During conceptual design of your product, cost engineering is essential. Once main obstacle that new ventures face is the cost of your product versus desired selling price. Volume can have a huge impact on this. For the gBook e-book reader, you’ll note the cost reduction in total cost from low volume (1000 units) to higher volume (100,000 units) – particularly in the LCD/controller and main processor. This reduces even further when considering volumes of 500,000 to 1M.
However, the entrepreneur should be cautious when selecting features and selling price. Basing selling price on extremely high volume can be tempting – but you may be in a situation of negative margin from introduction until (if ever) you reach the volume estimate. That means negative cash-flow from the onset – which may kill the company before you ever break-even. So, perform your bottom-up and top-down cost estimates – if there is a huge disconnect you may need to cut back on features/capability and/or adjust target market/demographic (higher selling price) to make the economics work. These iterations and cost engineering are essential at the beginning stages of product design.
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