Quality Management
A. BLANTON GODFREY

Newgdfry

The Market Side of Quality

Quality has many dimensions, even for the simplest of products or services.

Many organizations have made considerable progress in reducing mistakes, rework, in-process failures and field failures. The "freedom from deficiencies" side of quality is no longer a major challenge for companies. Some now think that the quality problem is solved, and they can relax. Others have found that as soon as they achieve one level of quality, some competitor matches that level and introduces new products and services that perform even better. Many find that their customers expand the definition of quality to include exceptional levels of delivery performance, documentation, packaging and the like.

 Other companies are finding that even though their products and services appear near-perfect in their own eyes, customers are making other choices. Companies get the sinking feeling that defect-free quality is not enough. They have begun to understand that quality has another side--the market side. This side of quality is quite complex and little understood by most organizations.

The first problem addressed must be the complex meaning of quality on the market side. Quality has many dimensions, even for the simplest of products or services. Which dimensions are important to which customers? What is the cost to provide this dimension vs. the value to the intended customers? How do we measure the quality level of this dimension? What are the necessary trade-offs?

There are numerous examples of the mistakes organizations have made in defining the correct dimensions of quality in the marketplace. Years ago Frank Gryna, University of Tampa professor and author, presented a classic case study. He had worked with a leading appliance manufacturer that was trying to understand the drop in its market share for washing machines. After much careful work, company management defined the six critical dimensions of washing machine quality. Honest comparisons of the company's performance in these dimensions with its three top competitors led to the disconcerting realization that it ranked last in each dimension. The conclusion was clear: Redesign the washing machine to improve performance in each dimension, or accept continuing declines in market share.

In another classic study, Irwin Gross of DuPont tried to understand how to achieve premium prices in "commodity chemical products." Gross found that the price premium was equal to the value times the difference in perceived performance. For this chemical product, the dimensions of quality included chemical purity, innovation, the total support system, service, delivery performance and training support. Achieving a superior position in each dimension was worth a price premium several times the cost of achieving the superior position.

A second difficulty in the market side of quality is the difference between customers. We rarely can design a product that all customers perceive as the best. Different customers give different weight to the dimensions. While one set of customers wants to know the laptop's speed, another set asks about screen size and resolution, while a third set wonders about battery life and total carrying weight. We can manage market share only by understanding the different values customers place on the different dimensions of quality and their willingness to pay for each dimension. We also must discover how many customers there are in each group. If we know that 10 percent of the laptop customers will buy the lightest laptop possible if other features compare reasonably, we then know how to capture that part of the market.

The third and perhaps most difficult part of the market side of quality is what Noriaki Kano, a University of Tokyo management professor and quality management authority, has called "attractive quality vs. required quality." Customers have become very demanding and expect their requirements (stated or assumed) to be met. Any failure to provide the dimensions of required quality results in customer dissatisfaction and lost sales. But just providing the required quality provides no differentiation or advantage in the marketplace. To create a winning market position, we must provide "attractive quality," something more than the customer expects or a performance level of an existing dimension beyond what others can offer.

By adding new features we can often create a distinct advantage over the competition. It is easy to see that even a modest score on one of these new dimensions far exceeds the zero our competitors receive.

The fourth difficulty in managing the market side of quality is that we deal frequently with perceptions as much as reality. We face the challenge of marketing as well as design and production. It is not enough to be best in the important dimensions; the customers must know that we are best. We need to be able to convey to the customers the reasons we have the best offerings.

It all adds up to a complex and challenging part of quality management. Customer needs and wants are constantly changing, competitors are redefining their products and adding new dimensions, and what today is an attractive new dimension, tomorrow is the expectation.

About the author

A. Blanton Godfrey is chairman and CEO of Juran Institute Inc.

1999 Juran Institute. For permission to reprint, fax Godfrey at (203) 834-9891 or e-mail agodfrey@qualitydigest.com .

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