SMBs Like to Try Before They Buy

As it turns out, small businesses owners are into free stuff.

The latest edition of  The LSA’s Modern Commerce Monitor™️ small business technology survey delves much deeper than previous waves into how SMBs are acquiring SaaS tools to help them operate their businesses more efficiently and effectively.

What’s clear from the latest data is that freemium products play a major role in bringing SMBs into SaaS. When combining freemium and free trials, a majority of SMBs are signaling they prefer some flavor of the try-before-you-buy model.

The first chart below shows that nearly half (47%) of SMBs are using a freemium version of the cloud software they acquired most recently. Another 13% purchased the software on a monthly subscription following a free trial. The free trial component is nearly double that of those skipping the free trial (7%).

Freemium products cover a lot of ground. Most of us use some kind of free product for a business-related purpose. This is particularly true for productivity apps like Slack, Dropbox, or Evernote. Many companies offering tools to run the small business enterprise (accounting, CRM, marketing, supply chain, payments, HR, etc.) also offer free versions of their software.

Freemiums usually offer limited functionality and include limited service and support, or usage caps, all designed to encourage conversion to paid versions of the software. Conversion rates are typically in single digits for freemiums and low- to mid-double digits for free trials.

 

About half of SMBs tells us they would only have purchased the software through a free trial. The other half said, in essence, that they accepted the free trial but were planning to buy the software anyway.

There is a generational component in the data that suggests the number requiring a free trial in order to convert will grow to a much larger share than half. According to the MCM, 72% of millennial and younger decision-makers regard the free trial as table stakes.

As we’ve noted in the past, about 10,000 Americans reach retirement age every day. We read this as a broader signal that small business decision making is shifting from boomers to millennials and GenZs, the latter two being cloud-first in their approach to running small businesses. And they are “try before you buy” first as well.

 

Stay tuned for more posts honing in on key data points from the MCM survey and exploring their implications to the local market.

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Source: LSA Insider

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