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 prefer to work with… and the number actually they use… we we now drill down into SMBs that have consolidated vendors.
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 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.
– However, that’s at odds with SMBs’ stated preference, with a majority (58 percent) reporting that they prefer to work with a single software provider for all their needs
– The disparity between preference and action represents an opportunity for SMB SaaS vendors that can attract SMBs with one-stop-shop offerings.
– The benefits of single software providers include convenience and billing simplicity. However, working with several providers means “best of breed” capabilities within each function.
– Turning attention to this week’s featured data point, how many SMBs have actually consolidated down to one vendor? Based on the above, that’s the dream… but who’s actually following through?
– It turns out that among those who have consolidated their software vendors, 44 percent have gone down to just one solitary provider.
– This indicates momentum among SMBs to actually act on the one-vendor preferences highlighted earlier in this series.
– At the same time, it indicates headroom in the remaining portion of SMBs that haven’t yet consolidated to this degree.
– Speaking of which, 53 percent of SMBs haven’t yet consolidated down to just one software vendor, while the remaining 3 percent aren’t sure.
– This 53 percent represents an addressable market for software vendors that can get SMBs to consolidate… we already know they largely want to do so.
– This represents a sales challenge, but the payoffs are meaningful, including greater ARPU and greater potential retention.
– The latter is a function of switching cost and stickiness, which grows as a given vendor serves SMBs on deeper levels across their operations (e.g., sales, marketing, HR, finance, etc.).
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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.
