Benchmark Bytes: What’s the Most Popular SMB Saas Pricing Model?

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 during a global pandemic that has hit local businesses hardest?

Localogy’s Modern Commerce Monitor (MCM) wave 6.1 answers these and other questions across the SMB SaaS product set, which we preview in this Benchmark Bytes series. After the last installment examined how SMBs purchase online services, we switch gears this week to examine pricing models.

Specifically, the most prevalent pricing model for SMB SaaS services is freemium, with 33 percent of respondents saying they purchased something in this manner. That’s followed by the similar pricing model of buying an online tool, service or monthly subscription after having used it through a free trial

Further down the list is the more straightforwad one-time purchase at full price (22 percent), folowed by monthly subscriptions without a free trial (19 percent) and “other” (5 percent). These data were gathered in January and February so they have some Covid-influence in terms of adoption drivers.

Localogy members can access full charts and SMB survey reports.

What Does it All Mean?

Going a bit deeper, a few things jump out at us:

— Freemium pricing models seem to the the most popular among SMBs

— If we combine freemium and the similiarly-structured “upsell after a free trial,” they collectively account for 55 percent of responses.

— But it’s not all good news for freemium online services: The model declined from 42 percent of responses in Wave 5 to 33 percent in Wave IV.

— Meanwhile, “one time purchase at full price” and “monthly subscription without a free trial” trail in popularity… but+ they’re trending up.

— The decline in freemium services noted above matches the growth in these non-freemium categories.

— “One time purcahse at free price” is up five percentage points from Wave V, while “monthly subscription without a free trial” is up 7 points

— The deviation in scoring over time across these pricing models could be Covid-influenced.

— For example, digital transformation was more urgent during this period, so SMBs could have been less inclined to adopt at a slow pace while trialing products in a typical freemium manner.

Time to Shine

Stepping back, SMB online services adoption tracked by MCM continues to grow rapidly.  SMB SaaS startups and online services providers are correspondingly thriving with exit velocity, funding, and public-market performance. SMB SaaS is becoming a leading subsector of the broader SaaS universe.

Meanwhile, new SMB SaaS users could represent permanent adopters — a concept that’s accelerated in the Covid era as SMBs are forced to boost their digital transformation. This sends them into the arms of SaaS providers to accomplish a range of operational and marketing functions.

We’ll return in the next installment to go deeper on other areas of SMB technology adoption. That will include the types of SMB SaaS software that resonate most. 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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