Customer care and quality - Marketing Management

There is a close, but complex relationship between customer care and quality management in the organization. Quality has been a major issue in competitive strategy in recent years, and in particular the pursuit of improved and consistent quality has mainly been due to the fact that we know now that good quality is a major factor in competitive success.

Note that ‘good quality’ does not necessarily mean simply high quality. In consumer terms, good quality means ‘fitness for purpose’. In other words, the marketer must ensure that the product or service is of a quality that meets customer needs and expectations. For example, if we purchase a shovel or spade then we must at the very least be able to dig with it. Used for the purpose intended, it should not bend or break and should last what can be considered a reasonable life-time. Over and above this, the customer might be looking and paying for higher quality levels like stainless steel construction.

The PIMS programme5 developed by the Marketing Science Institute and the Harvard Business School in the early 1970s, has long established the link between management strategies and profitability. The PIMS project (Profit Impact of Management Strategies) looked at the return on investment (ROI) of a large sample of American and European businesses and compared this with information on the various strategies these businesses were using. The essence of PIMS is the use of empirical evidence to establish which strategies are associated with higher levels of profitability in an industry and thereby to steer managers in these industries towards better (more profitable) courses of action.
Some of the basic questions that PIMS seeks to answer include:

  • What is the typical profit rate for each type of business?
  • Given current strategies in a company, what are future operating results likely to be?
  • What strategies are likely to help improve future operating results?

To obtain this information for a particular company, the company must subscribe to the PIMS project and provide detailed information, including, for example:

  • competitors and market information;
  • balance sheet information;
  • assumptions about future sales, costs, strategies, etc.

This information is then compared with the PIMS database and a series of reports prepared for the subscribing company as follows:

  1. A ‘Par’ report showing the ROI and cash flows that are ‘normal’ for this type of business given its market, competition, technology and cost structure. Also included is an analysis of strengths and weaknesses that are regarded as explaining high or low par figures compared with other businesses in the database.
  2. A ‘Strategy analysis’ report which computes the predicted consequences of each of several alternative strategic actions, judged by information on similar businesses making similar moves, from a similar starting point and in a similar business environment.
  3. A ‘Report on look-alikes’ (ROLA) that examines possible tactics for achieving strategic objectives such as an increase in market share, by analysing strategically similar businesses more closely.
  4. An ‘Optimus strategy’ report aimed at predicting the best combination of strategies for that particular company, again based on the experiences of other businesses in ‘similar’ circumstances. The advantages of PIMS to an individual business are that not only can management assess the likely outcome of its proposed strategies, but it can also identify those strategies that will yield the highest return on investment.

Why doesn’t every company subscribe to PIMS for its strategic planning? First, there is the question of cost. The full range of PIMS services is expensive. Second, the amount of data required to be supplied by a company for a PIMS analysis is extensive. This can be costly and time consuming. Most important of all, there are limitations to PIMS:

  • PIMS data is historical and may be misleading in conditions of rapid change.
  • The underlying assumptions of the PIMS model are not clarified and must be taken on trust.
  • The statistical basis of PIMS can give rise to problems of interpretation and understanding.

PIMS is not a panacea for strategic decision making in individual companies. It is best used as an aid to managerial judgement. In general terms, analysis of the PIMS database has shown that some 37 variables together account for almost 80 per cent of the variations in return on investment. These, therefore, are the key factors that most strategic marketing planners will need to consider in their marketing plans. From the viewpoint of our discussion, good quality was found to be a major factor accounting for differences in success for the companies in the PIMS database as measured by return on investment. Put simply, quality pays! PIMS offers access to a comprehensive, empirically based strategic planning tool although the full advantages of PIMS are available only to a company that subscribes to the PIMS database. However, even for the non-subscribing company, the general published findings of PIMS regarding key determinants of return on investment consistently underpin the importance of good quality and company success. Given our definition of customer care, effective standards of customer care are impossible where the quality that the customer experiences or perceives does not match their expectations. Customer care and quality are inextricably linked.

A major development in recent years has been the total quality management (TQM) approach to business that is applied when managing every aspect of the company’s activities. Given that quality management revolves around meeting customer requirements and expectations, and what represents acceptable quality is essentially determined by customers and their requirements, then customer care and TQM are closely related.

Quality programmes encompass many other areas than dealing with customers, while customer care programmes are specifically focused on customers and how to improve care. The major influence of TQM on customer care activities is the notion that with TQM processes, all activities, not only in-company activities, but also partners in both the demand chain and the supply chain (i.e. the entire value chain) can affect quality. Total Quality Management also gives central place to the customer in designing quality systems. Customer-driven quality is one of the key distinguishing features of TQM as a philosophy.

Companies can make two types of mistakes when it comes to quality and customer needs. The first of course is producing products and services which do not come up to the target customer’s quality requirements and expectations. The quality is too low. In our previous example of the spade, obviously if on first use the spade bends or breaks then the customer to say the least is going to be disappointed. Less obvious, however is the mistake of supplying products and services which exceed the target customer’s quality requirements and expectations. The quality is too high.

This may result in a product which either has too high a price, lowers company profits or both. Many British engineering companies have in the past made this mistake, producing things that were of too high a quality or specification for market needs hence leaving the way open for other lower priced, ‘lower quality’ competitors.

In many ways, TQM and customer care go hand in hand in the contemporary organization, but what is the relationship between customer care and customer service?

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