have to spend a bundle—more than the $50 or $100 check that
Aunt Agnes sent you for your birthday (to avoid your total disap-
pointment, Aunt Agnes might try looking at a check in the $500
to $1,000 range). But then you’d say to yourself: “But I could get
an entire stereo system for that price!” Here’s a perfect example
where new product developers could fulfill unmet consumer needs,
in this case, by offering a reliable, high-quality docking station
priced 25 to 35 percent above those-low quality products.
So what is a product developer to do?
Start with your innovation/product strategy, and discuss the
ramifications of Target Costing. Find out if it’s alienating your
customers or if there’s any white space for high-performing in-
novative products (white space is that undiscovered domain of
opportunity for new products and new markets).
Investigate online magazines and product reviews. Online retail
sellers, such as Amazon, encourage customers to provide feedback
(customers are evidently far from shy when sharing their faulty
product experiences). Based on these reviews, where do you and
your competitors fall short on performance, and where can you
improve relative to your competitors?
So, when developing your product requirements document,
don’t merely list target cost, but also consider things like reliability
and the mean time before failure (MTBF). Be sure to test your
supplier components on an ongoing basis, and be aware of your
supplier’s motivations to reduce costs.
“So, when developing your product requirements
document, don’t merely list
target cost, but also consider
things like reliability and the
mean time before failure.”
Endnotes
1. Robin Cooper and Regine Slagmulder, Target Costing and Value
Engineering (New York, NY: Productivity Press, 1997)
2. Sohrab Vossoughi, “Consumer Electronics: Innovate or Die,”
BusinessWeek Online (January 1, 2009): p. 50.
3. For more on Perceptual Mapping, see Staking Out Valuable
Positions, Strategy2Market, Inc. (February 2007)
http://www.strategy2market.com/downloads/perceptual_mapping.html
