Target costing: a way to make a product cheaper
Posted: Tue Dec 24, 2024 6:55 am
Innovations have changed a lot in business. If a few decades ago the markets were stable, it was possible to produce and sell standardized products according to an established scheme, today we have to look for new methods and approaches. Including approaches to pricing. And target costing is one of the methods that marketers are adopting.
Fractus specialists will help you apply the concept in your company.
Target costing: what is it all about?
Target cost is the literal translation of the term target costing. And target costing is one of the ways to manage product costs ( cost , price, margin ) by planning them for the purpose of optimization.
The essence is simple: at each stage of angola email list 276670 contact leads development, costs are optimized using engineering, innovative, production and other developments. This leads to very non-standard solutions. By implementing the method at the production stage, and not after, it is possible to take risks into account.
But cost reduction does not reduce the quality of the product: on the contrary, the goal is to present the consumer with a quality product. Moreover, the product is designed to meet the wishes and needs of customers. It is also oriented towards the market: will it be able to accept it, will the product be able to occupy its niche.
The management concept comes from Japan: most manufacturers use it, and since the 60s of the last century. For example, Sony, Nissan, Toyota, Cannon, Olympus and others. And many European and American companies actively use it.
Target costing: what is it all about?
Method and pricing
The target costing method involves a specific pricing method – the opposite of the traditional one. First, the price of the product is determined, then the desired profit, and based on this, the acceptable cost is calculated. The price of the product is expected, market-based in essence: it is determined by conducting marketing research.
Who uses
The scheme has been adopted by developers and manufacturers of innovative products, especially in the field of electronics, technology, computer and digital technologies. It is also actively used in the automotive industry. Non-profit organizations, the service sector, and medical institutions do not refuse it. In general, it is most successfully implemented by those types of business in which competition is very high.
Principles of target costing
First of all, developers focus on consumer requests and market requirements. They take into account how the cost price of a product is affected by the wishes of buyers regarding the quality of the product and the timing of its release. They also calculate the costs of both the product itself and its components in order to achieve cost reduction. And they use the concept of the so-called product life cycle.
Calculation of target costs
Determine the estimated price for a specific unit (element) of a product (for sale).
They formulate the target cost of a product or service both as a whole and per unit.
Both types of cost are compared – estimated and target – in order to determine the amount of cost reduction.
Re-engineering is carried out to improve the manufacturing process.
Calculation of target costs
Target Costing Strategy by Fractus
Are you planning to implement target costing principles in your business? Fractus specialists can help you with this task.
After analytical research, you will receive a fully working strategy. It will allow you to reduce production costs and strengthen cooperation between departments within the company. And the results will exceed your expectations. Contact us, we will solve the problem!
Join and choose thousands of products for wholesale and dropshipping from Ukrainian suppliers for your business, upload products to your online store
Fractus specialists will help you apply the concept in your company.
Target costing: what is it all about?
Target cost is the literal translation of the term target costing. And target costing is one of the ways to manage product costs ( cost , price, margin ) by planning them for the purpose of optimization.
The essence is simple: at each stage of angola email list 276670 contact leads development, costs are optimized using engineering, innovative, production and other developments. This leads to very non-standard solutions. By implementing the method at the production stage, and not after, it is possible to take risks into account.
But cost reduction does not reduce the quality of the product: on the contrary, the goal is to present the consumer with a quality product. Moreover, the product is designed to meet the wishes and needs of customers. It is also oriented towards the market: will it be able to accept it, will the product be able to occupy its niche.
The management concept comes from Japan: most manufacturers use it, and since the 60s of the last century. For example, Sony, Nissan, Toyota, Cannon, Olympus and others. And many European and American companies actively use it.
Target costing: what is it all about?
Method and pricing
The target costing method involves a specific pricing method – the opposite of the traditional one. First, the price of the product is determined, then the desired profit, and based on this, the acceptable cost is calculated. The price of the product is expected, market-based in essence: it is determined by conducting marketing research.
Who uses
The scheme has been adopted by developers and manufacturers of innovative products, especially in the field of electronics, technology, computer and digital technologies. It is also actively used in the automotive industry. Non-profit organizations, the service sector, and medical institutions do not refuse it. In general, it is most successfully implemented by those types of business in which competition is very high.
Principles of target costing
First of all, developers focus on consumer requests and market requirements. They take into account how the cost price of a product is affected by the wishes of buyers regarding the quality of the product and the timing of its release. They also calculate the costs of both the product itself and its components in order to achieve cost reduction. And they use the concept of the so-called product life cycle.
Calculation of target costs
Determine the estimated price for a specific unit (element) of a product (for sale).
They formulate the target cost of a product or service both as a whole and per unit.
Both types of cost are compared – estimated and target – in order to determine the amount of cost reduction.
Re-engineering is carried out to improve the manufacturing process.
Calculation of target costs
Target Costing Strategy by Fractus
Are you planning to implement target costing principles in your business? Fractus specialists can help you with this task.
After analytical research, you will receive a fully working strategy. It will allow you to reduce production costs and strengthen cooperation between departments within the company. And the results will exceed your expectations. Contact us, we will solve the problem!
Join and choose thousands of products for wholesale and dropshipping from Ukrainian suppliers for your business, upload products to your online store