SaaS Spending Insights

The last 5 conversations I’ve had with CMOs go like this: “I need to cut my budget by 20% and still hit the Q4 number. What should I do?” And the crazy thing is that almost every B2B SaaS company is clearly wasting at least 20% of their Marketing budget with clear data to show it. Here’s an example: I just finished an analysis with a Series D SaaS company with a $9MM/year Marketing program budget and found $1.7MM in clearly wasted spend. The common culprits are: 1. 3rd Party Content Syndication: 15,600 “MQLs”, 3 Closed Won Deals - $775,000 annualized wasted spend 2. Non-Branded Low Intent Google Paid Search: 831 “Conversions”, No CRM Tracking in Place - $220,000 annualized wasted spend 3. Google Programmatic / Display Ads: 0 MQLs, 0 Closed Won Deals, No Effective Measurement - $270,000 annualized wasted spend 4. LinkedIn Gated Content “Lead Gen” Campaigns: 1 Closed Won Deal - $520,000 annualized wasted spend In 8 weeks, we helped the CMO save $1.7MM per year in Marketing program budget and expect effectively no negative impact on qualified pipeline / revenue production. We also re-architected their Events strategy, which could recoup another $750k+ per year in spend that can be saved or re-deployed to programs that drive significantly higher ROI. ___ This analysis called “Split the Funnel” is highly effective in identifying wasted spend in a pure MQL model, which most B2B SaaS companies still run due to outdated demand waterfall models and misguided requirements for digital touchpoint-based attribution. When pressure gets put on the Marketing budget, it starts to become very clear what’s working and what’s not. Especially when you scrutinize each program against actual ROI (revenue) instead of cost per MQL. #marketing #b2b #demand #sales

All SaaS firms spend on Google Search Ads. Specifically they spend on competitor keyword Ads.  Eg : Freshworks would run Ads on Zendesk Alternatives and Pricing. Chargebee will run Ads on Zuora pricing/competitors etc. Early stage startups also spend signigicant $$'s on search Ads. Importantly these keywords are also the source of maximum leads and pipeline for companies. Signups and Leads from competitor search keywords also convert faster, tend to be high ACV as well. When we had started running Ads we used to run Ads against our attribution competitors like Bizible. The math is, if you get 100 clicks , only 4-5 leads come in. The CPC’s for competitor keywords are $10+ and , spending $1000 for 4-5 leads or $200 per lead is the general metric most SaaS marketing teams are resigned to. 💡 The interesting part is nobody randomly searches for a competitor keyword, and clicks on the Ad and come to your website. Only a high intent prospect will search for a competitor keyword and click on the Ad copy and visit your Ad landing page/pricing page. Eg : If someone searches for Bizible Pricing and comes to Factors.AI website it is a high intent user. Yet, for every $1000 spent or 100 clicks we pay for, we get only 4-5 leads. Harvesting more leads from the remaining high intent 96 clicks coming to the website can be a huge revenue driver. The point was, how do we do it ? We knew about deanonymization tools like Clearbit. The issue with plain vanilla visitor identification products are they identify visitors but not all visitors need to be high intent and ICP. Users might visit the website & bounce off immediately. Identifying low intent or non-ICP accounts is of no use. Deanonymization of website visitors + Slack or CRM would be plain noise and we burnt our fingers with some tools. This is when we found mix of visitor identification data with account analytics can be a great feature. With Factors.AI analytics + Account Deanonymization, you can build cohorts with specific filters to narrow down to ICP based on city, country, firmographics/technographics and intent based on website behavior and most importantly, to the level of which keyword the user searched and clicked on, when visiting the site. Since we also connected with the CRM, we were able to filter for Accounts which are existing customer or leads or identify Accounts which coming back live after being tagged closed lost. We identify high intent ICP accounts coming to our website from competitor keyword Ads, cohort them with our analytics product & immediately alert SDRs on Slack and also run 6 hour workflows to push this data to Apollo.io for enrichment and start a sequence. Result : On a daily basis, apart from 5 direct search based signups, we are able to generate 3 more demos. Simple tweak of adding Analytics & Workflows to Account Identification, gave us 60% more leads from Google Search Ads.

If you predicted that tech stacks would shrink in 2024, it was probably a good bet. After all, the trend line had been headed in that direction. The average number of apps in companies’ stacks shrank in both 2022 and 2023, albeit by only a modest amount, less than 10% on average. But economic times were tight last year, and CFOs were on the warpath to cut SaaS waste. And, of course, there’s the ongoing 10-year narrative that the whole SaaS industry, martech especially, has been ripe for consolidation. So betting on red — shrinking SaaS stacks — would have seemed a safe wager. However, if you made that bet, I’m sorry to say, you lost. According to the data, the average number of SaaS apps in stacks grew by 2.2% in 2024. Spend on SaaS in 2024 grew even more, by 9.1%. Another interesting stat: average SaaS spend per employee grew 21.9%. In the SMB segment, companies with 1-500 employees reported a whopping 44.1% increase in SaaS spend-per-employee. Is AI to blame/thank? While it’s too early attribute to this primarily to AI, it is the overall narrative of our time: the ratio of software to humans in business operations is increasing. And will increase more, and more, and more. More discussion — including the latest findings about "shadow IT" — in my latest post on chiefmartec, based on the awesome new SaaS Management Index 2025 report by Zylo: https://lnkd.in/eRrpHJSz #martech

Consumption Pricing is not just about driving growth; it’s necessary for survival in 2025. CFOs are cutting SaaS spending like never before. The average number of SaaS applications companies use is trending down (see below), and the average overall SaaS spend has dropped even faster. The thing CFOs hate most is unused licenses. According to SaaS Management firm Zylo, 53% of SaaS licenses go unused each month. That’s astounding and unsustainable. In their most recent survey, “Seven in ten respondents said that reducing [SaaS license] waste is their top SaaS management priority” this year. Unused licenses occur for various reasons. Sometimes, underutilization is due to a poor initial estimate of users, slow implementation, weak training, or simply a clunky app that’s hard to use. However, other, more mundane things like employee turnover or position changes also cause significant underutilization. Do you know which applications have zero underutilization? Those with 100% consumption pricing. A company may be using an application less than it should, but it never pays for an application it is not using. When it comes to renewal time, there is a long list of unused SaaS products on the chopping block ahead of yours. Consumption pricing is also advantageous when securing a new booking in this environment. Customers are pushing to lower their commitment levels and maintain flexibility. According to the same Zylo data, SaaS contract durations have decreased over the past two years. Consumption pricing is naturally lower in commitment and fits perfectly into this trend.

Which marketing and sales benchmarks have you seen move most in this challenging market? These factoids from Ray Rike and his SaaS Barometer newsletter stood out to me this morning. I put them in a tracker I keep to do better back-of-napkin math and check if numbers at a company I'm helping are out of the norm. *From The Bridge Group - Win rates down decreased across the board by an average of four percent. (TLDR: As companies cut budgets the last few years, fewer buyers are in market buying (additional data I've seen also is showing longer times to close and lower total contract value)) * Marketing expenses as a percentage of revenue were reduced by a median of 5% in 2023 in the name of better efficiency. (I've seen this as well, though also see companies trying to figure out where / how to reinvest to restart growth again). * Sales expenses are typically twice the Marketing expenses in B2B SaaS companies with ACV ranges in the $25K - $100K range.   (This is a useful stat for marketers to understand the total cost of acquisition to figure out what's "really worth it" at the high end of paid advertising) * New CAC Ratio, which measures Sales and Marketing expenses incurred to generate $1 of new ARR from new logo customers in private SaaS companies, continues to increase - hitting $1.85 (median) in 2023, up from $1.76 in 2022 and $1.59 in 2021. It's much more expensive to get people to buy. (TLDR: It's getting harder and more expensive to get new revenue. So many marketers I know have expressed this) I'm enjoying Ray's newsletter (Linnk in first comment) - he shares a bunch of helpful metrics insights that help marketers be better business strategists. Recommended. The whole Bridge Group report on Account Executives is also a helpful resource. I find that the more I understand about what's going on in sales, the better I can make leads flow all the way through to revenue. #CMO #Marketing #sales #leadership #Metricsthatmatter