As part of the ritual of examining local commerce and SMB SaaS strategies, Localogy goes right to the source: SMBs themselves. After examining SMBs’ favorite channels from which to buy SaaS, we switch gears this week to look at the number of software vendors they work with, and how that figure is trending over time.
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
– To recap previous findings, the biggest cohort of SMBs in our survey (48 percent) prefer to buy software from their existing cloud-based tech provider (e.g., Square, Gusto, Stripe).
– Next on the list at 20 percent is SMBs’ existing marketing services provider, such as a marketing agency or local publisher
– Though these are online sources, as opposed to a friendly local sales rep, they are trusted in that SMBs have an established relationship.
– In addition to trust, it’s a matter of convenience given things like bundled pricing and cohesive billing cycles.
– Many of these same dynamics and SMB preferences flow into this week’s featured data point: the number of software vendors that SMBs work with.
– Though many signals throughout the MCM survey indicate that SMBs prefer the above bundling advantages… 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.
– This isn’t too surprising, considering the number of functional areas where SMBs need software: everything from payroll to point-of-sale.
– This grouping has grown over time, representing 45 percent of respondents in Wave 7, and 37 percent in Wave 6.
– The next largest grouping (27 percent) works with 3-4 software vendors.
– This hasn’t changed much over time, with 24 percent of respondents in this group in Wave 7, and 28 percent in Wave 6.
– Following that, 12 percent of SMBs work with 1-2 software vendors.
– This group has declined sharply, representing 23 percent of survey respondents in Wave 7 and 26 percent in Wave 6.
– Lastly, 11 percent of respondents claim to work with zero software vendors, a surprisingly high figure that represents room for growth among SMB SaaS vendors.
– Altogether, year-over-year survey trends indicate that SMBs as a whole are working with more vendors, not fewer, which is antithetical to SMBs’ explicit desires for simplicity and bunding that are expressed elsewhere in the survey.
– We’ll pick it up there in next week’s Benchmark Bytes…
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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.
