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 post-pandemic world? 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 sales channels where SMBs buy (or get sold) SaaS tools, we switch gears to examine the pricing models under which they procured those tools. Is it classic SaaS with monthly recurring cycles, or a front-weighted purchase? And did they take advantage of a free trial before purchasing?
Data Dive
– Diving right into the data, the top pricing model (29 percent) that SMBs experience is Freemium.
– To define this, it involves free services with the opportunity to upgrade to a paid version with more features.
– Trials can also be limited in time (as opposed to features) which is covered below.
– The second-most prevalent pricing model is a one-time purchase, which 24 percent of SMBs reported using.
– This is somewhat surprising as this is a legacy software pricing model that was the standard before the era of SaaS.
– This model also has cash-flow disadvantages, as it happens all at once. Monthly SaaS pricing conversely allows SMBs to spread out their payments into recurring subscription cycles.
– The fact that this model is still so prevalent is likely due to the habitual nature of SMBs and their sometimes-slow pace in adopting new technologies (including new pricing models).
– Next in order of popularity was monthly pricing with a free trial, which was reported by 22 percent of respondents.
– This is similar to the ‘try before you buy’ orientation of freemium offerings above, however the trial is limited in time as opposed to features.
– Last on the list, though still substantial in its response, was monthly pricing without a free trial, at 20 percent.
– This response was also somewhat surprising, given that purchases without a free trial were only 2 percentage points behind those that did take advantage of free trials.
– This could be due to limited offerings for free trials in the SMB Saas competitive landscape, signaling a possible opportunity to differentiate through attractive free-trial offerings.
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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.
