How much does marketing cost in a tech company?

When looking for ways to grow a business, it makes sense to learn what world-class marketing should cost and what are the options for hiring internal teams vs. using external consultants.

But let's start with a question why does a tech company need marketing?

Why does a tech company need marketing in the first place?

There are two main reasons why it makes sense to have marketing:

1.????To make more money: increase the perceived value of your offering and increase prices

2.????To grow business by generating demand

While it may seem that having no marketing and instead of providing a lower price is a good strategy to pursue, I would strongly argue against it in most cases.

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What happens if a tech company doesn’t invest in marketing?

We have worked with a number of clients who are focussing on developing a great product at reasonable (actually - too low in our opinion) prices and struggling to sell it.

While at the same time, competitors with inferior products can charge premium prices, grow their business and make substantial profits.

How is that possible?

It turns out competitors are investing in marketing.

They are able to get the attention of prospective buyers, build trust with marketing content and become a preferred solution provider.

You see, before deciding to contact a seller, most buyers consume 3-7 units of content.

If you do not have that content, you cannot build trust and preference.

So you may notice, that most of your website visitors check pricing and if you have a conversation, it centres around pricing.

This happens, because they have already made up their mind about the (other) solution they prefer.

They only need to get pricing for alternatives to show their boss they have considered other solutions as well.

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What should the marketing team be able to achieve?

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The main objective of having internal marketing is to generate more business.

As simple as that.

The primary measure of marketing succeeding with this would be the number of qualified leads generated and a number of deals closed that were marketing generated.

I would say that marketing should be responsible for generating no less than 30% of all closed deals.

Or else you should really take a close look at what marketing really does and try to understand where your money goes to.

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What internal marketing must do to generate leads?

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First, a company must have a clear Go-To-Market strategy developed.

This should tell quite precisely what marketing should do to reach the company’s business goals.

Generally, in tech companies, marketing does the following:

-??????Develops marketing content, such as blogs, whitepapers, videos, online assessments, websites, and other materials

-??????Manages performance of paid advertising campaigns

-??????Manages marketing technologies, marketing data and analytics

-??????Participates in regular deal reviews together with sales

-??????Provides information and analytics for senior management

-??????Manages external relationships with agencies and creatives

-??????Organize occasional trade show or conference participation

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Where does the marketing budget go?

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This can differ from company to company; however, Gartner’s research shows that the budget is split into four roughly equal parts:

-??????Team salaries: salaries you pay your marketing team

-??????Third-party agency costs: that’s the work of third-party agencies, designers, copywriters, editors, SEO specialists etc.

-??????Marketing technologies: marketing automation, landing pages, integration, analytics, etc.

-??????Media costs: these typically are costs paid to Google, LinkedIn and other paid media

The main thing to understand here is that you need to budget to spend a few times more on marketing than you spend on marketing salaries alone.        

So, entry costs to start doing proper marketing internally are substantial.

Or else you will have a marketing employee who will be severally limited in their performance simply because of budget limitations.

Many companies make this mistake.

They shouldn’t.

There are better ways.

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How much to budget for marketing?

Again – this highly varies.

On average, companies spend around 10% of their revenue on marketing.

Do note that Covid causes an unusual drop in 2021.

Fast-growing SaaS companies spend 10-11 months of revenue per customer before they cover the cost of customer acquisition and up to 50% of revenue in more extreme cases.

How to know what is appropriate marketing spend for you?

Making a competition analysis is an excellent way to get a general sense of your competition's spending level and, therefore, what you need to plan for.

Do note, however, that investment in marketing takes time to impact the sales numbers.

It will take time to:

1) plan, prepare and launch a demand generation campaign

2) generate and educate prospects until they are ready for a sales conversation

3) complete sales

According to research, the average sales cycle in B2B is 4,7 months.

It is not uncommon for a sales cycle in B2B to take six months, nine months or over a year.

You must be patient with the end result but control the leading indicators early on.

How to know early if marketing works?

While it takes some time to set up marketing technologies and develop the content, marketing must be able to report early results in a few days after the demand generation campaign has been launched.

You should look at the quantity and quality of generated leads, cost per lead and most importantly – the rate of marketing-generated leads which are qualified by your sales team.

Having single view dashboards, like the one below comes in handy.

This metric is an early indicator confirming that marketing investment actually contributes to your sales efforts.

This and other metrics should be reviewed in weekly / bi-weekly deal review meetings.

Do check out our conversation with Vigants Lesausks about marketing/sales alignment!

Over time you should expect your qualification ratio to improve.

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What to do if marketing is not delivering desired results?

Modern marketing is not a simple and straightforward matter.

In fact, it requires an exceedingly broad skillset.

So broad in fact, that you cannot expect a single person or a small team to be able to handle it.

This is why a considerable part of the marketing budget is spent on third-party specialist services: designers, copywriters, SEO experts, strategists, analysts, technologists, etc.

Moreover, marketing in B2B is a complex system of interdependent elements.

It is enough to fail with one of these elements, and the whole system underperforms.

Think of it as a phone number: you can only get a connection if you get all digits right.

Because of this, it is a good idea to have external experts audit your marketing from time to time.

Chances are there are a couple of issues that can unlock performance boost if fixed.

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How to build world-class marketing internally?

Because of the complexity of modern marketing, marketing management must be approached as a service management function.

This means that first, you need somebody (Chief Marketing Officer or external partner) who can:

1.????work with you to develop a Go-To-Market strategy

2.????Ensure of putting together a demand generation system by using either internal or external services

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If you ask me, the limiting factor here is the ability to hire marketing management talent (Chief Marketing Officer / Chief Revenue Officer).

First, there is an acute shortage of experienced talent and second, hiring senior talent is a substantial cost to the business.

Unless you can offer a world-class salary and benefits, the talent you really need won’t even talk with you.

But there is an alternative.

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How to hire world-class marketing externally?

I believe that hiring external marketing consultants is the best way to benefit from world-class marketing and kick-start your business growth without massive upfront investment in your own marketing team.

In fact, I believe this so much that I left a high-growth start-up to start my own company back in 2017.

At the moment of writing, we have delivered well over 150 demand generation campaigns for tech companies all across the world. We have accumulated significant experience and have finetuned our processes to be highly efficient.

As a result, we can provide world-class marketing-as-a-service at a cost that is often less than what you would pay for an entry-level marketing specialist.

Faster, cheaper and with less risk.

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Conclusion

There is no reason why tech companies should not invest in marketing.

Marketing allows to grow business, make more money which can be turned into a better team, more resources and more money in pocket at the end of the day.

What not to like about it?

However, building a world-class marketing team is rather expensive.

If you compete in the global market, you must hire world-class talent who asks for a world-class salary.

And you always have a risk of it not working out.

So, I recommend hiring external consultants like ourselves.

Easy to hire and easy to fire if for some strange reason it doesn’t work out.

You will reduce costs, reduce risks, and get instant access to the best practice fine-tuned on over 150 demand generation campaigns.

You will only pay for work that matters and your money will go into generating new deals in sales pipeline, instead of experimenting and figuring out how to do it.        

So, why don't we have a conversation?

I invite you to schedule a call with me!

Let’s talk and figure out if there is a good fit between your needs and our capabilities.

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?https://www.gartner.com/en/marketing/research/annual-cmo-spend-survey-research