24. The Law of Quality

The Laws of Business Success

Under the Laws of Business

The customer demands the very highest quality for the very lowest price.

This seems simple except that many companies try to violate this law on their way to the bankruptcy courts. The customer is very smart. The customer will always act to satisfy the greatest possible number of his or her needs in making any particular buying decision. Only companies that cater to the customer’s relentless insistence on ever-higher levels of quality at ever-lower prices are successful in the marketplace.

In 1989, both the Toyota Lexus and the Nissan Infiniti were introduced into the U.S. market. Both companies advertised these cars as the cars of the future, with the luxury features of the more expensive European cars but at prices that were $10,000, $20,000, or $30,000 cheaper. Both companies committed themselves to offering the finest quality automobiles in their class in America.

And they succeeded. From 1991 onward, the J. D. Power Survey of Customer Satisfaction has consistently rated Lexus and Infiniti among the best cars, in terms of vehicle quality and after-sales service, among all 557 models of automobiles sold in the United States. Repeatedly, J. D. Power rankings have the Lexus and the Infiniti tied for first place in quality amongst all cars sold in the country.

As a result of these quality rankings, the sales of these cars consistently amount to hundreds of millions of dollars each year.

The first corollary of the Law of Quality is
Quality is what the customer says it is and is willing to pay for.

Only the customer can define quality. Sometimes even the customer cannot define it clearly, but the customer will vote for quality by the way she spends her dollars. And more than 80 percent of buying decisions today are either made or strongly influenced by women.

Philip Crosby, in his book Quality without Tears, wrote, "Quality is fairly easy to define. The quality of a product can be measured by what percentage of the time it does what it is sold to do and continues to do it."

You can measure the quality of a watch by how long it continues to tell perfect time. If it does so 100 percent of the time without stopping, it would have a 100 percent quality rating. If you buy a car, the quality rating of that car is how long it continues to give you trouble-free service, without needing repairs, aside from those specified at the time of purchase. If the car runs trouble-free for 100 percent of the time, it has a 100 percent quality rating.

Unfortunately, it is not uncommon for fully 25 percent of products manufactured today to have to be reworked and rebuilt right at the factory because of quality defects. Philip Crosby’s book title Quality Is Free is based on his conclusion that manufacturing a high-quality item, without defects, actually saves money and boosts profits, both in the short term and in the long term. In the short term, quality creates customers, and in the long term, a rep-
utation for quality keeps customers.

The second corollary of the Law of Quality is
Quality includes both the product or service and the way that it is sold, delivered, and maintained.

The customer’s definition of quality includes all of the activities associated with the purchase, ownership, and use of the item.

Prices in a quality restaurant are not based only on the fact that good food is served on a plate. A first-class restaurant, one that commands above-average prices and can earn above-average profits, also serves the food in an atmosphere of comfort and enjoyment that people are willing to pay more for. Can you imagine a waiter in a nice restaurant slapping the plate down on the table and just walking away?

Even a simple product can be sold and served with cheerfulness and courtesy, thereby increasing its perceived value. The total experience the customer enjoys is all part of the impression of
quality.

The third corollary of the Law of Quality is
Companies are profitable in direct proportion to their quality ranking, as customers perceive it.

What this means is that if a research firm was to go into your marketplace and conduct an honest, objective survey amongst the customers for what you sell, it could develop a quality ranking for your company in terms of how it compares to your competitors.

For example, suppose ten companies are offering the same product in the same market area. A survey of customers would reveal which of these companies is perceived to be the very best company in that industry in that market. The survey would also be able to determine which company would rank as number two, number three, and so on. The companies that were perceived to be the highest-quality companies in that market would also turn out to be the most profitable companies in that market.

A major reason that companies that are seen as high-quality companies are more profitable is because of the deep need that customers have for security or safety in their purchase decisions. Whenever people have to make a choice between a higher priced product and a lower priced product, if they can possibly afford it, they will choose the higher priced product because a higher price is associated with better quality. Better quality is associated in the customers’ minds with greater safety and predictability. The perception of better quality reduces the feeling of uncertainty or risk in making the buying decision. It makes it easier to buy.

That’s why it is said, "If you can afford to buy quality, you can’t afford not to." There is almost always a direct relationship between the amount that you pay and the quality of the product or service that you receive. You very seldom get good quality at a low price. You never get something for nothing. You always get what you pay for. In a competitive society you can safely assume that paying a higher price will assure you a higher level of quality and a lower
level of risk.

Remember what Thomas Ruskin said: "The bitterness of poor quality is remembered long after the pleasure of low price has been forgotten."

Wherever your business stands in the quality rankings, and almost everyone knows intuitively where his or her business ranks, even without a survey, you must commit yourself and your company to the number one position. You must commit to becoming the very best in your chosen field.

Aim for quality leadership in your product or service. The commitment to quality will not only animate and excite everyone in the organization, but it will also be reflected in the profits that flow to your bottom line. The companies with the highest quality are the companies that earn the highest profits. They represent the greatest opportunities for the future.

How you can apply this law immediately:

1. Determine your quality ranking in your industry. Use objective polling if you can. Use your intuition if you must. But be absolutely honest with yourself. Ask your staff and colleagues where they would rank your company on a scale from one to ten among your competitors, as well.

2. Determine exactly how your customers define quality. Find out what level of quality they expect from you. Critically examine your products and services and how you sell and support them. Ask your best customers what they most value about your business and how you could improve in that area.

3. Select one critical area to focus on for improvement. Pick an area or activity that has a direct bearing on customer satisfaction. Resolve to be the best in this one area. Tell everyone in your company about this commitment and then measure yourself regularly to see how well you are progressing.

Source: Brian Tracy, The 100 Absolutely Unbreakable Laws of Business Success, Berrett-Koehler Publishers, Inc, (San Francisco, 2000).