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Digital Marketing SaaS

This is Where SaaS CMOs Are Putting Their Money in 2018

Published on
Words by Jera Brown

Heading into 2018, SaaS CMOs understand that they’re not just looking for a sale, but they’re investing in long-term customer relationships and brand recognition. They’re using a wide array of tech solutions to create more personalized user experiences and campaigns, diversifying their inbound marketing using text-based, podcast, and video content, and focusing on the overall customer experience

SaaS marketing budgets continue to vary from from other industries

The Gartner CMO Spend Survey 2017-2018, which polled 353 marketing specialists at companies with over $250 million in revenue in the U.S., Canada, and U.K., shows that marketing budgets are decreasing.

Between 2016 and 2017, they decreased from an average of 12.1% of the company revenue to 11.3%. This came after several solid years of marketing budget increases.

In comparison, SaaS companies tend to allot a much larger percentage of their annual revenue to marketing and sales expenses.

While the marketing budget for large companies across industries is around 12%, the average SaaS budget is around 30-35% of their ARR. And, the most successful companies are spending above 50% for their combined sales and marketing costs.

The difference in marketing budgets for SaaS companies is mostly due to low cost of producing SaaS products (allowing a greater percentage of the ARR to be allocated toward growth), but it’s important that the SaaS marketing continues to grow and sustain product growth. Research firm IDC found that the public cloud services market grew 28.6 percent in the first half of 2017 with revenues over $63 billion.

There are other ways in which SaaS marketing trends vary from other industries, including greater adoption of MarTech solutions, which is the first trend of SaaS marketing spending heading into 2018.

1)   SaaS CMOs are investing in a diverse portfolio of martech solutions

Maybe not all SaaS marketing teams are taking advantage of the growing amount of marketing technology, also known as martech, but the most successful ones are. In Drift’s analysis of Forbes’ 2017 Cloud 100: the “hottest private tech companies in cloud computing,” they found that the top SaaS companies are adopting martech solutions at much higher rates.

Bizible’s Pipeline Marketing Stack

Cloud 100 companies are much more likely to use automation tools (like Marketo, Mailgun, and SendGrid), ad tech (like Bing Ads and Facebook Ads), and tracking/optimization tools (like Tag Manager and Optimizely) compared to companies outside of the Cloud 100.”

For instance, the report found that 54% of the Cloud 100 companies used Google Tag Manager compared to just 15% of other cloud companies.

These findings are at odds with other industries which, according to Gartner’s CMO Spend Survey, are decreasing their spending on martech from 27% in 2016 to 22% in 2017. However, the reason for the decrease might not be about the usefulness of the technology. Only 51% of those polled believed they were “effective at buying and managing” marketing technology products.

Poorly selected, under-performing or underused marketing technology forces marketing teams and agencies to rely on manual processes, which hurts marketing efficiency and effectiveness,“ Gartner report authors Anna Maria Virzi and Ewan McIntyre told CNBC.

It helps that martech are generally SaaS products themselves, which makes it easier for the technology to be integrated into other cloud-based apps. Since SaaS marketers are more fluent of how their own industry works, it’s easier for them to adopt related solutions.

Tim Kopp, a Partner at Hyde Park Venture Partners, explained, “From the investor seat, it’s exciting to watch the latest trends in martech, because technology is allowing marketers to reach customers in a more targeted and personal way than ever before. This is game-changing for CMOs.”

2)   They are investing in AI and machine learning solutions

An Economist Intelligence Unit special report from 2016 found that 75% of surveyed executives planned to actively implement AI in their companies within the next three years. It makes sense that SaaS companies will be at the forefront of AI creation and adoption. Many SaaS platforms already integrate or run on machine learning technology or are primed to do so.

AI is changing the marketing landscape with enhanced and affordable marketing solutions. For instance, machine learning is dramatically improving data analytics tools, chatbots are enhancing the possibility of 24-7 individualized sales attention, and customer experience (CX) intelligence is enabling companies to personalize their service of individual customers.

AI is Improving Data Analytics Solutions

According to Andrew Stephen, the Associate Dean for Research and head of the Marketing Faculty at Saïd Business School at Oxford, among the uses of AI within the marketing realm, professionals are using AI to integrate individual tools and provide stronger data sets.

“Marketers have more insights-related tools at their disposal that facilitate true data-driven decision making but AI is needed to help integrate across tools, datasets and platforms,” Stephen wrote.

More companies are investing in customer service chatbots

Consumers are growing more accustomed to using chatbots. LivePerson’s 2017 global chatbot survey of 5002 consumers, found that 67% of those polled had used a chatbot for customer support. For simple tasks, many would prefer to speak to a bot over a human.

With mass consumer adoption, more marketing teams are growing comfortable adding chatbots to enhance customer service. 80% of companies polled by Oracle planned on implementing chatbots by 2020, and the majority of these will be used for customer service.

Companies are investing in CX intelligence

Dennis Wakabayashi, VP of Digital Marketing and Commerce Integration for The Integer Group, told brandwatch, “In 2018, agencies and brands alike will transform themselves to take advantage of Customer Experience (CX) strategy and technologies as online e-commerce and retail shopping converge through the use of newly available customer tracking data sets.”

Oracle and Salesforce are leading the way in CX technology, creating solutions that follow a customer’s journey with a company, creating personalized product recommendations and better personalized self-service experiences. SaaS companies can either integrate with these enterprise systems or build their own.

3)  SaaS CMO’s are investing in diversified content marketing campaigns

Content marketing is still one of the primary tools for marketing and sales teams to maintain customer interaction and build brand. Smart brands understand that a diverse content marketing approach captures different audiences and builds brand recognition on a wider front.

The Smart Insights team asked over 850 marketers around the world what one activity will make the largest impact in 2018 on their business or clients. The top response was content marketing with over 20% of votes. Tied for second was big data and AI.

SaaS companies have a wider adoption of content marketing solutions than other industries. Where the Content Marketing Institute found that 80% of businesses polled across industries maintain a blog, a recent study from Cobloom, a SaaS marketing agency, found that 89% of the world’s biggest SaaS companies maintain a blog. And, according to Drift’s Cloud 100 report, 99% of Cloud 100 companies do so.

Text-based content

Content marketing campaigns are a multi-functioning part of a marketing campaign, offering information about the values and overall feel of the company, as well as valuable information about the product itself. This includes a company’s blog, email and social media content, and downloadable content, such as ebooks and whitepapers (offered by 45% of the Cloud 100 companies offer according to Drift).

Intercom’s Matt Hodges told Entrepreneur, “We need to understand customers, and find content which is interesting and valuable to them. This content reaches them, introduces them to our brand, offers brand recognition and trust so that if they need us in the future they will think of us.”

Potential customers tend to read between three and five pieces of content before engaging with a sales rep.

While text-based content continues to be an important part of the content marketing ecosystem, more users are consuming digital content than ever before, and many SaaS brands are taking advantage. For instance, Cobloom found that nearly one-fifth of the biggest SaaS companies have their own podcast.

Podcasts

While podcasts are an expensive investment, costing up to six figures per season, they hold the promise quality time with consumers and rich brand recognition. According to Digiday, branded podcasts are “bucking the trend” of historically low rate of branded content renewals. Every show produced by branded podcast creators Pacific Content was renewed for 2018, Digiday reported. This includes podcasts for Mozilla, Tinder, Prudential, McAfee, and Slack.

Steve Pratt, a partner at Pacific Content, explains, “Brands have some very unfair advantages over other podcasts … when you look at all the channels and assets that brands have, by shifting or tweaking them a bit, when you have a compelling show, you can reach a lot of people very quickly.”

Video

In 2016, Adweek called video the “future of content marketing,” and more than half of marketers surveyed in SimplyMeasured’s 2016 State of Social Marketing report expressed that video brought the best ROI.

Users are consuming videos at much higher rates. Cisco predicts that by 2021, 82% of all consumer Internet traffic will be video traffic. This is up from 73% in 2016.

Of course, with massive video consumption, simply producing a promotional video isn’t going to help your company stand out, which is why brands need to invest in a consistent digital strategy.

You can’t put all this money and effort into one video, thinking that sole piece of content will solve everything for your company. It’s not going to work,” Tom More, CEO of video creation app Slidely, told Inc Magazine. “The way the social feeds operate, these assets have very short life spans. Which means businesses need to understand why they are creating videos in the first place. In order to be successful in the video space, you need to be creating more videos, more often.”

What’s your budget look like in 2018?

Overall, SaaS marketing spending is centered less on one-hit campaigns and are looking at long-lasting solutions that enable them to better understand and serve their customers. A diverse mix of AI-enabled analytics and customer service solutions, along with quality content marketing will enable SaaS brands to thrive in 2018 and beyond.

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