Cost targets and time pressure during new product development

Abstract

Investigates the impact of using cost targets during new product development (NPD), in terms of design quality, product cost and development time. An NPD environment with cost targets is compared with an NPD environment where design engineers receive no specific cost targets, but are expected to “minimize” the cost level of future products. The impact of cost targets versus no‐cost targets is investigated in combination with high/low time pressure. The 2 * 2 factorial design was tested in a laboratory experiment that simulated a real design process, with customers asking for the highest design quality. The results demonstrate that cost targets during NPD lead to lower‐cost new products, while not impairing design quality or development time. However, under high time pressure, cost targets lead design engineers to work longer on the design, without a corresponding cost decrease.