1. Module 4 Quality

2. Module 4 Objectives Discuss business practices within a framework of corporate social responsibility. Understand the various definitions and dimensions of “quality”. Know the strategic implications of adopting a multi-dimensional approach to quality. Understand the psychological processes that affect perceptions of (service) quality and strategies designed around each.

3. What are the effects of specific business practices? Raises Profits Raises Social Welfare Good Management Borrowed Virtue Pernicious CSR Delusional CSR Reduces Profits Reduces Social Welfare “Pick Your Permutation” framework, Clive Crook, The Economist

4. Figure 1 - Zeithaml’s Means-End Model Perceived Quality Perceived Value Extrinsic Attributes Intrinsic Attributes Objective Price Perceived Monetary Price Perceived Non-Monetary Price Perceived Sacrifice Intrinsic Attributes Purchase

5. In the past customers judged the value of a product or service based on some combination of quality and price. In the past customers judged the value of a product or service based on some combination of quality and price. Today customers have an expanded concept of value that includes convenience of purchase, after sale service, dependability and so on. Today customers have an expanded concept of value that includes convenience of purchase, after sale service, dependability and so on. According to Treacy and Wiersma…

6. Two Quality Failures 1.Implementation – failure to implement quality control principles effectively. 2.Scope – quality principles that are implemented are too narrow in scope.

7. Evolution of QUALITY Conceptually Avoidable and unavoidable costs Avoidable and unavoidable costs TQC TQC Reliability engineering Reliability engineering Zero defects Zero defects Strategic quality management Strategic quality management

8. Quality = Value? “One thing is certain, high quality means pleasing consumers, not just protecting them from annoyances.”

9. 1. PERFORMANCE Definition – A product’s primary operating characteristics Objective measures of both objective and subjective attributes. Performance is typically ranked based on individual aspects of performance

10. 2. FEATURES The “Bells and whistles” of products and services that supplement the basic functioning More features = higher quality or certain types of features = higher quality Customers often want to customize their purchases to fit their needs

11. 3. RELIABILITY Definition – The probability of a product malfunctioning or failing within a specified time period. Measures -Time to first failure -Time to first failure -Mean time between failures -Mean time between failures -Failure rate per unit time -Failure rate per unit time

12. 4. CONFORMANCE Definition – The degree to which a product’s design and operating characteristics meet established standards. Statistics are used to ensure that products fall within an established deviation Measures -Defect rates in the factory -The number of service calls from customers -The precision of finish quality

13. 5. DURABILITY Technical definition – The amount of use before the product deteriorates Economic definition – The amount of use one gets from a product before it breaks down and replacement is preferable to continued repair

14. 6. SERVICEABILITY Definition – The speed, courtesy, competence and ease of repair Downtime can be costly Customers are concerned with:  Time before service is restored  The dealings with the service personnel  The frequency of repairs that fail to correct the problem

15. 7. AESTHETICS Definition – How a product looks, feels, sounds, tastes, or smells. It is subjective and a matter of personal judgment and preferences On this dimension of quality it is impossible to please everyone. Companies often search for a niche.

16. Subjective Nature of Quality Some dimensions signal quality more than others Customers rarely have complete information about a product Images, advertising, and brand names are all perceptions of quality A good reputation is important to develop and maintain “There are no best products. All that exists in the world of marketing are perceptions in the minds of the customer or prospect. The perception is reality. Everything else is an illusion.”

17. Strategic Considerations Few products rank high on all seven dimensions. Those that do are often costly due to the superior workmanship Companies do not need to pursue all seven dimensions simultaneously Question – How does a company choose which dimensions to pursue?

18. Competing On Quality: Japanese (and others) entered US on reliability and conformance. Then added features, durability, aesthetics… Japanese (and others) entered US on reliability and conformance. Then added features, durability, aesthetics… Why reliability and conformance first? Why reliability and conformance first? Is it possible in today’s marketplace to enter an industry focusing on other dimensions of quality first? Is it possible in today’s marketplace to enter an industry focusing on other dimensions of quality first?