I purchased a couple of exceptional examples of product design recently. The first was an ‘Uppababy Vista’ pushchair and carrycot and the second was a ‘Clicgear 3.5+’ golf trolley. They are similar in some ways – both are functional and attractive and both fold down to impossibly small bundles. The big difference was the price with the pushchair and carrycot costing five times the cost of the golf trolley. Obviously there is more to the pushchair but not five times more. I mean with a bit of modification you could almost push a baby around in the golf trolley. However the market knows best and both are market leaders.
It got me thinking again about what ‘stuff’ costs. ‘Stuff’ starts as a raw material, say clay in the case of a brick or iron ore in the case of a steel beam, and then all along the way costs are added. These include materials, labour, management, marketing and selling, operating costs, borrowing, research and development, return on capital, setting aside for future expansion and replacement etc. etc. A degree in economics is needed to make sense of the likes of fixed cost, variable cost, marginal cost, opportunity cost. The more you think about it the more complicated it becomes as it often depends on the route to market which is why in most cases it is left to the market to decide.
I am regularly asked what my designs will cost to build and I can, and do, provide an estimate on a m2 basis. A more detailed estimate can be provided by a quantity surveyor on an elemental basis or a contractor can give a ‘budget’ cost. If cost is looking like it could be a problem we can look at things like the size and complexity of the design, the method of construction, the specification level and the procurement approach. Do we use named products or generic equivalents or a performance specification? When all is said and done, competitive tendering remains the best route to determining price as the only price that ultimately matters is the market price which is the price at which a reputable contractor is prepared to sign a contract for the work.