This session was presented at the LOCALOGY ENGAGE 19 event in Washington, D.C., June 3-4, 2019.

1. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
WHAT DO YOUR
SMALL BUSINESS
CUSTOMERS WANT?
(and why aren’t you giving it to them?)
We’ve learned these three fundamental things from four waves of LSA small business
tech adoption research. No. 1: SMBs are steadily moving their businesses into the cloud.
No. 2: They are seeing real benefits from doing so. No. 3: The SMB software industry is
failing to fully realize this opportunity.

2. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
ABOUT THE SMB SURVEY
Four waves of data since 2017
Approx. 1,000 completes per wave
SMBs = 500 or fewer employees
Latest wave (IV) completed in April
Results weighted based on census
business sizes
New focus in Wave IV on how
SMBs use software

3. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
THREE MAJOR
THEMES
No. 1: The steady march into the cloud
No. 2: SMBs’ benefitting from the shift
No. 3: Developers’ failing to capitalize

4. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
1. THE STEADY MARCH INTO
THE CLOUD

5. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
SMB CLOUD-BASED SERVICE ADOPTION KEEPS EXPANDING
U.S. SMB ADOPTION RATES OF CLOUD-BASED SERVICES*
Cloud-based
software is quickly
becoming the default
technology for many
SMBs
Sources: LSA Modern Commerce Monitor Survey, 2017-2019; 4,029 SMBs; Thrive Analytics, Local Pulse Report™, 2017-2019; 6,685 SMBs.
*Estimates based on SMBs that use cloud-based services at least once a month to support a business function.
35%
42%
55%
65%
75%
2017 2018 2019 2020E 2021E
+180% since 2016

6. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
THE ADOPTION TREND WILL CONTINUE
SMBs THAT DON’T USE CLOUD-BASED
SERVICES THAT PLAN TO START USING
THEM IN THE FUTURE
Nearly half of SMBs
that don’t use cloud-
based services plan to
start using them.
SMBs THAT CURRENTLY USE CLOUD-
BASED SERVICES THAT PLAN TO
PURCHASE MORE IN THE FUTURE
49%51%
Yes No
49% of Non
Users Plan To
Shift Services
65%
35%
Yes No
65% of Users
Plan To Get
More Services
Source: LSA Modern Commerce Monitor Survey; Wave IV: N= 1,015 SMBs

7. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
2. BENEFITTING FROM THE SHIFT

8. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
WHY DO SMBS ADOPT CLOUD TOOLS?
8
Source: LSA Modern Commerce Monitor Survey; Wave IV: Have shifted N= 795 SMBs; Considering N= 787 SMBs.
81%

9. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
HOW DO THEY SPEND THE EXTRA TIME?
9
Source: LSA Modern Commerce Monitor Survey; Wave IV: Have shifted N= 795 SMBs; Considering N= 787 SMBs.
60%

10. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
WHY DO SMBS ADOPT CLOUD TOOLS?
10
Source: LSA Modern Commerce Monitor Survey; Wave IV: Have shifted N= 795 SMBs; Considering N= 787 SMBs.
45%

11. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
3. DEVELOPERS FAILING TO CAPITALIZE

12. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
WHAT DO NON-USERS SAY?
Source: LSA Modern Commerce Monitor Survey; Wave IV: Have shifted N= 795 SMBs; Considering N= 787 SMBs.
45%

13. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
SMBS ARE UNDERUTILIZING YOUR SOFTWARE
Source: LSA Modern Commerce Monitor Survey; Wave IV: Have shifted N= 795 SMBs; Considering N= 787 SMBs.
62%

14. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
WHAT MAKES ENGAGEMENT BETTER?
Source: LSA Modern Commerce Monitor Survey; Wave IV: Have shifted N= 795 SMBs; Considering N= 787 SMBs.
76%

15. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
Localogy:Engage 2024
Washington DC - June

16. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
The Localogy Forecast

17. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
Key Assumptions and Drivers
➔ SMBs are 98% of all businesses in the US
➔ SMBs drive about 46% of US GDP or about $9T
➔ SMB ownership is undergoing a generational shift - selling or
turning over to next generation
➔ New SMB business owners have grown up in the Internet,
mobile and App world
➔ SMB adoption of cloud tools and solutions will accelerate with
generational shift

18. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
98%

19. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
46%

20. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
$9T

21. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
75%

22. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
The “Typical” SMB P&L
CRM
Advertising & Marketing
Supply Chain
Operations & Finance
Human Capital
Profit Margin
2%
2%
25%
11%
45%
15%

23. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
SaaS to SaaT - What and Why?
➔ SaaS models will continue to be part of the landscape
➔ SaaT: monetization models - (Software as a Transaction) will
develop over the next decade
➔ SaaT - shifts the mind set for SMB from pay per X to “pay as
they go”
◆ For instance - Payroll is per employee - why not shift to % of
payroll spend - allows for more value add via a %, just
payroll pays %, other HR functionality drives up % based on
total payroll

24. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
SMB SaaS and SaaT Spend
2019 2024
SaaS $14B $15.3B
SaaT $53B $87B
% of SMB GDP 0.72% 1.01%

25. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
SaaS and SaaT Share of SMB Spend 2019

26. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
SaaS and SaaT Share of SMB Spend 2024

27. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
WHAT DO YOU
THINK?

28. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
ABOUT THE
INDUSTRY SURVEY
 Online survey of those likely to attend this
event
 Questions explore what drives SMB SaaS
churn & techniques to mitigate churn
 Full results to be shared in an upcoming
LSA white paper in partnership with
Mono Solutions

29. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
WHY DO YOUR CUSTOMERS CHURN?
NO 1 RESPONSE?
“NOT USING THE PRODUCT”
NO 2 RESPONSE?
“FAILURE TO SET EXPECTATIONS”
NO 3 RESPONSE?
“COST”
LSA SMB/SaaS Engagement Survey 2019, n = 36

30. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
WHAT IS THE ENGAGEMENT CYCLE?
In your experience, how much
time does an SMB SaaS provider
have to establish customer
engagement with its product
before churn becomes likely?
19%
10%
45%
16%
10%
ONE DAY ONE WEEK ONE MONTH SIX MONTHS ONE YEAR
LSA SMB/SaaS Engagement Survey 2019, n = 36

31. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
WHAT WORKS IN DRIVING ENGAGEMENT?
NO 1 RESPONSE?
“IMPROVED MESSAGING/
EXPECTATION SETTING”
NO 2 RESPONSE?
“SERVICE CALLS TO CUSTOMERS AT
REGULAR INTERVALS”
NO 3 RESPONSE?
“INVEST IN ONBOARDING/
TRAINING”
LSA SMB/SaaS Engagement Survey 2019, n = 36

32. ENGAGE: SaaS/SMB w w w . l o c a l o g y . c o m
Thank You!
Charles@TheLSA.org