- THE MAGAZINE
- WEB EXCLUSIVES
My inclination as a quality professional is to develop a high-quality product without even thinking about it, but that could be a foolish approach. As I drive past discount stores with packed parking lots, I quickly realize how much consumers love low prices.
There are many quality theories that address the cost vs. quality question. Theories such as W. Edwards Deming's chain reaction and Philip Crosby's quality is free state that the more effort you put into quality, the lower your costs become. I know this is true because I've seen it first hand. Other theories, such as Genichi Taguchi's loss function theory, do a great job illustrating that there is often a relationship between cost and quality and at some point, investing more cost to improve quality does not pay back.
I'm finding Taguchi's loss function theory to be true as I develop a new line of products for kids. There simply are low-priced, lower-quality raw materials that I can put in my product, and there are higher-priced, higher-quality materials that I can put in the products. I keep running into these quality vs. cost issues and it's a pretty black-and-white issue. Should I make the product cost more by putting in better quality materials or should I appeal to the strong desire for low prices and put in lower-quality materials? How does a company decide?
Using pure business theory, the best answer to this cost vs. quality question is to test market the product, which I will do soon. Will the company generate more profits by selling low-cost, low-quality products or will the company do better with higher-cost, high-quality products? Again, that's the theory from a pure business perspective, but I didn't start this business for the sole purpose of maximizing profits. I started this business so I could have control and run things using a quality approach so I could feel good about what I was doing and producing. I wanted to create a business that passed what I call the "parking lot test."
I developed the parking lot test early in my career. It works like this: at the end of each day, as I drive out of the company parking lot, I ask myself a few standard questions-Did everyone have a safe day today, and do I feel good about my actions and what I shipped today? Fortunately, in my career there have been few days when I didn't like my answers.
In the book, The Entrepreneurial Mind, Jeffry Timmons dispels the myth that entrepreneurs are primarily motivated by money. He explains, "A sense of personal achievement and accomplishment, feeling in control of their destinies, and realizing their vision and dreams are also powerful motivators. Money is viewed as a tool and a way of keeping score." I could not agree more.
This brings me back to the cost vs. quality issues I'm facing for my new line of product. I'm hoping that my test marketing shows that people are willing to pay for a higher-quality product. I doubt that making low-cost, low-quality developmental products for children would pass the parking lot test each day. Kids don't deserve to be short-changed; they deserve high quality.
We likely will test market some lower-cost, lower-quality products to understand our consumers better, but I hope that few people buy them. I would rather make a high-quality product and drive out of the parking lot each day with a big smile on my face.
Even if I find out that high-quality, higher-cost children's products are not the optimal profit generating market, I think I'll pursue that market as long as it has the potential to support a reasonably profitable business. I would rather be happy than rich if forced to make a choice.
I've got faith that I won't need to make a choice, though. By leveraging quality theory, I'm confident that I'll have a truly great product where people see great value and are willing to pay for it. What do you think? Send me an e-mail, I would like to hear your thoughts.