As part of the ritual of examining local commerce and SMB SaaS strategies, Localogy goes right to the source: SMBs themselves. After examining the number of software vendors they work with, we drill down this week into the number of vendors they prefer to use. Is there alignment between the two?
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.
Data Dive
– The benefits of single software providers include convenience and billing simplicity. However, working with several providers means “best of breed” capabilities within each function.
– To recap last week’s findings, SMBs more often than not work with several vendors.
– Specifically, more than 51 percent – the largest grouping in the survey – work with five software vendors or more.
– The next largest grouping (27 percent) works with 3-4 software vendors.
– Following that, 12 percent of SMBs work with 1-2 software vendors.
– Lastly, 11 percent of respondents claim to work with zero software vendors.
– So how does that reality align with SMB preferences? It turns out, not very well…
– Specifically, the highest grouping of SMBs (58 percent) would prefer to work with a single software provider for all their needs
– This figure is down significantly from previous waves, including 77 percent in Wave 7 and 75 percent in Wave 6.
– The next-largest group in this survey (34 percent) represents SMBs who prefer to work with a different specialized software company for each function or need.
– This figure is up from previous waves, including 22 percent in Wave 7 and 21 percent in Wave 6.
– Synthesizing the takeaways, the biggest thing that jumps out from these figures is how aspiration deviates from behavior.
– A majority of SMBs want a single software provider… however, most SMBs (per last week’s data analysis) work with many.
– This variance in reality versus preference signals an opportunity for software vendors that can successfully consolidate SMBs’ business through larger bundles.
– It’s also notable how sentiments are changing over time. Though the preference for single providers is greater among SMBs, it has declined over time.
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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.
