Page 35 - The Handbook for Quality Management a Complete Guide to Operational Excellence

22 B u s i n e s s - I n t e g r a t e d Q u a l i t y S y s t e m s T h e Q u a l i t y F u n c t i o n 23

services. Customer concerns must be balanced with the concerns of inves-
tors and employees. The senior leadership, consisting of top management
and the board of directors, must weigh all of these concerns and arrive at a
resource allocation plan that meets the needs of all stakeholders in the orga-
nization. The unifying principle for all stakeholders is the organization’s
purpose.
There are two basic ways to become (or remain) competitive: achieve
superior perceived quality by developing a set of product specifications
and service standards that more closely meet customer needs than com-
petitors; and achieve superi or conformance quality by being more effec-
tive than your competitors in con forming to the appropriate product
specifications and service standards. These are not mutually exclusive;
excellent companies do both simultaneously.
Research findings indicate that achieving superior perceived quality
(that is, as per ceived by customers), provides three options to a business—
all of which are favorable to its competitiveness (Buzzell and Gale, 1987):

• You can charge a higher price for your superior quality and thus
increase profitability.
• You can charge a higher price and invest the premium in R&D,
thus ensuring higher perceived quality and greater market share
in the future.
• You can charge the same price as your competitor for your superior
product, building market share. Increased market share, in turn,
means volume growth and rising capacity utilization (or capacity
expansion), allowing you to lower costs (or increase profit).

Research also suggests additional benefits to companies that provide
superior perceived quality, including higher customer loyalty; more repeat
purchases; and lower marketing costs. Achieving superior conformance
quality provides two key benefits:

• Lower cost of quality than competitors, which translates to lower
over all cost.
• Since conformance quality is a factor in achieving perceived
quality, it leads to the perceived quality benefits listed above.

Customer “satisfaction” does not simply happen; it is an effect. Qual-
ity is one important cause of the customer satisfaction effect, along with
price, convenience, service, and a host of other variables. Quality and cus-
tomer satisfaction are not synonyms; the former causes the latter. Gener-
ally businesses do not seek customer satisfaction as an end in itself. The
presumption is that increased customer satisfaction will lead to higher
revenues and higher profits, at least in the long term. This presumption
has been validated by numerous studies, including the Profit Impact of

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