Target costing tool in product development: increase efficiency and reduce costs

In recent years, the target costing tool in product development has established itself as an indispensable instrument if companies want to bring innovative products onto the market with economic success. While traditional costing methods often only take effect after a product has been completed, the target costing tool starts early - namely in the phase in which the biggest cost decisions are made.

Companies today are faced with the challenge of developing products that meet customer expectations on the one hand and designing cost structures in such a way that sustainable profitability is guaranteed on the other. This is precisely where the target costing tool comes into play in product development by defining the target costs right at the start of the development process.

Why the target costing tool is so important

A key advantage of the target costing tool in product development is that it aligns product design with customer requirements and the market price. Instead of starting from internal production costs alone, a marketable sales price is set first. This results in the maximum permissible cost structure, which must not be exceeded. In this way, unnecessary expenditure is avoided and resources are used in a targeted manner.

In addition, the target costing tool promotes collaboration between different departments such as development, purchasing, production and marketing. By involving all relevant areas in the process at an early stage, cost potentials can be identified and utilized. This makes the target costing tool in product development not only a pure calculation instrument, but also a strategic management approach.

Practical benefits in product development

In product development in particular, it is crucial to set the right course right from the start. The target costing tool in product development makes it possible to link innovative ideas with clear economic goals. Developers and engineers know exactly what financial framework they are allowed to work within, which minimizes undesirable developments and costly adjustments later on.

Another benefit lies in the market and competitive orientation. Companies that consistently use the target costing tool in product development can react more quickly to changes and develop products that are both technically convincing and competitively priced