Why We Don't Design To Cost

POSTED BY DANNY CHOO On Mon 2021/03/15 17:26 JST
Smart Doll shoes are made with the same processes as their human counterparts - but unlike human shoes - it costs more to make the miniature versions.

There is a design/manufacturing method known as Design-To-Cost (DTC) used by most manufacturers to control the costs of creating a product. This is done so that a product can be sold at a competitive price point while retaining a profit at the same time.

To remain competitive, a manufacturer must consider what an average consumer thinks is "reasonably priced" for that genre of product and then work top-down through the production process - "top" being the consumer at the top of the food chain.

Imagine a manufacturer wants to create a product that an average consumer thinks is worth 110 dollars. The manufacturer sets the price point to be 100 dollars so that they can sell cheaper than its competitors. Let's presume a profit margin of 10% - this means that materials, manufacturing, assembly, logistics, and labor costs (there are actually many more costs) have to amount to no more than 90 dollars.

Most consumers are not concerned with the costs that go into creating a product - they do not care that the shirt they wear on their back was stitched in a factory that crumbled due to poor conditions killing 1,134 people (Rana Plaza factory.) Consumers do not care about the research and development costs that went into a product and believe that product blueprints and prototypes grow on trees. If anybody knows where this tree is, please tell me!

As hunter-gatherers on the savanna many moons ago, humans needed to expend much effort and risk their lives to scavenge for resources and hunt for food - these days, it takes a mere 10 millionth of a calorie to click a mouse button and have food/resources arrive on the doorstep.

Research shows that even the act of scrolling a browser page is too much effort (which is why UX designers want everything above the fold) so expecting a consumer to expend energy to care about any form of costs involved in product creation is like expecting a DeLorean to appear outside your house in a trail of flames.

Most manufacturers want market share meaning they need to price competitively by setting low price points. This is mostly done by reducing costs spent on the quality of materials or work(wo)manship and/or labor/vendor costs.

Design-To-Cost is the most practiced, tried and tested model that works for many manufacturers, but it doesn't quite work for Smart Doll.

Smart Doll was designed for myself from the very beginning, and to this day, I remain the primary target "consumer." This is the reason why Smart Doll has unconventional design features like a socket at the back of the torso for the support stand. Humans have a selfish gene and inherently want the best for themselves - I am no exception. This means there is no point in designing to any specific cost as I want my products to have the best quality materials and works(wo)manship.

While production costs in Japan are much higher than producing elsewhere globally, I wouldn't have it any other way. We pay vendors the highest rates in the industry to make sure we can both maintain a win x win partnership - if we squeeze our vendors to lower costs which eventually leads to them going bankrupt, we would essentially be shooting ourselves in the foot - but we are in this for the long run and need our feet to do the running ;-)

Our "Cost-To-Design" approach in spending whatever it takes to attain the level of quality that we seek has a potential "downside" - fewer customers would find our price points "reasonable" leading to less sales and market share.

But as making money is not the driving factor behind all that we do, we will continue using the Cost-To-Design approach to spend whatever it takes to create and maintain the level of quality that we seek in our products - even if it means that many folks end up going for more "reasonably priced" brands.

Whatever it takes ;-)

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