By Saul Carliner | Fellow
As organizations prepare budgets for the coming year and, in turn, managers and business owners prepare their own budgets, one of the central elements of those budgets are the rates for the products and services offered by the technical communication group. In general terms, these are the prices for technical communication products and services. But what issues should managers and business owners consider when establishing prices? This article explores six of the most significant ones.
1. Pricing determines what an organization receives for its products and services.
"Pricing is the process of determining what a company will receive in exchange for its products" and services (Wikipedia). That is, pricing is a planning activity in which an organization establishes what it will charge for its services or how it will change the price.
According to Wikipedia, factors that affect pricing include:
- The cost of producing the product or service, which includes the costs of developing the product or preparing to offer service, manufacturing the product or delivering the service, distributing the product or traveling to offer the service, and marketing the service.
- The market, which refers to the physical or virtual location where the product or service is offered, the number of competitors, and other economic factors affecting the sale of the product or service.
- The position of the product or service in the market, which includes how the organization wants prospective customers to perceive the product or service in relation to its competitors. For example, should people should perceive this product or service as superior? A better value for the price?
Prices have these components:
- Suggested price, which is the official "price" of the product or service. Some organizations refer to this as the manufacturer’s suggested retail price because some products and services are never sold at the suggested price.
- Discounts, which refer to reductions in the price. Organizations offer discounts in a variety of instances:
- to customers who purchase in large quantities (called a volume discount) or over a period of time (such as "buy nine, get the tenth free")
- to drive sales, such as discounts offered during a holiday promotion (usually called a sale)
- to reduce inventory (when discontinuing a product or when a product is not selling as expected)
- Premiums, which are incentives to encourage people to purchase the product or service. Usually customers pay the suggested price. But in addition to receiving the product or service, they also receive something additional. For example, an organization might include a book as a premium for registering for a course or make a contribution to a designated charity based on the value of agreements signed before a designated date.
2. Technical communicators price three types of products and services—and price each differently.
Most commonly, technical communicators sell their services. Typical services offered by technical communicators include designing and developing content, conducting usability tests, conducting audience analyses and needs assessments, revising content, producing content, advising on strategy, and managing projects that involve these skills. We usually sell these services in units of time; the hour is most common but we occasionally charge by the day. In some instances, we charge a single price for a complete service.
A second item priced by technical communicators is content sold directly to customers. Books, courses, and paid-access websites are all examples of content. For one-time purchases, like books, we charge by the unit. For ongoing access to content, we charge a subscription that provides access for a period of time.
A third item priced by technical communicators is software, which refers to applications for computers and mobile devices. This is the least-common product or service offered by technical communicators. We charge for software in much the same way we charge for content.
3. Pricing looks different depending on whether you’re purchasing or selling a product or service.
Technical communicators play the roles of consumers and producers. Consumers purchase products and services. Technical communicators purchase professional services and products like these:
- labor (such as writing, editing, instructional design, programming, design, illustration, project management)
- software (productivity, authoring tools, enterprise systems)
- hardware (computers, tablets, smart phones, gadgets)
- memberships and subscriptions
- conferences
Consumers want to get the best value for their money. For some, that means the lowest price. Often, price alone does not determine value. For example, a less-expensive product might not last as long as a costlier, but higher-quality product.
Consumers often know the prices of the products and services they regularly purchase, but they don’t always know the prices of products and services they rarely purchase. For example, most technical communicators are aware of the prices of laptop computers and office software. But most of us do not regularly purchase specialized authoring software like Adobe Creative Suite, nor enterprise technology like content management systems, nor outside services like content strategy. When we do not purchase a product or service regularly, we might have unrealistic expectations of the price for a service.
Technical communicators need to maintain an ongoing awareness of the prices for the primary products and services we consume in our professional life and have a network of trusted colleagues whom we can contact when we need to purchase products and services we have little experience with.
Producers bring products and services to market and set the prices for products and services. When doing so, technical communicators should establish prices that:
- cover costs
- provide for a surplus when needed (called profit in for-profit organizations)
- reinforce the identity you hope to establish with customers (a superior product or service [usually with a higher price] or a "value" product or service with a lower price)
- consumers can afford
At its most basic, that involves determining:
The rest of this article focuses on the role of technical communicators in establishing prices as producers.
4. Pricing is important to technical communication groups.
Pricing is important to technical communication groups because it determines our income. Whether working internally on staff or externally as a consultant or contractor, the price you charge determines the income you have to work with. This income covers key expenditures, including salary, benefits, equipment, software, and professional development.
This point might seem obvious to those working externally, but it is equally important to the majority of technical communicators who work internally. Although most seemingly receive a set "budget," that budget is the price of your services. If those costs are higher than external providers, organizations might choose to outsource your work. So when establishing salaries and other costs for a budget, make sure they’re competitive so that you minimize the risk of being outsourced.
But even when internal salaries compete with external providers, the time needed to complete projects might differ or the overhead of the cost—that is, the costs of benefits and support services—might be unusually high and, as a result, drive up costs. Those, too, could make your internal services uncompetitive with external ones.
Astute internal managers calculate their costs as if they were pricing these services as a contractor to make sure their group can provide services competitively.
5. Technical communicators set prices on a variety of products and services.
Table 1 summarizes the types of products and services sold by technical communicators. It identifies key categories, presents examples of the types of products and services sold in each category, states the unit of purchase (that is, on what is the price established), describes the strategies for establishing the price, and describes common discounts available.
6. Additional issues to consider when setting prices.
When establishing prices for technical communication products and services, there are a number of issues to consider.
Make sure that the logic used to establish the price is sound. In some cases, organizations have a weak or inappropriate business model (see Carliner 2012) and might not have a good plan for generating revenue. In other instances, an organization might not support efforts to generate revenue. For example, most of the companies selling Massive Open Online Courses (MOOCs) only offer courses for free; they have not yet devised plans for generating enough revenue to cover their costs. At some point, if they do not do so, they will not remain in business.
|
Hardware |
Software |
Published content |
Courses |
Services |
|
|
Examples |
Instructional computers |
Authoring tools Enterprise software (like content management systems) Apps |
Books and guides User assistance eLearning Subscription websites |
Face-to-face and virtual classes |
Technical communication Instructional design User experience design Content strategy Consulting |
|
Unit of purchase |
Device plus "options" (such as a computer plus additional memory and power adapters) |
Product or group of products |
Per course or subscription |
Classroom: per day per student Virtual classroom: per session or per location (may be one or more students) |
Contractor (hour, project) Consultant (hour, day, project, or retainer) |
|
Pricing options |
Cost to re-sellers (such as a Best Buy) plus markup |
"License" (purchase) Lease Software-as-service (per use) Free/upgrade |
Cost plus extras (such as travel) plus profit Cost recovery |
Cost plus profit Cost recovery |
Cost plus profit (surplus) |
|
Discounts |
Volume Premiums (options included) |
Volume Premiums |
Volume (number of students or time on agreement, or both) |
Volume (varies by product, usually small, medium, and large) |
Volume (in hours or days) "Thank you" discount for several contracts |
Table 1. Summary of Pricing Opportunities and Strategies in Educational Technology and Technical Communication
In other cases, organizations have not fully figured out the cost of offering a product or service and, as a result, set prices that are too low. At some point, the organization might realize that it has not generated enough revenue to cover its costs, but that might happen too late. For example, some technical communication organizations do not include the costs of research, development, and marketing in their overall costs. Maintain awareness of pricing within your industry so that you can knowledgably set prices and, as pricing changes in your industry, you can respond in a timely manner.
Disruptive technologies can disrupt pricing. For example, the revenue generated by classified ads for jobs, personals, used cars, and similar items sustained newspapers for years. But services like Monster.com made finding jobs easier and quicker, and employers significantly reduced their use of classified ads. Services like Match.com made the process of finding a suitable date easier, quicker, and less expensive—and customers significantly reduced their use of personals in newspapers. Craigslist did the same to advertising for used products. The Internet was a disruptive technology to newspaper classifieds and, in the end, replaced them. Newspapers had an extremely difficult time replacing that revenue; some could not and went bankrupt. Easy-to-use authoring tools are disrupting, in part, technical communication.
Think twice before giving away work for free. On the one hand, giving away sample chapters of published books and sample lessons from elearning courses provides prospective customers with a more complete idea of what they are purchasing. Product descriptions do not always provide a complete picture; a sample usually does.
In contrast, providing services for free in the hope of eventually landing paying work is not the same as a free sample. In theory, the idea sounds good. Offer a service to a high-profile company for free, get a great résumé credit and portfolio piece, and that, in turn, might lead to future work—ideally with the company for whom the work was performed.
In some instances, workers only perform initial work on a project hoping to land a paying contract to finish the job. In many cases, however, the company chooses not to hire the worker, then uses and profits from the ideas without paying for them.
This type of work is called "spec work" and some professional associations label it unethical. From the prospective employee’s perspective, it takes advantage of them and also discourages the company from paying for the service. From the employer’s perspective, it often appears that they are skirting employment laws. gi
Saul Carliner (saulcarliner@hotmail.com) is the eLearning fellow and an associate professor at Concordia University in Montreal and has taught certificate programs on business and management issues for STC. He is a board member of the STC Certification Commission and a Fellow and past president of STC.
References
Carliner, S. 2012. Using Business Models to Describe Technical Communication Groups. Technical Communication 59.2, 124-147.
Wikipedia. Viewed at http://en.wikipedia.org/wiki/Pricing. Visited 8 October 2012.
