Managing Quality
Business: Edexcel GCSE, topic 2.3.6
The Importance of Quality
The two main aspects of a product or service that customers use to make decisions are price and quality. Quality is therefore important for a business that wants to be profitable and compete with rivals (competitors).
What determines quality?
- Quality is determined by lots of of factors such as:
- The quality of the materials that are used.
- The quality of the production process.
- The style of a product.
- The durability, speed, and quality of a service.
Customer expectations
- When customers buy a product they have expectations about the quality of the product and service.
- For companies that produce goods, the goods need to be of a certain quality. The product should not break after one use (unless it is a disposable item) and it should be fit for purpose.
- For companies that provide a service, a customer will have expectations about the benefits of the service and the time it will take for it to be completed.
Customer service
- For all businesses, it is important to have good quality customer service. If a company fails to deliver a good quality of customer service, customers may buy products and services from competitors instead.
Customer returns
- There are costs associated with returns:
- If a customer is unhappy with a good or service then they may be able to return it for a refund. This often means that a product is wasted and the costs of processing a return may be high.
- Businesses like Asos offer free 28 day returns for customers. This is likely to be one of Asos’ largest costs.
- In 2016, the Financial Times reported that it cost retailers £60bn each year to process customer returns.
Lost customers
- Customers who think a business does not deliver high quality products or services are less likely to purchase from that business again.
Low quality is costly - product recalls
- A product may be found to be unsafe for use or may violate legal requirements. A business may be forced to recall all products like this.
- In 2015, Volkswagen was found to have cars that exceeded the legal limit for emissions. This meant they had to recall 11 million cars worldwide at a great cost to the business.
Measuring Quality
How a company measures quality depends on the product or service. Different products will have different things that are important to measure. For a car, a company may randomly test the engines to make sure they have the correct horsepower. To measure quality, companies can use:
Customer feedback
- Getting reviews from customers is a common way that firms measure the quality of a product or service.
- For example, sites like Airbnb ask people who stay in properties listed on the website to rate them afterward.
- TripAdvisor collects reviews from customers and some restaurants now have hand-held technology to allow people to review their experience instantly.
Customer surveys
- Firms will sometimes do more detailed customer surveys, asking them about their experience with the good or service.
- Using customer surveys, businesses can find out if there are quality problems in any of their products.
Identifying Quality
To measure and identify quality, businesses can:
Check quality in production process
- Businesses can check the raw materials from the suppliers, take random samples of products that are in the middle of being produced (made) and take random samples of finished products.
- It can be expensive to do this checking, but it means that defects are spotted before they reach customers. It also may stop a business bearing the costs involved in processing returns.
Customer service and complaints
- Customer service is a common way for firms to identify problems that they have with their product.
- Customer service is beneficial because it helps businesses to correct an issue that the company has not yet identified.
- There are monetary costs and reputation costs from having dissatisfied customers.
Test yourself on Managing Quality
What determines the quality of a product or service?
Which of the following is not usually a consequence of poor quality?
Why is quality important for businesses?
What can companies use to measure quality from customers?
Airbnb ask people who stay in properties listed on the website to rate them afterwards. What is this an example of?