Where Do SMBs Buy SaaS?

Where Do SMB In-Person Software Sales Go Wrong?

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 and other questions across the SMB SaaS product set, which we preview in this Benchmark Bytes series. And we recently entered a new chapter of this series, with highlights from the latest wave (8.0) of Modern Commerce Monitor.

After examining the SMBs that utilize the full capacity of the SaaS tools they adopt (and why / why not), we switch gears to examine the places where SMBs buy SaaS tools? What are the sales channels that deliver this software to SMBs? The answer to that question is critical for SMB SaaS sales strategies.

SMB SaaS Use and Purchase Trends, April 2023

Data Dive

– diving right into the data, the top way (27 percent) that SMBs buy SaaS is to simply do so through the provider’s website.

– This can be a positive outcome for SMB SaaS providers, given that margins can be greater due to lower customer acquisition costs (CAC) that are inherent in self-serve.

– However, this result declined sharply from waves 6 and 7 of the survey, when 35 percent of respondents relied on self-serve advertising.

– This is likely reflective of post-Covid dynamics when physical interaction is bouncing back. The drop in self-serve is a consequence of greater in-person sales.

– Speaking of which, traditional direct-sales solicitations tied for the top spot (27 percent) in SMBs’ software purchases.

– Showing the inverse trend as the above, this result was up considerably from Waves 6 and 7, when Covid-sheltered SMBs relied less on salespeople and more on online purchases.

– The fact that in-person software sales have bounced back is telling: The digital transformation trumpeted in the Covid era didn’t sustain as speculated… at least in terms of SMB SaaS purchasing.

 – Coming in third place on this list (21 percent) was “Discovered the solution in an online marketplace.”

– Among other things, this validates that online channels and affiliate sales are still effective.

– Further down the list, results include “Was introduced to the solution by a local advertising or marketing agency” (10 percent); “Was persuaded by an intermediary – such as an accountant or lawyer” (5 percent); and “Other” (10 percent).

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Long-Tail Opportunity

Stepping back, SMB online marketing – as well as operational and fintech tools – continues to grow rapidly.  SMB SaaS startups and online service 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 – a concept that accelerated in the Covid era as SMBs were forced into digital transformation. This sent them into the arms of SaaS providers (where many have stayed) 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, and stay tuned for more breakdowns in our Benchmark Bytes series.

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