Web Apps have scalability built-in at the business model level and at the technology level; but beware the revenue streams that aren't scalable.
When you sign-up for one of our workshops, you are given links to download PDFs of both "The Reality of Freemium in SaaS" and "The 7 SaaS Revenue Streams" - both of which are game-changing works I created for Sixteen Ventures, with the latter really setting the foundation for what we talk about in the SaaS Pricing Page Design & Optimization Workshop.
The mantra of Sixteen Ventures is that Pricing is Marketing, and it is, but for companies leveraging the SaaS Business Architecture, it goes deeper than that. SaaS and Web App companies have to deal with pricing differently than companies who leverage revenue models that are disconnected from their product. I like to use the example of a tractor tire... you can change the revenue model and pricing strategy for a tractor tire all day long and the tractor tire remains exactly the same.
This is not so with SaaS, Web Apps, many iPhone and other Mobile Apps, etc. These all leverage a business architecture that tightly-couples marketing to revenue model to technology and a change to one - whether it is a positive move or fixing a mistake - can require significant changes to the underlying product. Sometimes it can expose significant weaknesses and holes in frameworks, billing systems, etc. that the vendor chose to build on or around without fully vetting their pricing strategy or revenue model.
This is what makes SaaS and Web Apps so unique and why our expertise in SaaS makes our expertise in Value Pricing and Marketing so powerful. I don't think I would be much help in pricing a tractor tire, but I can help SaaS vendors all day long (and I do!).
I encourage everyone who buys the archive video of the SaaS Pricing Page Workshop for ONLY $50 to also check out the "7 SaaS Revenue Streams" PDF prior to the workshop. You can also get it by signing up for our mailing list.
An attendee of our last SaaS Pricing Page Design & Optimization Workshop sent in this question after reading the "7 SaaS Revenue Streams" PDF:
Lincoln, I did have a question about the seven streams of revenue. What is the definition of “products” and “services”. You use examples of Hardware, Devices, Appliances for “Product” and Content Creation, Training, Installation for “Services” What are the examples for a service-based industry/company. I just want to make sure I understand this less-scalable revenue stream concept fully.
Here is my answer and I thought you would benefit from seeing it:
Products are one-off sales that might also have a production/distribution cost associated with them. That could be an iPhone App that is a one-time (non-recurring) sale of $0.99 or it could be a piece of hardware that has to be built in China with material sourced from Indonesia and then shipped to the US for distribution in retail stores.
Obviously the iPhone app is an information product and is "more scalable" because the production cost is up front, but it is "less scalable" because it is a one-time sale. This is in contrast to the subscription / recurring revenue stream where one sale is really a revenue multiplier, resulting in a much larger Customer Lifetime Value (CLV).
Services are those things that have a human element to it and therefore the only way to add more revenue from that service is to add more humans. Humans don't scale very well, so this means that it will be harder to achieve any level of "economy of scale" with human-centric services.
We recommend looking at the repeatable processes performed by your service professionals and moving those into the app. It could be that 80% of the things that your service pros do could be repetitive for every client; so push as much as possible of that into the app for either self-service by the customer or for streamlined performance by the service professional.
Now, you have the 20% that is unique to each customer being performed by - hopefully - less people (or the same amount of people as you grow) AND that 20% is unique to each client and therefore higher value so you can charge MORE for the professional services.
Use leverage wherever possible to achieve greater levels of scalability, look to reduce wasted effort and find ways to make the services *more valuable* so you can charge more. Its still not as scalable a revenue stream in the way that recurring revenue for the app is, but you can make it better.
Learn the secrets of how to build a powerful Pricing Page! I've put together a 5 Hour video series - the Pricing Page Success Formula - to help you get the most out of your Pricing Page. For a limited time you can get the Pricing Page Success Formula video series - with content on Value Pricing, Pricing Page Design, and even Price Testing - for the Introductory price of ONLY $297.
Go get this amazing video series for only $297 right now. As soon as you get it, immediately watch the 35-minute Value Pricing Basics for SaaS & Web Apps video; it will truly change the way you look not only at pricing, but your entire marketing strategy, your customers, and your offering as a whole!