Footnotes
1. Marketing spend includes people spend, program spend, and other spend. It excludes the cost of BDR/SDRs if they sit in marketing.
2. Program spend is spend for demand generation and brand.
3. Other spend is mostly fixed and overhead spend, including MarTech, travel, and corporate allocations.
About the Data
Our data comes from our portfolio of B2B SaaS ScaleUps. Sample distribution is below.
About the Marketing
Center of Excellence
Insight Onsite’s Marketing Center of Excellence helps founders, CEOs, marketing leaders and their teams
navigate the ScaleUp marketing journey. Our capacity
to deliver unparalleled impact is powered by our unique access to data from our world-class portfolio and our learnings from the thousands of conversations we have each year with ScaleUps and industry experts. The Marketing Center of Excellence is your trusted partner
to accelerate demand gen and build a world-class brand.
What’s Next
Insight portfolio companies can access our Onsite Marketing Center of Excellence’s 2022 Marketing Planning Playbook on our GO Community platform. The Playbook includes more granular data along with additional insights on where to hire and what percent of pipeline marketing should be targeting. It also includes top-down and bottom-up models to help with planning. You can also schedule time with the Marketing Center of Excellence to ensure you
are allocating the right resources to grow this year and in the years after as you continue to scale.
5 Takeaways for the ScaleUp Journey
For enterprise sales, companies can get away with limited investment in marketing in the early days. sales is doing the heavy lifting in driving new-business ARR given the complex buying process and need for 1:1 selling. Marketing is initially playing more of a support role.
1
Marketing will play an increasing role as companies scale. There are only so many events to go to and so many people in your network. There needs to be a scalable way to find and nurture leads for sales. Not to mention to figure out messaging for different use cases and verticals, up-leveling the brand, and driving broader market awareness.
2
Early on, teams are leaner and focused on supporting sales with in-person events, sales enablement, and basic paid digital. As they scale, spend will shift towards people spend, driven by an up-leveling of the team and more diverse headcount to support areas like brand, analyst relations, partners, and customer marketing to drive up-sell and cross-sell.
3
Where we see companies run into challenges is when they fail to appropriately resource and scale marketing. They hit a plateau and each additional sales FTE has decreasing effectiveness. The overall go-to-market engine becomes less efficient, and worse yet, it takes time to hire and build marketing to course-correct.
4
During COVID, earlier-stage companies pulled back on program spend. They tend to be more reliant on in-person events with fewer resources to pivot to digital channels. Later-stage companies with more mature marketing orgs were able to more easily reallocate spend. That said, marketing spend vs. new business ARR and vs. total sales & marketing spend went up across company size given a slowdown in new business ARR and the sales team grounded. We see this moving closer to pre-COVID levels as buying picks up and teams have had time to build their digital capabilities.
5
For ScaleUps with Larger New-Deal Sizes
Marketing is doing the heavy lift to drive awareness and new-business ARR. Getting the marketing budget and resourcing right will have a significant impact on growth.
1
Product-led growth (PLG) motion companies show greater efficiencies in marketing spend since the product provides extra leverage in driving trials and conversions.
2
Sales will play an increasing role as you scale – outreaching to priority leads, targeting enterprise deals. Cross-sell and up-sell bookings also require less marketing spend. Expanding ARR will dial down the ratio of marketing spend
to new-business ARR and also marketing’s percentage of total sales & marketing spend, while increasing new-business ARR per marketing FTE.
3
Early on, teams are leaner and focused
on content to drive SEO and spending on paid search and paid social. As they scale, spend will shift towards people and “other” spend, driven by an up-leveling of the team, more people to own more acquisition channels, and the need for diverse headcount to support the push up-market to enterprise sales.
4
During COVID, earlier-stage companies pulled back on program spend while later-stage companies leaned into their digital engines, pulling back instead on sales spend. We expect earlier-stage companies to move closer to pre-COVID trends more quickly. Later-stage companies will maintain their level of digital spend longer with continued questions around in-person events.
5
For ScaleUps with Smaller New-Deal Sizes
We saw new business ARR per marketing FTE decrease during COVID due to many of the factors we’ve discussed: slowdowns in new-business ARR without corresponding headcount cuts, pullbacks in variable demand gen program spend (notably at smaller ScaleUps with small-deal sizes), and a shift in sales focus to up-sell and cross-sell (notably at larger ScaleUps with large-deal sizes).
Impact of COVID
As companies scale, each marketing FTE can support higher levels of new business ARR. This is largely driven by increasing efficiencies in marketing from building out areas like lead nurture, messaging, targeting, and increased awareness and impact of SEO. This enables marketing to do more with less – including supporting a larger number of sales reps who can bring in more new business ARR. Not surprisingly, this is most evident for ScaleUps with larger new deal sizes given the role of sales.
Impact of Stage of Growth
Companies with larger new-deal sizes should plan for each marketing FTE to support a higher level of
new business ARR. Marketing is working together with sales to drive larger deals; this allows each FTE
to support more new business. As new-deal sizes go down and marketing plays a larger role, new-business ARR per marketing FTE also goes down (since each person does more work). This trend reverses for companies with very low new-deal sizes, notably those with a product-led growth (PLG) motion (e.g., with a free trial and a self-service checkout). In PLG companies, the product team and the product itself provide marketing with added leverage. These companies also invest early in content engines and word-of-mouth strategies that continue to pay dividends (e.g., organic search, community, referrals, peer reviews).
Impact of Average Deal Size
Marketing is complex and requires people to build, strategize, and execute. This is made more challenging given the breadth of tasks that marketing is responsible for as the company scales, from demand gen to messaging to brand awareness. Use this benchmark to ensure that you are budgeting for enough people in marketing to support your stage of growth and ARR goals.
Why It’s Important
Median new business ARR per marketing fulltime employee (FTE) was $626K during COVID, down from $708 pre-COVID. This means that each person in marketing supported $626K in new-business bookings during COVID compared to $708K pre-COVID.
New Business ARR Per Marketing FTE
Read first KPI
For smaller companies, we saw marketing’s percent people spend go up. This shift was not driven by an increase in people spend as much as it was a decrease in program and other spend. Key drivers included:
1. Being more heavily invested in in-person events, which were put on hold, slow to ramp new digital channels.
2. Being more conservative and pulling back on variable program spend while keeping headcount.
3. Drops in “other” marketing spend, which includes travel and other corporate expenses.
Larger companies held steadier on spend breakdown, though we also saw some slimming of “other” marketing spend. Notably, we saw large companies with smaller new-deal sizes increase program spend as they leaned into their paid digital acquisition engines (see our commentary in the prior section).
Impact During COVID
As ScaleUps mature, the percent of their marketing budget going to people increases. This is driven by the need for a more-diverse and specialized headcount. For example, you need people to manage and optimize more acquisition channels and to support more products, geographies, verticals, and segments. Marketing also needs to add more specialized headcount to drive strategy in areas like brand building, analyst relations, community marketing, and partner marketing, and we often see a move to bring in-house formerly outsourced services (e.g., PR and SEO). As companies scale, they also need to budget for more senior talent with higher salaries. This all drives up the percent of budget going to people.
This shift is still evident but more muted for companies with smaller new-deal sizes since they invest earlier in building out marketing. Companies with larger new-deal sizes tend to underinvest in marketing early on. They also face increasing complexity in their business as they scale. This results in a larger step-up in people spend.
Impact of Stage of Growth
Impact of Average Deal Size
ScaleUps with larger average deal sizes need to allocate slightly more marketing budget to people and other marketing spend. This is driven by the need for more specialized and diverse headcount (e.g., field marketing, partner marketing, sales enablement, AR) and more overhead (e.g., MarTech including data
and ABX platforms and that hefty Gartner subscription) to support a more complex sales process. Marketing teams at ScaleUps with smaller new-deal sizes focus on testing, optimizing, and scaling key digital demand gen channels. This drives up the percent of budget that goes to programs.
It’s not just about how much you budget, but where you allocate it. With a focus on driving new ARR,
we see ~50% of ScaleUp marketing budgets go to programs. However, ScaleUps need to ensure they
are continuing to build out their marketing teams as they scale and the business becomes more complex. Use this benchmark to guide budget allocation to the right places.
Why It’s Important
Pre-COVID we saw marketing spend break down into 38% people spend, 51% program spend, and 11% other spend. In other words, for every dollar spent in marketing, $0.38 went to people, $0.51 went to programs to drive demand, and $0.11 went to other spend like MarTech and overhead. While on the surface the impact of COVID seems marginal, the story changes when we look at specific data cuts.
Marketing Spend Breakdown (People, Program, Other)
Read next KPI
This trend reversed during COVID. A key driver of this was a decrease in spend on sales with a slowdown in buying. This means fewer new business commission pay-outs as the sales team was grounded and increased its focus on up-sell and cross-sell. This reversal was most apparent for larger ScaleUps that become more reliant on sales as they scaled and had more opportunity to shift to up-sell and cross-sell. We also saw this reversal more evident in the larger ScaleUps with smaller new-deal sizes. These companies have well-oiled digital demand gen engines. During COVID, we saw many of them lean back into their strengths and increase their paid digital spend, whereas historically they would have been starting to lean more into a sales-driven motion.
Impact During COVID
In pre-COVID days, we would see marketing’s portion of a total sales and marketing budget go down as companies scaled. As mentioned above, marketing begins to realize more efficiencies at scale as repeatable processes are developed and with increased brand awareness. Sales, on the other hand, continues to add incremental headcount to drive new business. Additionally, as companies grow, their focus shifts more towards up-sell and cross-sell. This is especially the case for companies with smaller initial-deal sizes and a land-and-expand motion. While marketing certainly plays a role here, it is more of a support role and one that relies on more cost-effective owned channels. This further drives down marketing’s proportional spend.
Impact of Stage of Growth
ScaleUps selling larger deals to enterprise buyers are reliant on sales to drive new business given the complex buying process and need for 1:1 selling. Since marketing plays more of a support role, the ratio
of the marketing to sales budget should be lower for these ScaleUps vs. those who have a simpler buying process and smaller new-deal size.
Impact of Average Deal Size
ScaleUps, especially those selling to mid-market and enterprise buyers, have a tendency to overinvest in sales vs. marketing. Without the appropriate investment in marketing, sales needs to work harder to find, warm, and close leads. Use this benchmark to ensure that your sales and marketing budgets are in balance to drive efficient growth.
Why It’s Important
Median marketing spend as a percentage of total sales and marketing spend was 34% during COVID, up from 28% pre-COVID. In other words, for every dollar spent on sales and marketing during COVID, $0.34 went to marketing and $0.66 went to sales. Marketing’s portion was just $0.28 pre-COVID.
Marketing Spend as a Percentage of Total Sales & Marketing Spend
Read next KPI
During COVID, companies had to spend more in marketing for each dollar of new business ARR they closed. Key reasons this occurred included:
1. Slowdowns in buying, reducing new business ARR.
2. The loss of in-person events as a key marketing channel.
3. Initial cutbacks in demand gen spend, while people spend stayed steady.
The impact of COVID was more pronounced for smaller companies that were more conservative with spend and had fewer resources (and infrastructure) to help pivot to new acquisition channels like virtual events. Smaller companies also tend to be more reliant on in-person events. In a 2021 survey of our portfolio companies, those with less than $10M in revenue reported that 20% of their marketing pipeline still came from in-person events vs. just 4% for those greater than $50M in revenue. Note: Pre-COVID we saw in-person events play an even greater role in the pipeline for early- stage ScaleUps.
Impact of COVID
How this ratio changes as a company scales will vary depending on the company’s go-to-market strategy. For ScaleUps with smaller new-deal size, this drops due to:
1. Marketing efficiencies driven by building out systems and processes, successes “cracking” new channels, and gains from increased brand awareness and organic search performance.
2. Increasing role of sales driven by more proactive outreach to high-quality leads and a push up-market
to target enterprise buyers and larger deal sizes.
The change in this ratio is more muted for companies selling to enterprises with larger new-deal sizes. These companies spend less on marketing early on, relying instead on one-to-one selling by the founder
or sales. As they scale, marketing spend goes up, but sales becomes more productive with the added marketing support. This counterbalances the greater spend by increasing new business ARR.
Impact of Stage of Growth
ScaleUps with smaller new-deal sizes need to budget more marketing dollars for each dollar of new business ARR they target. Because these companies have a self-service or low-touch sales process,
they rely heavily on marketing to drive awareness and new deals at scale. While their marketing spend
as a percentage of new business ARR is higher, their overall CAC can afford it compared to ScaleUps withlarger new-deal sizes that also have costly sales teams to support.
Impact of Average Deal Size
While we often see marketing spend as a percentage of revenue, ScaleUp marketing teams are focused on driving new customers and new business. This makes marketing spend more highly correlated to new business ARR than revenue. Use this benchmark to ensure you have enough marketing budget to hit new business growth goals. Companies are having to spend more to get the same number of bookings.
Why It’s Important
Across our data set, median total marketing spend
as a percentage of new business ARR was 59% during COVID, up from 46% pre-COVID. In other words, the median company spent $0.59 in marketing for each dollar of new business during COVID and $0.46 pre-COVID – meaning the marketing cost per dollar of
new business has gone up.
Marketing Spend vs. New Business ARR:
Read next KPI
New Business ARR
Per Marketing FTE
Marketing Spend Breakdown (People, Program, Other)
Marketing Spend as a Percentage of Total Sales & Marketing Spend
Marketing Spend¹
vs. New Business ARR
Choose a KPI:
Marketing Spend¹
vs. New Business ARR
This had significant impact on the ability of companies to efficiently generate new business ARR. Buying processes were disrupted and sales and marketing teams were forced to do without in-person events. To understand this impact, we compare pre- and during-pandemic values.
3. COVID
Consider the impact of go-to-market maturity, market awareness, and need to find, nurture, and convert increasingly large numbers of leads. Critically, to isolate the impact of this dimension, you need to view it with the added lens of ASP (i.e., hold ASP steady).
2. Stage of growth / Size of ScaleUp (revenue).
This drives significant differences in spend. As an extreme example, consider
the difference in spend between companies selling to consumers vs. enterprise B2B buyers.
1. Average new business deal size/selling price (ASP).
For each benchmark, we further look at the impact on this metric by:
This provides guidance on the size of team needed to support growth goals.
When benchmarking, it can flag team capacity and productivity.
4. New Business ARR per Marketing FTE:
This provides guidance on where spend should be allocated. When benchmarking, it can flag areas of inefficiency our underinvestment.
3. Marketing Spend Breakdown – People, Program, Other/Overhead:
This provides guidance on the balance of sales and marketing spend needed
to ensure efficient and effective growth. When benchmarking, it can provide
a warning sign if you are under or over investing in marketing.
2. Marketing Spend as a Percentage of Total Sales & Marketing Spend:
This provides guidance on the investment needed in marketing to achieve growth goals. When benchmarking, it can provide a measure of unit economics and payback on spend.
1. Marketing Spend vs. New Business ARR:
The key marketing budget benchmarks we track are below.
The Data
B2B SaaS ScaleUps should use these marketing benchmarks as an input into strategic discussions around marketing budgets. This data should be used as a starting point for discussions, not a target. Benchmarks will vary by company type, resources, and goals. Additionally, when budgeting, it’s important to take both a top-down and bottom-up approach.
How to Use This Data
This data, while valuable in any year, is particularly relevant today. Many companies
are speaking to the “return to normal” in 2022, but the reality is something in between. There
is the lingering impact of COVID and a change
in what “normal” means. Buyer preferences along with the sales and marketing tactics, strategies, and resources to meet those preferences have changed. To help ScaleUps better prepare for this unknown, we’ve updated our Marketing Budget Benchmarks to provide ScaleUps with insights for 2022 and what’s ahead.
We’ve seen Gartner’s CMO Budget Survey. Their data is largely composed of companies $1B+
in revenue and includes blended data across industries (e.g., consumer products and manufacturing). While valuable for certain use cases, the data is not a good benchmark for B2B SaaS ScaleUps. Conversely, the data in this report is derived from Insight Partners’ portfolio of 400+ B2B SaaS ScaleUps. Insight Onsite – our team
of scaleup experts – has unique access to the data behind how marketing spend evolves as ScaleUps grow. We’ve also guided hundreds
of individual companies on that journey, which allows us to provide a deeper perspective on
what the data means.
Why This Data
You don’t become a billion-dollar company without marketing. Knowing when, where, and how much to spend on marketing is critical for all ScaleUps – and
this continuously evolves and changes en route to IPO. Having insights into how marketing spend needs to change as your business changes will provide you
with a roadmap for how to invest to accelerate growth
Why This Matters
