How Much Does a Typical B2B SaaS Company Spend on Digital Marketing Each Year?

The amount a typical B2B SaaS company spends on digital marketing can vary widely based on several factors including the company's size, target market, and growth stage. This article aims to provide some general guidelines and insights into the digital marketing budgets of B2B SaaS companies.

Percentage of Revenue

Many B2B SaaS companies allocate around 5 to 15% of their annual revenue to marketing. Startups or companies in rapid growth phases might spend more, sometimes up to 20% or more. This percentage can influence the budget allocation for different digital marketing activities.

Average Spend

A small to medium-sized B2B SaaS company might spend anywhere from $100,000 to $500,000 annually on digital marketing. Larger companies or those targeting enterprise clients may spend millions of dollars each year. Below are some key components included in this budget:

Key Components

Content Marketing: Blogs, whitepapers, case studies, etc. Search Engine Optimization (SEO): Techniques to improve search engine ranking. Pay-Per-Click (PPC) Advertising: Targeted ads on search engines and social media platforms. Social Media Marketing: Engaging with the target audience on various social media platforms. Email Marketing: Sending promotional emails to subscribers to drive engagement and leads. Webinars and Online Events: Virtual events to engage potential customers and build credibility.

Growth Stage Considerations

Early-stage companies may focus more on brand awareness and lead generation. As they scale and refine their strategies, their marketing spend may increase. For example:

Startups: Tend to allocate a percentage of their total revenue towards marketing. This can range from 10-20% initially as they establish themselves in the market. Companies in Growth Phase: Invest more in marketing, sometimes reaching up to 20% of revenue as they aim to accelerate growth. Mature Companies: Allocate a smaller percentage of their revenue towards marketing once they have established a significant market share and customer base.

Understanding the B2B SaaS Space

The B2B SaaS space can be segmented into three main types based on the sales model and average customer value (ACV):

1. Relationship Driven Enterprise SaaS

These companies operate in highly competitive markets with large enterprise clients. They often rely on field sales and have a higher ACV ranging from $250,000 to $250,000 . For these companies, digital marketing can be effective but perhaps not as efficient as Jason Lemkin has suggested. These companies may look elsewhere for their primary digital marketing channel, possibly focusing on more direct and personal sales methods.

2. Inside-Sales Driven B2B SaaS

These companies can sell without physical sales teams and have a lower ACV, ranging from $1,000 to $20,000 per annual subscription. Digital marketing is highly effective for acquiring top-of-funnel pipeline through activities like webinars, ebook downloads, and demo requests. Companies in this segment are seeing growth rates that far surpass what Jason has described for major B2B tech companies.

3. Self-Service SaaS

Companies with a self-service model, where the product is easy to use and customers can sign up without a salesperson's help, have an ACV ranging from $120 to $4,000 per annual subscription. SMBs in this category are already using digital networks like Facebook, Instagram, LinkedIn, and Ads service for their business promotion. It can be cost-effective to reach them at scale and encourage product sign-ups and premium subscriptions. This is true both for small businesses and for corporate teams in larger organizations.

Implications of B2B Purchasing Trends

One of the underlying assumptions in the question and its answers is whether B2Bs make purchase decisions top-down in 2019 and beyond. My personal opinion is that CXOs today would be very hesitant to deploy software company-wide, excluding things that must be deployed top-down like cybersecurity solutions, cloud resources, CRM, etc. This is why we see more products being built and used by teams within enterprises on a self-service basis. This phenomenon presents an interesting opportunity for B2B SaaS companies to tailor their marketing strategies to meet the needs of these teams.