What will be the eventual cost of my product?
Developing an innovative product that doesn't exist yet is not an easy task. During the development process, stumble blocks emerge. Below, our team took the time to share some advice about what's important when thinking of your total cost.
Let's zoom in on the total cost of your hardware product!
Our advice to help you get an overview of your total cost
Of course, the cost of your product depends on a lot of things. We very often get the question what the total cost would turn out to be. It is always essential to look at what costs we are actually talking about.
Often there is a reference to the material cost. After all, you have a tangible product, that you can physically hold and feel in your hands. But to get that finished product in your hands, of course, there is a whole process beforehand, with various steps leading up to the final product.
Think, for instance, of assembly: parts have to be put together, tested, and checked. Think of transport, packaging. So that the product can reach you safely and in one piece. These are all things that play a role in that total cost price.
An exercise that is very useful to define your costs is to start from your customer's point of view. You need to ask yourself the question, when the customer has received your final product in a certain way, what steps did the product have to go through to get there? Then pinpointing all those steps and their matching costs will be much easier. This way, you’ll gain insight into the entire process. So we do not only talk about the Bill Of Material (material cost) but also about the Cost of Goods and everything that comes with it.
Naturally, the economy of scale also plays its role, since the cost price is determined by the numbers you are going to produce. So if you decide to limit yourself in a first phase, not producing too much yet, then chances are the cost of your product in that number will be higher than in a later phase, where you might produce thousands, tens of thousands, or millions. For sure because you’ll have your entire process aligned and adjusted to that decision.
Our point of view at the start of a development is to try to have insight into your cost forecast as soon as possible. Know the numbers you are developing and dare to commit. If you immediately go for those large numbers, dare to make those investments. If you are going to reduce risks and start with lower numbers, know that those products will probably be slightly more expensive to achieve that same quality.
We hope these tips & tricks will help you get a better idea to map your product cost!
If you’re in need of a good partner, we can always help you figure this out for your project. Interested? Let’s plan a quick meeting to talk this through!