Why Quality Impacts Your Bottom Line

Posted: 02 Aug 2012 05:30 AM PDT

Recently I was engaged in two conversations that dealt with the importance of quality. The first was in a thread on my small business forum and the second was in the comments on an older post here.

Two things struck me about the conversations.

Quality is a subjective word that gets thrown about without much definition.
My comments in the two discussions might appear at first to take different sides, though I think they’re consistent.

The two conversations made me think a little more about quality in general and this post is the result of that thinking.

What is Quality?

Let’s start with a definition

quality (noun) — The standard of something as measured against other things of a similar kind; the degree of excellence of something.

There are 2 important points in the above definition.

Quality is measured on a sliding scale
The measurement of quality is in comparison to something similar

Sometimes there’s an objective standard to measure against, such as the karat purity of a bar of gold. Most of the time we talk about quality, that objective standard doesn’t exist. It makes it hard to define things like quality content or a quality design in absolute terms.

Judging quality is often subjective because we bring our own experience to the judgement. If I’m an absolute beginner to developing with Ruby on Rails and read an article about advanced rails topics, it won’t be a quality piece of content to me. You being an advanced user might consider it one of the greatest articles ever written.

To give something more quality means to move it higher on the scale. It means making something better than it was. It’ll still be a subjective judgement, but hopefully one we can be more reasonably sure of.

Quality as a Business Goal

I think you should always strive to do your best no matter what you do. If not, what’s the point? I think striving to be your best is one of the higher purposes of being a human being. It’s art. It’s craftsmanship. It’s taking pride in what you do than for no other reason than to be the best you can.

That said what is the role of quality in business?

When people buy from you they have expectations about the quality they’ll get in return. If they buy a product, they expect it to work. If they hire you to perform a service, they expect you to perform that service.

Different people will likely have different expectations about what they’ll receive, however all will consider whether or not the value they get back is equal or greater than the price they paid to get it. Quality will impact what they perceive as value and before someone will buy they have to hold the perception that what they’ll get back is more valuable than what it will cost them to get it.

You have to at least meet the customer’s expectation of quality for them to believe the value they received was worth the price and you have to convince them the same will be true for future purchases.

The Benefits of Improving Quality

No matter where on the quality scale your product or service sits, it probably meets someone’s minimum expectation. However, the higher on the scale, the more minimum expectations it will meet.

Off the top of my head, improving quality:

Helps your product or service appeal to more people
Leads to more recommendations and word of mouth
Delights customers and clients
Helps your business stand out
Builds a stronger brand

All other things being equal no one is likely to stop buying from you because you give them more quality than they expected. That’s why you under promise and over deliver. You set expectations about how much quality to expect and then you deliver more.

The Cost of Quality

Of course all other things are seldom equal. It takes time, effort, and money, to improve the quality of a product or service. The bottom line question is will the additional cost (and price) to add more quality result in enough business to justify that cost.

I think the answer depends where on the quality scale your offering currently sits.

At the low end of the scale — the cost for more quality is usually minimal, especially when compared to the resulting increase in sales.
At the high end of the scale — you likely run into diminishing returns where additional quality is less noticeable. The cost outweighs additional sales

Again I think it’s always worth it to give something more quality, because it serves a higher purpose, but from a bottom line perspective there are points where adding more quality won’t make you any more money.

There’s more to the story than the bullet points above. While making a high quality product probably has limited short term gains in the bottom line it can have greater gains over the long term as it impacts your brand.

Having a brand known for quality has never hurt any business. It helps overcome obstacles to a purchase. It allows you to charge a higher price. It increases the perception of quality you deliver.

The additional cost to the above is you’ll be held to an increasingly higher standard and you’ll be raising minimum expectations you need to exceed. However it also means greater margins per sale, meaning you need to sell less to generate the same return.

Adding more quality generally comes with a decreased need for greater quantity.

Summary

Quality is not easily measured, because there’s usually no single absolute standard against which to measure it. Everything has some quality. Everything sits somewhere on the quality scale. It’s probably easier to see when something moves along the sliding scale than to determine its absolute position on the scale.

A business needs to meet minimum expectations of quality. Different people have different minimums, though.The more quality you give to something, the more minimums you’ll be above and, all else being equal, the more potential sales you can make.

More quality also means greater cost. At the low end of the scale this cost is minimal and the resulting return greater. At the high end of the scale there are diminishing returns. The cost to add a little more quality is likely greater than the return to the bottom line.

However, even at the high end, the gains can be greater when you take a longer term view. More quality builds a stronger brand that leads to loyal and passionate customers.

I think you should strive to improve quality simply because it meets a higher purpose. Regardless of the bottom line there’s an intrinsic worth to making something better. Still adding more quality to your product or service makes business sense.

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