B2B Marketing Budget Benchmarks
A tops-down view of where VC-Backed SaaS companies spend $$
Annual planning is upon us, and most CMOs I know are looking for benchmarks to help justify their investments. I’ve found it hard to get real-world data from peers. For one, there are privacy/strategy concerns in sharing; secondly, there’s the time sink of one-on-one research; and lastly, we tend to categorize things differently at times, leading to comparison complexity. But we all want the benchmarks anyway. So, below, I’ve compiled all of the data I’ve seen over the years. Plus, I’m running a survey to see if 2023 chaos and 2024 plans have changed the historical trends. Take the survey here!
Disclaimers and thoughts in the blog below.
“Why can’t we just do ROI-Based Budgeting,” asks the CEO
In an ideal world, we could do an ROI-based marketing budget: “If we spend $5M, we’ll make $7M, and we’ll tell you exactly how!” Unfortunately, marketing is messier:
Some of the budget goes toward MULTI-YEAR AWARENESS. It is both difficult to track and often doesn’t result in immediate revenue - public relations, awareness advertising, event and sports sponsorships, social media, and some content marketing all fall into this bucket. I wrote recently about how only 5% of your ideal customers are in market at any period of time. We continue broad-market awareness marketing to be top-of-mind when the 95% get ready to buy.
A large portion of the budget goes toward SOURCING NEW CLIENTS. This is generally most measurable if it’s in the form of digital advertising. However, 75% of buyers' journeys in B2B happen before they even engage with your company, and only 3% of website visitors fill out a form. So there’s a massive dark funnel component we just can’t see. The change in cookie preferences over the years has made it harder to track, correlate, and de-anonymize users.
Some of your budget will go toward DEAL ACCELERATION AND EXPANSION — budget spent on account-based marketing, field marketing, sponsorship of events, and analyst relations, for instance. As you help salespeople add more contacts to their account or surround potential prospects with reminders of your company’s strength, we *think* we’re helping the deal get done (faster and larger than if marketing hadn’t touched it.) But without A/B testing some accounts, it’s hard to prove decisively how much of a difference each of many touches makes.
Lastly, the marketing budget goes toward customer UPSELL AND EXPANSION. Much of our marketing: content, web, advertising, events, sponsorships, analyst relations give our customers confidence in our strength, educate them on our product, expose them to our other product lines, and prime them to renew and buy more. This, too, is difficult to measure. How much new revenue would we get without ever touching a customer with marketing materials…? A/B tests on customers are possible but generally can’t eliminate all marketing contributions to the holdout group.
Because of these complications in building an ROI-based bottoms-up budget, many marketers turn to a tops-down budget benchmark framework. What % of revenue are we budgeting for the year ahead? Is that in range with what others are spending? How are we distributing it between our different disciplines? How does this compare to others? There are several factors that influence market benchmarks:
Strategy - Atlassians spent much less on marketing than peer companies because we were trying to invest twice as much as peers in product. Some companies I know that are inbound-based have much different ratios of people / programs - they spend more on converting than on advertising than peers. The strategy of the company and what works in your market will change distribution choices.
Large companies tend to spend less as a % of revenue - they already have the infrastructure in place, and they have greater market awareness than early-stage startups trying to be seen for the first time in the world.
Higher growth companies *may* have higher marketing % of revenue as they are trying to rapidly prime the pump to get recognized and take market share quickly. The exception is that some efficient, word-of-mouth products/companies don’t spend as much - the viral nature of the products does much of the advertising for them at a MUCH cheaper price (OpenAI would be the prime example).
Model matters. Product-led-growth companies might spend differently than sales-assisted companies.
Average deal size matters - companies that have a lower average sales price might rely more on marketing to drive revenue, whereas companies with a higher average sales price may rely more on the sales team and less on marketing.
What’s in and out of the buckets? I’ve seen budgets for many different companies. Sometimes, marketing BDR budgets are included in marketing, sometimes not. Some companies include hosting costs for free / trial users in the total costs of marketing, and some do not. It’s tricky to get a clean comparison.
So, what are the marketing spend benchmarks?
Over the years, I’ve seen a handful of official benchmarks for marketing and probably almost two dozen different budgets at different companies. At Atlassian, I commissioned IDC to do a head-to-head comparison of budget distribution with similar companies in terms of growth / products / model (you can buy their 2023 highlights report here for $7500). Several VCs publish benchmarks based on survey data of their portfolio. Sirius Decisions used to publish an annual report for paid subscribers. I’ve also been party to CMOs trying desperately to benchmark themselves, with limited success. My chart at the top is my summary of what I’ve seen. It appears to hold pretty constant over time and different types of surveys. But there are always notable outliers.
Breakdowns by department within marketing also exist, but I’m not going to cover them here.
WHO WANTS TO BE AVERAGE?!
If you’ve found a model that works for your company, the average might not apply to you as much. Mark Benioff is a legendary marketer - Salesforce’s marketing spend was often double benchmarks in the big growth years. Microsoft is a huge partner channel - their allocation to partner marketing spending is wildly different than that of other companies. Small companies can have outlier budgets as well - OpenAI doesn’t need awareness advertising, for instance :)
Take This Survey - See Current Results
To see if there are any interesting trends this year, I’m running a market survey on marketing benchmarks in 2023 and plans for 2024. To participate, please fill out the survey here. I’ll report back what I find on this blog!
Carilu Dietrich is a former CMO, most notably the head of marketing that took Atlassian public. She currently advises CEOs and CMOs of high-growth tech companies. Carilu helps leaders operationalize the chaos of scale, see around corners, and improve marketing and company performance.
Wondering if this may be updated in future years to track and percent allocation shift :)
Hi Carilu! By marketing spend as % of revenue, do you mean ARR or TCV bookings? Is that % of revenue typically forward revenue or trailing revenue?