Product details

By continuing to use our site you consent to the use of cookies as described in our privacy policy unless you have disabled them.
You can change your cookie settings at any time but parts of our site will not function correctly without them.
Management article
-
Reference no. 96104
Authors: W Chew; Rowena Cooper
Published by: Harvard Business Publishing
Published in: "Harvard Business Review", 1996

Abstract

In the past, companies took a cost-plus approach to pricing, charging high prices when a product was first released, then lowering prices when production was scaled up. Lean competitors make that approach impossible, however, as they are quick to introduce competitive "me too" products to market. To gain and hold market leadership today, a company must design the cost out of its products from the outset. Target costing is a cost- management technique that lets a company do just that: The company determines how much customers are willing to pay for a product and then designs the product within cost limits that will permit it to sell profitably at the predetermined price.

About

Abstract

In the past, companies took a cost-plus approach to pricing, charging high prices when a product was first released, then lowering prices when production was scaled up. Lean competitors make that approach impossible, however, as they are quick to introduce competitive "me too" products to market. To gain and hold market leadership today, a company must design the cost out of its products from the outset. Target costing is a cost- management technique that lets a company do just that: The company determines how much customers are willing to pay for a product and then designs the product within cost limits that will permit it to sell profitably at the predetermined price.

Related