Do SMBs Prefer Vertical-Specific SaaS?

SMB SaaS Survey

As part of the ritual of examining local commerce and SMB SaaS strategies, Localogy goes right to the source: SMBs themselves. How do they feel about marketing and operational software? What features do they want? And how has their hunger changed in a pandemic? This is all a moving target.

Localogy’s Modern Commerce Monitor (MCM) answers these website dynamics questions across SMB SaaS, which we preview in this Benchmark Bytes series. After examining SMBs’ desires to consolidate SaaS and work with one provider, we switch gears to look at what types of vendors they want.

In other words, most SMBs prefer one-stop-shop software vendors for a range of operational needs (though far fewer have actually done so). For those that have expressed this sentiment, do they want industry/vertical-specific software or more general tools that have been proven in the broader market?

Localogy members can access full charts and SMB survey reports. Non-members can purchase reports

Data Dive

Going deeper, a few insights jump out from these figures.

– As we examined last week, the vast majority of SMBs surveyed (78 percent) prefer to work with just one software vendor for all their SaaS needs.

– 21 percent conversely prefer to work with several vendors to have the freedom and flexibility to cherry-pick the best software across functional areas.

– These results stand to reason, as SMBs are famously time-starved and tech challenged. Working with just one vendor alleviates some of these common challenges.

– However, as is sometimes the case with survey sentiments, these stated preferences are highly aspirational.

– We say that simply because the number of SMBs that actually work with just one software vendor is far fewer than the number that say they want to.

– Specifically, 36 percent report that they currently work with just one software provider for all their SaaS needs: less than half that say they want to consolidate SMB SaaS.

– Meanwhile, 63 percent of SMB respondents work with more than one SaaS vendor.

– So for those that do prefer a one-stop shop, what types of software vendors do they prefer?

– 62 percent say that they want a provider that specializes in their industry.

– 36 percent meanwhile say that they prefer vendors that work with a variety of SMBs while 2 percent are unsure.

– The desire for specialization stands to reason as SMBs naturally want software that addresses their unique pain points.

– This is truer in some verticals more than others, with specialization carrying greater value in any industries that are complex or that have a high degree of regulation.

– These specialized verticals include healthcare and finance among others.

SMB SaaS Use and Purchase Trends, October 2021

Time to Shine

Stepping back, SMB online marketing – website-based or otherwise – continues to grow rapidly.  SMB SaaS startups and online services providers are correspondingly thriving as it continues to grow as a leading subsector of the broader SaaS universe. There’s a long-tail opportunity at play.

Meanwhile, new SMB SaaS users could represent permanent adopters. This is a concept that’s accelerated in the Covid era as SMBs are forced to boost their digital transformation. This sends them into the arms of SaaS providers to accomplish a range of marketing and operational functions.

We’ll return in the next installment to go deeper into Localogy original survey research. That will include SMB goals and success factors. Let us know what additional insights jump out at you from the above data. Stay tuned for more breakdowns in our Benchmark Bytes series.

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