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Cost of components.

COST OF COMPONENTS Any attempt to generalize about software manufacturing costs quickly runs into a forest of variables. Reference manuals range in size from a few pages to several thousand; package designs vary dramatically across product categories; the number of disks can be any quantity from one to more than a dozen. This problem was reflected in the responses we received from our survey respondents, who reported that the overall unit cost of their most opular product ranged from a low of 22^ to a high of $345. Similar broad ranges showed up when we looked at individual components of these packages. Even a simple warranty card, presumably a fairly straightforward item, cost our respondents anywhere from 1^ to $3.00.

Nevertheless, we did find some general trends. Not surprisingly, our survey results demonstrated clearly that companies are willing to spend more to manufacture products with higher retail price points:

When we looked at the cost of individual components, we found that the product price had a similar impact on costs:

* Primary reference manual: For most developers, reference manuals are the single most expensive manufacturing component. Although inexpensive products tend to have relatively brief manuals, the survey found that the size of the manual didn't always correlate with product price:

One key difference in the cost of producing a manual is the choice of binding methods. Generally, software companies rely on four different binding techniques: saddle-stitching (magazine-style, with staples through the spine), perfect binding (book-style, with a square spine), spiral binding (plastic or metal coil), and ring-binder (notebook-style). Overall, ring-binding turns out to be the most popular; 34% of respondents said their primary manuals are ring-bound, followed by 28% who chose spiral binding. However, saddle-stitching and perfect binding are much more popular for lower-priced packages:

* Secondary manuals. In addition to a primary reference manual, many software packages include separate tutorials and other specialized publications. Overall, 39% of respondents reported that they included some kind of secondary manual and said that the median price for this component was $1.50.

* Boxes and packaging. Our survey data highlighted the diversity in packaging techniques--and the varying cost of differing packaging styles--that prevail in the software industry. Again, we found a clear correlation between retail price and a company's willingness to spend money on packaging: The median cost of packaging for products under $100 was 85^, while the median for those over $1,000 was $6.00.

Software companies rely on an even greater variety of packaging formats than binding methods. The survey indicted that the most common format currently in use was the cardboard box, which 52% of companies said is the packaging method for their most popular title:

* Miscellaneous items. Most companies include such items as warranty forms, quick reference cards, and marketing materials as part of their packaging. We found the following median prices for these items:

* Diskettes. It turns out that customers who buy higher-priced products literally do get more software for their money: The average number of disks (both 5.25" and 3.5" formats) included in a package rose consistently with the selling price of the product:
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Copyright 1989, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:results of software manufacturing survey
Date:Sep 1, 1989
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