Have a Product Idea? Know These Costs Involved in Product Development

There are dozens of issues in the digital world and your product idea might just be able to solve a majority of them. But building the product from just an idea can be challenging, especially for non-technical entrepreneurs or CEOs. And even if you have found out how you want to get started with your product development, knowing about the costs is still something that drives many product owners into confusion.

There are several costs involved when you are planning to build your product. While some of the costs are very obvious, there are some costs that many of the startups, enterprises, and even the digital agencies seem to miss out on. Your digital product requires you to have a state of the art IT infrastructure, a team of expert developers, designers, testers, etc. You also need a budget for your prototype, marketing the product, and much more.

So, if you also have a product idea, here are the costs that you must certainly know about.

The Cost Of IT

The first and most important cost when you are launching your product idea is the cost of technology. In order to realize your product dream, you are required to bring in new IT equipment and create an IT infrastructure. Without IT support in place, you might not be able to give your product the advancements it needs. In fact, a Gartner study reveals that firms usually spend around $700 per user if you calculate all the IT expenses. You require the latest technologies for the development of the product and more than that, you also need the perfect IT infrastructure where it can be tested and revised with iterations.

However, just buying the IT systems does not solve the issue. That is, in fact, just 20% of the IT cost. The main cost comes when you are required to maintain and provide support for these systems. The technical support, labor, and maintenance cost take up around 80% of your total technology or IT cost.

The Cost Of Developer/Development Team

Having a product idea and not having the right team to make it into a reality is as good as not having an idea at all. You need to bring together a team of developers who will be working on your idea and bringing together the codes from different programming languages.

Finding the perfect product developer out of the ever-booming talent pool is not an easy task. You need to see how complex your product would be. Say, if you are building an app that would cater to a maximum of 20-30 users in a day with just the basic functionalities, a junior developer might work. The cost could be around $70,400 per year.

But if your product is a bit complex, which needs to serve a large populace while also having several features and accesses, you might need the expertise of a senior developer. Such software engineers with experience might ask over $122k per year as salary.

Apart from the software developers or mobile application developers, you might also need to have UI/UX designers, graphic designers, front-end developers, back-end developers, etc., which would add to your cost. Apart from that, you might also need developers from some specific framework or language to integrate new features in it.

The Cost Of Product Prototype

The next cost in the product development process is the cost of the product prototype. Depending on your product idea, your prototype or Minimum Viable Product could be as simple as a combination of some things around your space or something that might require some time. When you are in the technology field and your product is more like a software or an application, the prototype could be an incomplete version of the program. It would be a working model but not have all the features or finishes that your final product would have. Developing a successful MVP is essential for you to get a clear idea of how your product would work.

This is an additional cost in your development as many times, the end product is nothing like the prototype and all the efforts and money spent on creating the prototype turns out to be not that effective.

There will be many retakes in this prototyping phase itself. There would be many prototypes that would look like they are a perfect fit for your idea but not work with your target users. So, in all, you might have to work on different prototypes before getting started.

Depending on the complexity of your product, a minimum of three months’ time might be needed to develop a prototype. So, if you have hired a developer for around $20/hour and it takes around three months, i.e., 480 hours of work. So, in total, even a prototype might cost you around $9,600.

The Cost Of Testing The Product

Once you are satisfied with the product prototype, the next step is to get started with the testing. For this, you will have to bring together a team of software testers and quality analysts and even have to find a particular segment of your users who will test your prototype at the ground level.

This would add to your product building cost.

Software or application testing usually comprises around 15-20% of the development cost. There would be the testing of systems, acceptance, programs, codes, etc. Apart from that, you also have the cost of getting reviews, resource testing, cost of terminals, cost of rewriting programs (if required), re-testing, and many other things.

The Cost Of Project Management

Poor communication and insufficient resource planning are the two main causes of project failure. A project manager can be of help in this department. When you are getting a digital product built, there is going to be a full team that would be working together to get the product in the market. Managing collaboration, delegating tasks, ensuring quality compliances, and even ensuring that the deadlines are met could be a challenge for any individuals who lack the expertise in team management. A project manager would ensure that the project goes as planned.

The cost of hiring a project manager would add to your development cost. Product owners are always advised to hire project managers and tell all their requirements to them. The project managers, in turn, would manage everything for speedy, streamlined, and successful development of the product.

The monthly salary of a product/project manager could range anywhere from $65,000 to $110,000 per year.

The Cost Of Security

Cybercrime, hacking, and phishing have become serious threats to our privacy. Hence, the security and privacy of any product should always be at the top of any product owner’s mind. If your digital product is supposed to have even a single user, security is an imperative issue.

For example, if you have created a digital product for finances calculation or management, it could go well if it just lets the visitors read some data while only storing the name, email id, etc. But if the digital product collects other important and sensitive data of the users like their banking details, or their income, or any other similar information, you might have to take the security level up by several notches.

There would be several security certificates you might need, use the emerging tech like blockchain to encrypt the data, and may even have to invest in innovative cybersecurity schemes. These could be enabling features like fingerprint lock, behavior analysis, one-time passwords, end-to-end encryption, and much more. Needless to say, all of this would come with a hefty price tag.

The Cost Of Marketing

One of the costs that most of the product owners tend to overlook is the cost of marketing. Just having a great digital product is not going to help you. You need to hire a digital marketing company or even hire digital marketing experts in your own team to market the product right. There is email marketing, paid marketing like PPC (pay-per-click), search engine optimization, social media marketing, website optimization, and whatnot. The average cost per action (CPA) is $49 for paid search and $75 for display ads, as per a source.

You need to ensure that your digital product reaches out to our target audiences, no matter what channel or approach you adopt. You might also need to attend different conferences, exhibitions, trade shows, etc. to showcase your digital product. This would come with the price tag of traveling, setting up your booths, and much more.

How To Reduce These Costs?

Well, a simple solution for that is to outsource your product development. You can choose different models like hiring remote workers/ dedicated teams for building your product or even hire them for end-to-end product development.

Hiring Remote Developer/Teams: In this model, you can simply hire a remote developer for developing the app or a full team to ensure all the aspects of your product are developed by a team sitting together in a remote location. You would save on several costs like the infrastructure cost, project management cost, separate testing cost, etc. You can hire a full team that would be under the supervision of a project manager and would be taking care of your full product development as per your requirements. You will only need to pay the salary of the remote team or developer and get your product built.

Getting End-To-End Development: The next model is delegating the complete development of your product to any digital agency. Right from the ideation stage of the product to the creation of the prototype and then the launching stage, and even scaling the product, these companies take care of everything.

So, outsourcing your product development can certainly be a great way to reduce your development cost and even cut down on most of the extra costs.