What's the pricing spread?

Subject: What's the pricing spread?
From: Jonathan Leer <jleer -at- LTC -dot- MV -dot- COM>
Date: Mon, 28 Apr 1997 11:13:16 -0300

David Locke recently responded to my question about document pricing:
Price has nothing to do with cost. Ultimately, the price of a manual is
part of the larger cost of sale. Sometimes the price of a manual can be
considered to be part of the cost of sale for subsequent versions, because
manuals contribute to customer loyalty. With the cost of sale of subsequent
versions, running about 1/6th of the original sale, you can provide a lot
of free services as long as you get that sale.

This is fine to talk about philosophically, but what are the real numbers? How about some case studies?

The problem with technical communications today is that those doing the work have no working knowledge of the $ involved, other than what they are getting paid. This is ridiculous if we are to understand the market and be competitive.

Of couse knowing what the market is paying technical writers is useful. But also knowing more about the income being generated from manuals is really useful. Unfortunately, most technical communicators believe that these numbers are only soft numbers. And of course, management shows no sign of interest in educating us. But talk to an accountant, and even soft numbers are numbers! Every activity going into developing and selling a product gets a number!

Consequently, I want to know what companies are charging their customers so I can know the market spread. OK it costs a company $20,000 to produce a manual. But what is the income being generated off of that manual. No matter how the product is marketed, it isn't smoke and mirrors. There has got to be real numbers. Is the profit margin 100%, 200%, or what?

Just think, if you know that you're getting paid $20,000 for a manual, and the company is turning around and reaping $75,000 in profit from that manual, you'd be in a better position to renegotiate your income stream.

Make a customer an expert quickly, and you will be rewarded with a loyal
customer. Loyal customers are your only revenue stream.

Before you can establish a price, you need to know if your company views
manuals as a cost center, a profit center, or a value-added product. I can
make the value-added case, but most software vendors see us as costs.

You're absolutely right. But let's look at the spreadsheet.

Human factors, documentation, training, and technical support all
contribute to the end-users productivity. And, they are all seen as cost
centers. And, costs are balanced. Neglect to spend in one area will drive
costs in the other areas. Increase the costs of these services increase
negative use costs, not acquisition costs. Customers don't mind acquisition
costs, but high negative use costs will be seen by customers as negative
and reduce sales.

Charge whatever the market will bear. But, consider the marketing strategy
and the market timing when you make your decision.

Until technical communicators understand the business aspects of their work, they will perpetually be the "workers in the back room", instead of real contributors to the success of their companies and to their own pocketbook.

Comments appreciated,
Jon Leer
Leer Technical Communications

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