in tech marketing spend through the rest of 2018 and over the next few years, as sales prospects consume content increasingly over multiple devices and social media platforms.
Software companies are spending a higher percentage of their overall budgets than ever to increase brand awareness, generate consistent leads, and meet their target buyers on channels and platforms in the most targeted way possible.
Here are some of the key takeaways from our report that any technology or SaaS company should keep in mind when thinking about how to allocate their marketing spend for the remainder of this year and beyond:
- Clearly define your overall business goals and work backwards towards implementing the right marketing mix that gives you the best chance at achieving those goals or overcoming your biggest challenges.
- Understand the ROI of various marketing strategies, tactics, and platforms carefully before diving in head first. Focus on developing powerful marketing capabilities over time that will generate consistent ROI, rather than focusing solely on short-term costs.
- Most likely, your competitors are ramping up marketing spend at a rapid rate year over year. While you want to keep pace, think about how to allocate your efforts towards both gaining new customers, as well as retaining and upselling existing ones.
- While content marketing remains perhaps the biggest focus for tech companies, don’t ignore more traditional tactics like email marketing. Tech companies are investing more in internal training, something you should also focus on in order to build some level of in-house capabilities.
- It’s no surprise that tech and SaaS brands are spending more on MarTech, with marketing automation platforms leading the way. But as you add new technologies and software, be aware of how those systems will interface with existing ones and have a plan to integrate them as tightly as possible.
- Artificial intelligence, AR/VR, and big data analytics are just a few of the areas that are expected to experience significant growth and usage for tech companies in their marketing budgets. Work with your digital marketing partner to see which new technologies might be best for your business, and place the appropriate ones on your budget roadmap for 2019 and beyond.