Product development costs: the most expensive choices are made at the beginning

Development costs tell only part of the story. The true cost of a product is not determined solely by the number of engineering hours invested in the design, but more importantly by the decisions made throughout the development process. A material that is difficult to process, a component that proves unnecessarily complex, or an enclosure that requires excessive assembly time can continue to impact the product’s cost for years to come.

That is why it is often said that a large share of a product’s final cost is determined during the design phase. Not because the product is already being manufactured at that stage, but because the most important decisions are made then. Companies that focus solely on development costs risk overlooking the total cost of the product over its entire lifecycle.

What does product development cost on average?

There is no simple answer to the question of how much product development costs. The differences between projects are simply too significant. A relatively simple plastic enclosure requires a very different investment than a medical device, a consumer product with electronics, or a complex product that combines mechanics, software and electronics.

General price ranges are frequently mentioned online. Depending on the complexity of the project, costs can range from a few thousand euros for a simple design assignment to well over one hundred thousand euros for a complete product development project, including engineering, prototyping, validation and production preparation. While these figures can provide a general indication of the required investment, they reveal little about the actual cost of successfully bringing a product into production.

Two projects with the same development budget can deliver completely different outcomes. The difference lies not only in the amount of engineering involved, but above all in the quality of the decisions made throughout the development process. A well considered design may require more effort during development, but can ultimately lead to lower production costs, fewer quality issues and a faster path to scaling up production.

Why general product development cost estimates tell only part of the story

Many organisations begin their search by asking how much product development costs. While this is a logical starting point, it is also a question that cannot be answered without context. The final cost is influenced by dozens of factors, including product complexity, production volumes, material selection, tolerances, certification requirements, assembly methods, testing procedures and the manufacturing process ultimately used to produce the product.

A product manufactured in small production runs requires different design decisions than a product produced in hundreds of thousands of units each year. In the first case, flexibility may be more important than maximum automation. In the second, even a small optimisation in material usage, cycle time or assembly can have a significant financial impact over the entire lifecycle of the product.

A low product development quote is therefore not automatically the most cost effective option. When critical technical challenges are addressed later in the development process, the costs shift to a stage where changes are significantly more expensive. A design change during the concept phase is relatively straightforward. The same change after tooling has been ordered, prototypes have been validated or manufacturing partners have been selected often has far greater consequences.

The biggest cost is not the design, but uncertainty

Many companies try to keep development costs as low as possible. This is understandable, especially when budgets are under pressure or when it is still uncertain whether a product will be commercially successful. In practice, however, the biggest cost in product development is often not the engineering itself, but the uncertainty that remains unresolved for too long during the development process.

Uncertainty about the manufacturability of a design, material behaviour, tolerances, assembly or real world performance often means that problems only become apparent at a later stage. For example, during the pilot phase, the first production run or even after the product has been launched. By that point, design changes are significantly more expensive than if the same decisions had been evaluated and validated earlier in the development process.

That is why experienced product development teams invest considerable effort in the early stages of a project. Not to make the development process unnecessarily longer, but to identify and address risks as early as possible. An additional iteration during the engineering phase can prevent far more costly changes later in the process. The same applies to a prototype that not only demonstrates what a product looks like, but also verifies whether it performs as intended from a technical, functional and manufacturing perspective.

What do product development costs consist of?

Although every project is different, product development typically consists of a number of recurring stages. The first phase focuses on defining the product requirements. What function should the product fulfil? Who will use it? Under what conditions must it perform? What technical, commercial and regulatory requirements need to be taken into account?

The next stage is concept development. During this phase, different solution directions are explored and evaluated. Not every concept that is technically feasible is also suitable for production. As a result, many of the decisions made at this stage will later determine material selection, assembly methods, production costs and scalability.

The design is then developed in greater technical detail. Materials are selected, tolerances are defined, components are engineered and calculations are performed to validate the product’s performance. It is often during this stage that it becomes clear whether a product can be manufactured efficiently or whether the design contains unnecessary complexity.

The engineering phase is typically followed by prototyping. This is where it becomes clear whether the design performs as expected in practice. Functional testing almost always provides new insights. Sometimes these lead to minor refinements, while in other cases they require more fundamental design decisions to be reconsidered. This is followed by validation, tooling preparation, production process development, quality assurance and ultimately the transition to series production.

Product development costs are therefore not determined by a single phase, but by the way all of these stages work together. Decisions made early in the process almost always influence the costs and risks of every stage that follows.

Why starting with the lowest cost can become more expensive later

A low development cost may seem attractive, especially when multiple suppliers are quoting for the same product idea. In practice, however, choosing the lowest cost approach often results in higher overall costs. This is particularly true when insufficient attention is given during the early stages to manufacturability, material selection, tolerances and production preparation.

For example, a design that has not been optimised for manufacturing may contain more components than necessary. This results in longer assembly times, a higher risk of errors and increased production costs per unit. A design may also perform well technically while proving difficult to reproduce consistently in series production. In that case, the real costs only become apparent when the product moves into production.

Material selection is another example. A lower cost material may seem attractive at first, but it can result in longer cycle times, higher scrap rates, assembly limitations or insufficient real world performance. The same applies to tolerances. Specifying unnecessarily tight tolerances increases manufacturing costs, even though they are not always functionally required.

Each individual decision may seem small, but together they determine a product’s cost, quality and reliability for years to come. That is why more and more organisations are looking beyond development costs alone and focusing on the total cost of ownership throughout the product’s entire lifecycle.

How DFM, material selection and prototyping reduce costs

Design for Manufacturing (DFM) is a key element of modern product development. The principle is simple: a product should not only perform its intended function, but also be designed for efficient manufacturing. This requires design decisions that take production, assembly, material behaviour and scalability into account from the very beginning.

DFM helps reduce unnecessary complexity. This can be achieved by reducing the number of components, designing smarter fastening methods, specifying more realistic tolerances or better aligning the design with the chosen manufacturing process. In plastics product development, this may involve considering wall thicknesses, draft angles, rib structures and material flow at an early stage of the design process.

Material selection also has a major impact on the total cost of a product. The right material is not necessarily the least expensive per kilogram, but the one that offers the best technical, manufacturing and economic fit for the application. Factors such as strength, stiffness, thermal performance, wear resistance, processability, sustainability and availability all play an important role in that decision.

Prototyping makes it possible to validate assumptions at an early stage. A good prototype is much more than a visual representation. It demonstrates whether a product functions as intended, how components interact, how users engage with it and where technical or manufacturing risks may arise. Because prototypes can be adapted relatively quickly, they are an effective way to prevent much higher costs later in the development process.

The value of prototyping extends far beyond the prototype itself. Its true value lies in the insights gained before investments are made in tooling, certification or production capacity.

When optimising existing products is more cost effective than developing new ones

Innovation does not always mean that a completely new product has to be developed. Many existing products were designed years ago based on the knowledge, materials, and production techniques available at that time. Since then, production processes have improved, new materials have become available, and requirements regarding sustainability, circularity, and cost efficiency have changed.

Therefore, it can be interesting to take a fresh look at an existing product. Can the number of parts be reduced? Can assembly be made simpler? Can a different material choice lower the cost price? Can the product be adapted for a more efficient production process? Or are there design choices that were once logical but are no longer the best solution today?

In many cases, optimizing an existing product yields more than starting completely from scratch. The foundation is already there, practical experience is available, and the bottlenecks are often known. This makes it possible to make more targeted improvements. Especially for products that are already produced in larger volumes, a small improvement in material use, assembly time, or failure rate can have a big impact.

The question is therefore not only what it costs to develop a new product. At least as relevant is the question of how much value is still hidden in the product that is already being produced today.

How PEZY keeps costs manageable from concept to Pilot Series

At PEZY, we view product development as a process in which development costs, production costs, and Total Cost of Ownership are interconnected. Naturally, development costs must remain manageable. But just as important is the return on that investment over the years a product is manufactured, assembled, used, and maintained.

For this reason, engineering, Design for Manufacturing, material selection, prototyping, and production preparation are not approached as separate steps, but as components of a single, cohesive development process. By considering manufacturability, material behavior, and production volumes at an early stage, design choices can be better substantiated before they become costly later in the process.

The combination of product development, prototyping, tooling, and pilot production makes it possible to validate assumptions early on and make adjustments where necessary. This reduces technical risks, prevents unnecessary iterations, and ensures that products not only function well but can also be manufactured efficiently.

Ultimately, product development is not about achieving the lowest development costs. It is about making the right choices at the right time—choices that make a product easier to manufacture, more reliable, and more cost-efficient.

And those choices are usually made at the beginning.