Over the past 15 years, company after company has learned that quality must be designed into products before they are manufactured—that it is expensive, if not misguided, to attempt to inspect in quality after the product has left the production line. Today the most competitive companies are applying the same logic to determining the price of new products. Before a company launches a product (or family of products), senior managers determine its ideal selling price, establish the feasibility of meeting that price, and then control costs to ensure that the price is met. They are using a management process known as target costing.
A version of this article appeared in the January–February 1996 issue of Harvard Business Review.