Total Quality in Marketing

Frank Voehl

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351407861
• Edition: 1
• Topic: Business
• Subtopic: Operations
• Index: Business

Total Quality in Marketing integrates the two areas of marketing and quality management and demonstrates how they are mutually compatible and complementary. Its primary focus is to assist managers in applying total quality principles to the overall marketing management process-preparing for a more highly competitive marketplace. Practical guidelines and processes are offered on how quality initiatives impact planning, organization, implementation, and quality control. This unique and valuable book presents a systems approach to quality-how to operationalize in the context of both the management and marketing cycles. It demonstrates how to establish effective team-based practices as well as describes the pitfalls of quality programs that are introduced as stand-alone programs without any linkage to overall strategy.
This useful new book serves as a teaching tool and comprehensive reference source for integrating total quality. Case studies, exercises and chapter profiles also provide excellent support materials.

CHAPTER 1

WHY TOTAL QUALITY IN MARKETING

Every time we travel in a car, fly in an airplane, or have surgery in the hospital we are reminded how critical quality has become in our lives. At today’s prices, no one wants a car that falls short of perfect, an airline flight that is an hour late (or, worse, not 100 percent safe), or a surgical procedure that is not done exactly right. We are also painfully aware of how a bad education can hurt not just our kids but our country as well. Thus, with more choices among product and service providers than ever before, we as consumers can be much more selective about who we patronize. In short, quality may become the biggest competitive issue of the 1990s and beyond.

Today’s companies are experiencing vicious competition as never before. Much of this competition since the late 1970s has focused on quality. And quality competition has gone global. What started as a quality race between the United States and Japan now includes many Pacific Rim countries as well as Western European countries. Many American companies such as Motorola, Hewlett-Packard, 3M, AT&T, and Milliken have introduced various quality programs with startling success. Yet more firms need to adopt quality practices to survive the fierce global competition. A recent survey of 100 top executives of the country’s largest companies found that 79 percent equated quality with business survival, 92 percent agreed that companies have no choice but to produce quality products because of fierce competition, and 96 percent felt that quality is one of the most important criteria their customers use. In another survey, 57 percent of U.S. executives polled considered quality more important than profit or cost. A retired vice-president of corporate quality for Ford Motor Company sums it up best by saying, “What we need is an American total quality renaissance [emphasis added].”

At a 1990 conference in Tokyo, J.M. Juran, the noted American quality guru, made a startling prediction. He stated that “America is about to bounce back…and in the 1990s ‘Made-in-America’ will again become a symbol of world-class quality.” Juran continued by saying that “when 30 percent of U.S. products were failures vs. 3 percent for Japan, the difference was enormous. But at failures of 0.3 percent and 0.03 percent, it will be difficult for anyone to tell.”

It is still too early to tell whether Juran’s vision was accurate. Yet quality efforts begun in such U.S. industries as autos, semiconductors, telecommunications equipment and office equipment are approaching the quality standards set by world-class competitors in Japan and Western Europe. Until recently, many such efforts were delayed by the misguided notion that quality costs more. The common perception of the relationship between cost and quality is illustrated in Figure 1.1. This conventional wisdom suggested that there was a “trade-off” between improving quality and costs.¹

Figure 1.1 Common Business Wisdom on the Quality-Cost Relationship.

Figure 1.2 Actual Quality-Cost Relationship.

The Japanese, following the advice of Deming and Juran, demonstrated that preventing instead of fixing defects was less costly over time. Murray Weidembaum, former chairman of the President’s Council of Economic Advisors, has said, “The key to improving American quality is to do it right the first time. Finding and correcting mistakes is extremely time-consuming and expensive.” Some experts say that only 20 percent of the defects occur on the assembly line. The rest are due to design flaws or purchasing policies that stress low price over materials quality.

Motorola’s Six Sigma process changed the relationship between quality and cost. In fact, a “family” of relationships rather than a single relationship best represents the quality/cost relationship. As Figure 1.2 clearly reveals, the more quality increases, the more costs go down.² Improving quality reduces the so-called “hidden plant” costs such as people, floor space, and equipment that are used to find and fix things that should have been done right the first time.

Moreover, we learned from the Japanese that there are no easy answers when it comes to quality programs. Total quality is not attained by using a “cookbook” approach, but rather involves a cultural transformation of the entire organization.

The trends of the 1990s make a culture that fosters quality and satisfaction a matter of survival in business markets. Scarcer resources, the accelerating speed of business, persistent environmental concerns, and a shortage of skilled labor will contribute to slow and no-growth markets. Satisfying customer quality demands will represent a key competitive advantage. (For additional information, see Abstract 1.1 at the end of this chapter.)

THE COMPETITIVENESS PROBLEM

Although over 26 studies have been completed in the United States during the last decade on ways to improve our international competitiveness, a minority of firms have actually adapted the recommendations.³ U.S. products still lag behind those of Japan and Germany, according to a poll recently conducted by Bozell-Gallup Worldwide Quality (see Figure 1.3).⁴ According to John F. Welch, Jr., “Quality is our best assurance of customer allegiance, our strongest defense against foreign competition, and the only path to sustained growth and earnings.”⁵ Allen F. Jacobsen, chairman of the board and chief executive officer of 3M Company, says, “I’m convinced that the winners of the ’90s will be companies that make quality and customer service an obsession in every single market [in which] they compete.”⁶

The problem is that many U.S. firms are playing a defensive game these days by shrinking, reducing employment, downsizing, and paring back business. Many economists today believe that without a serious turnaround in competitiveness, another 10 to 15 percent devaluation in the dollar would be needed to erase the merchandise trade deficit.

QUALITY PAYS

In examining the effect of quality on cost, the relationship is compelling, especially when one consideres product failure rates. Specifically, reducing field failures means lower warranty costs and reducing factory defects cuts expenditures on rework and scrap. In a study of U.S. and Japanese air conditioner manufacturers, David Garvin, an assistant professor at the Harvard Business School, found that the failure rates of products from the highest quality producers were between 500 and 1000 times less than those of products from the lowest.⁷

Quality also pays in the form of customer retention. Customer defections represent a significant cost to companies. In fact, according to a 1985 TARP study, it is five times more expensive to get a new customer than it is to keep an existing one.⁸ Moreover, it is estimated that 65 percent of all business comes from existing customers.

Research also shows a relationship between quality, market share, and return on investment (ROI). The exhaustive database from the Profit Impact of Market Strategy (PIMS) unequivocally documents these relationships. Higher quality yields a higher ROI for any given market share. Among businesses with less than 12 percent of the market, those with inferior quality averaged a ROI of 4.5 percent, those with average product quality averaged a ROI of 10.4 percent, and those with superior product quality averaged a ROI of 17.4 percent. The positive relationship between relative perceived quality and return on sales or ROI is graphically illustrated in Figure 1.4.⁹ (For additional information, see Abstract 1.2 at the end of this chapter.)

Figure 1.3 International Competitiveness: Excellent/Very Good Respondent Rating.

Figure 1.4 Quality/Profit Relationship.

WHAT IS QUALITY?

Quality is one of those elusive concepts which is easy to visualize but difficult to define. Quality has many definitions, ranging from specific to general, and varies by functional area. For example, Philip Kotler, a leading marketing guru, defines quality as “the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.”¹⁰ To expand on this definition, quality must provide goods and services that completely satisfy the needs of both internal and external customers. In other words, quality serves as a “bridge” between the producer of a good or service and its customer.

Quality gurus such as Deming viewed quality as reducing variation. Deming’s quality philosophy can be summarized in his Fourteen Points, which include such topics as “creating a constancy of purpose” and “ending inspections as a means of achieving quality.” (See profile entitled “The Deming Management Method” at the end of Chapter 4.)

Juran, on the other hand, defined quality as “fitness for use,” where products possess customer-desired product features and are free of deficiencies. The Juran philosophy of quality centers around three basic quality processes: quality planning, quality improvement, and quality control. In Juran on Quality by Design, he makes the distinction between “Big Q” and “Little Q” in defining quality, as shown in Table 1.1. Until recently, most managers associated quality with manufactured goods and production. However, during the 1980s there emerged a broader definition of quality to include services as well as goods. This broadened definition, represented by the content of “Little Q,” includes all processes within a firm, not just production. The customers described under “Little Q” are all who are impacted in helping to create value-added exchanges, both external and internal. Finally, “Big Q” quality is based on the Juran Universal Trilogy of quality planning, quality cont...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Series Preface
• Authors’ Preface
• Series Editor
• Authors
• 1 Why Total Quality in Marketing
• 2 Overview of Total Quality
• 3 House of Quality
• 4 Management System
• 5 Total Quality in Marketing Requires Vision
• 6 Strategy: Using TQM to Compete Globally
• 7 Working in Teams
• 8 Implementing Total Quality in Marketing
• 9 Adopting Quality Standards
• Glossary
• Index