Cost of Product Development Revealed!

cost of product development

Watch this video to understand the costs of developing a new product idea from scratch to manufactured product. Alternatively you can read the transcript below with images of the product examples.

Costs of product development

This video is all about the cost of product development.

Maybe you’re a company that’s going into new product design and development for the first time you’re trying to work out what it’s going to cost for you to employ a product design consultancy to do the work, but you can’t find any prices online, well – this video is for you! 

So, obviously product development is going to cost you some money but one of the other things you’re going to want to know is what return you might get back. We’ll talk about that at the end of this article. In the meantime let’s get stuck in.

The CouchCoaster product is about £15,000 to develop now that includes some initial concept design, two or three different prototypes as the design was evolved and developed and then creating a manufacturing specification. So that is the all-in cost from initial idea through to the point of production.


Designing a Bag

Now the next example we’re going to look at is a textile based product and this is a rucksack called Riut and this was £20,000 to develop. This cost a bit more because actually it’s a medium level complexity and there are some new features and that took some development so we actually ended up going through three different rounds of prototyping with this product. This is why the total cost from initial concept through to production readiness was around 30% higher than a standard rucksack development cost.


golf trolley design

Next is the R1 Push golf trolley. Now, this is clearly a whole level of complexity again with the mechanical requirements for the folding and the brake and the development cost for this product was about £70,000. So that includes four rounds of prototyping to refine and tweak all those mechanisms to make them as good as possible. We also had some market insight work within there where we added some focus groups to make sure that actually the product was being developed was the right product for the target market now in this case the company themselves had some engineering ability in-house and did do some of the work but what we’ve given you here is the cost as though they had outsourced all of the product development to us as a business.


The final product we’re going to look at now is TimerStat. This is a small electronic product the electronics are of medium complexity. There are some inputs from the buttons, a screen and there’s some complexity in terms of its internal circuitry so it’s not the easiest electronic product but it’s not hugely complex either. The cost of developing this case works and all the electronics was £35,000. So that gives you some idea as to the cost of developing that type of product.

I said at the beginning of the article that I would talk about return on investment so let’s go back to CouchCoaster. Now, the first order that Barry received for CouchCoaster was for 7,000 units. That first order was delivered within a few months and with it Barry managed to pay back
all of the initial design cost and all the cost of manufacturing setup including his mould tools. So, beyond that everything Barry has made has been a return on his original investment and he is now turning over £850,000 a year from that product. So that gives you some idea that’s the money he is now making back out.

The Riut rucksack, she went on to run a Kickstarter campaign her first Kickstarter campaign raised £64,000 and again that covered all of the costs of the first batch shipping running the Kickstarter campaign and the design development cost of £20,000 as well so again, she was very quickly into getting a return on the money that she put in. Her subsequent Kickstarter campaign raised nearly £160,000 and then she’s gone on to run a couple more since then as well as selling off her website and she now has a whole range of products as well. So those numbers give you some kind of idea as to what she’s made back out of that initial product development.

Now, the R1 Push trolley we don’t know too much about but we do know that sales have increased by 51% since they launched that product over their original design which they were just sourcing from Chinese factory. So that’s a huge increase in sales. But the main reason to design their own product was to improve the profit margin and we manage to improve this by over 100% and finally they wanted to use it to get into other countries which they were struggling to do when they just had an off-the-shelf Chinese developed golf trolley. It’s now sold all over the world.

Finally, the Timer Stat product that is now turning over £250,000 a year and the quote from our client on that was he has “made his money back many times over on that product”.

So, as you can see product development can lead to a really good return on investment but not if you make some mistakes. Do check out this article now on the top mistake that stop innovators making a good return on investment from developing a product: Top mistakes made in developing product ideas

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Bonus 40min extended case-study video!