Put the money where it counts

When developing a product, we look at the COGS (Cost of Goods Sold) to discover if our costs are on track and why the product costs what it does.

Sure, it’s easy to look at the highest cost items on the list and declare that we have to get that cost down, but think again. Are you falling prey to the race to the bottom trap? Cost reducing to compete on price? Emotional buy-in from your manager? Take the cost out of the wrong components and are you now eliminating your key benefits over competing products?

Value does not mean low price. Value means the product offers something other products do not, or perhaps the product does something others do as well, but your product does it better.

It takes guts and marketing acumen to take the right road in order to reach the right customers, your target group that will appreciate the fact that you didn’t strip out the most important product features and benefits.

This is not to say that cost is not important, nothing could be further than the truth, but taking the position that the footbed in the shoe is too expensive, for example, so we have to get a cheaper less comfortable footbed, is counter-productive if the shoe brand is a comfort shoe brand competing on comfort in a market with similarly styled and priced shoes.

Of course, don’t overpay for the right footbed, and make sure that footbed really is the right one so you’re putting your money where it counts. Why not piece the upper, or use a less expensive breathable lining, or choose from any number of other opportunities to lower your cost instead?

If the item improves the product in a way that is meaningful to the brand and to the customer, then the item is an Asset. If not, it’s a cost that’s ready to be reduced. Be thoughtful about where the money is going and put it where it counts.