Quality can be one of the most elusive elements of the business world. Company mission statements often refer to quality in one way or another e.g. ‘Delivering the right quality at the right price’.
Many authors provide definitions of quality from just about every standpoint in the business world. There is no doubt that quality is important in business, but what does quality mean and how can it be measured? In the trade or sale of goods, does quality mean new perfect goods?
If it did there would be no room for the mass of retail outlets that sell factory seconds or rejects. There would be no market traders selling bags of broken biscuits. There would be no call for second-hand goods.
The trade in less-than-perfect goods or multiple owner (second–hand) goods is extremely lucrative and has made many a millionaire! Most of their customers would claim to be getting quality or they just wouldn’t buy. So are they getting quality or are they getting value for money?
In the provision of services the same rules apply as in the provision of goods. If not there would be no room for no-frills airlines or basic B&Bs in the hoteliers’ world.
So quality isn’t an independent stand-alone factor. Price and customer needs or demands have a serious impact on approaches to quality. When we consider trade across the whole of the UK, quality becomes more elusive, and when we consider the whole of the EU, and finally world trade, it can seem too complex to imagine.
It is this difficulty in defining quality that has taken the quality gurus away from the notion of a universal ‘gold’ standard of goods or services to a notion of customer demands. Customer demands are by no means uniform so there needs to be flexibility in any definition adopted.
ISO 9001 (formerly BS5750 and then ISO 9000) is crucial to any organisation wishing to apply for government contracts or wishing to supply organisations who are themselves accredited to ISO 9001. It is ‘The’ quality club.
The International Organisation for Standardisation (ISO) was first established by the United Nations in the late 1940s. ISO is now comprised of quality standards organisations from around the world including the British Standards Institute (BSI) representing the U.K. The anomaly in the use of the acronym ISO instead of IOS apparently stems from the fact that 'iso' is the Greek word for equal.
ISO set itself the mission of developing a quality standard for universal use which was then adopted by each member state. In the U.K. the quality standard labelled BS5750 became the byword for quality and became known worldwide. Since the early days the standard has evolved considerably through its revisions and the current standard is labelled ISO 9001:2015.
One of the first things that the standard provides is a working definition of quality. The ‘it’ is the product or service provided to the customer in accordance with customer requirements and the quality assurance mechanisms employed by the business to ensure consistency of provision.
So, who decides that the standard is in place? In the first instance it is the organisation itself by the use of internal quality audits. Then when they are sure the standard is in place an external body conducts an independent audit of the systems to ensure that they are in compliance with the standard.
There is a great deal of mystique around ISO 9000 but it can be a very straightforward process, and we'll explore more next week.
The important question to be answered is: how do customers make choices? Customers have many alternatives to choose from. Even if there are no obvious alternatives, they can choose to spend their money on a different product altogether, make or produce the product themselves, or use their time in a different way.
Organisations need to provide products which are of value to their customers. Some customers will have no choice at all about which product to use, but even for them it is important that organisations consider what they require from a product.
A lack of choice does not necessarily imply a one-way process whereby the supplier dictates the nature of the product. A process of negotiation and agreement is important in the development of a situation in which both supplier and customer are happy with a product.
The following example shows that, even when customers do not have a choice, it is still important to talk to them to find out what they want from a service:
“A householder was supplied with a domestic waste bin and was told that she could be fined for leaving it on the pavement overnight, even though she had not wanted a bin in the first place and was rarely up in time to put it out for a 7.30am collection. A council spokesperson was reported by a local paper as claiming that the householder might be held responsible if the bin caused an obstruction, injury or damage, because 'the law is not clear’. This is a good example of a ‘we know best’ situation. The householder had little or no influence over the nature of the refuse collection service.”
Collins English Dictionary defines value as: ‘reasonable or equivalent return; an amount considered to be a fair exchange in return for a thing; satisfaction’. This brings us back to the initial idea of an exchange relationship. The challenge for commercial organisations, and for the people who work for them, is to find ways to ensure that their products will be considered of greater value than those of their competitors.
Organisations constantly strive to increase the value of their products so that their customers will perceive the return offered to be fair and reasonable. Customers will always compare one organisation’s offerings with the alternatives, and this is why we see products constantly changing and developing.
The challenge for public sector and non-profit organisations is to make sure that in every relationship they have, the nature of the exchange is developed through the processes of negotiation and agreement to the satisfaction of each party.
In both cases — the commercial and non-profit sectors — the closer an organisation can get to the customer’s view of value, the more likely the customer is to be satisfied and to return to that organisation. Organisations cannot always provide exactly what their customers want or even expect.
If this is the case, then it is important for the organisation to manage customers’ expectations so that they will not be disappointed. This obviously honest example of managing expectations comes from an Indian train timetable: ‘The times shown on this timetable are not the times when trains will leave: rather they are the times before which the trains will not leave’. There are many train services in the world that would do well to follow this example!
If asked, we could all list tangible goods: a car, a radio, a book, pens, soap, perfume. We could also quite easily list intangible services: public transport, legal advice, education, medicine, entertainment.
However, the distinction is not quite as straightforward as this would imply. In general, most products are accompanied by services, while services tend to have products that support them. It would be difficult to find services that are now available without the involvement of some products.
For example, some retailers may rent television sets and apply the rental payments towards their final purchase. The firm provides both a service (the rental) and a good (the television set).
Banks, which offer a number of different services to help customers manage their financial affairs, also offer tangible goods to customers such as debit and credit cards, chequebooks and regularly updated information about their products.
The distinction, then, between goods and services is not clear-cut. There are no pure products or services, but each product will have an element of service within it, and each service will have some products. From now on we will use ‘product’ for both goods and services unless we particularly need to distinguish between tangible and intangible offerings.
Given that it is almost impossible to find a service which does not incorporate some tangible good(s) - a local advice bureau is probably the closest we can get - and equally, goods with no services are unusual. Products can really be described only as ‘tangible dominant’ or ‘intangible dominant’, as mostly they are made up of a combination of offerings that forms a package which the customer buys or obtains.
For some products, you could take away the services or the goods and you would still be left with recognisably the same product. For example, if you removed the warranty and financing from the video recorder, you would still have a video recorder.
However, there are some products which rely on both elements being present. A fast-food restaurant must provide food - the tangible element - but also it must cook and prepare the food and serve it to you - the intangible element. If either of these elements were taken away, the result would not be fast food!
The characteristics of services
The special nature of services derives from four distinctive characteristics. These characteristics help shape your internal and external customers’ perception of what your organisation has to offer them. The extent to which these different characteristics apply will also affect the way you manage the service.
Your customers cannot see, touch or experience a service before they buy it, so word of mouth and recommendation are important. This means that your customers need to look for other clues about the quality or value of the service you offer. Whereas customers can test-drive a car, they cannot test a bank’s current account before they sign up. You could watch a hairdresser cut someone else's hair but few people would do this.
Instead, you will probably look for other signs as to the quality of the service provided. You may be influenced by the physical environment, the cleanliness of the salon, the dress of the staff, their politeness, or by their qualifications as shown by certificates on the wall.
Customers may also make an assessment according to the price charged. If they think it is too cheap they may guess that the quality will be low; if it is too expensive, they may believe that they are unlikely to get value for money.
Services are normally sold, produced and consumed at the same time, unlike goods, which are manufactured, stored, sold later and consumed later still. Obviously, if you have your teeth checked by a dentist you have to be there while it is being done. The dentist is the person who provides the service and is therefore part of it.
The factory manager may produce, or help produce, the can of baked beans, but they are not part of the product.
Furthermore, when you are sitting in the dentist’s chair, you can affect the service being provided; you are, in effect, a co-producer of the service. If you are frightened or uncomfortable you may make the dentist’s job more difficult, and so their ability to provide a good service may be diminished.
In some services, not only can you, as the customer, affect the quality of service you receive, but also other customers can affect the service you receive. If you go to a restaurant for a quiet meal and a group of noisy customers comes in, your enjoyment of the meal will be reduced. This is why some restaurants have a dress code, to encourage certain types of customer, and why some restaurants only have small tables, to discourage large groups.
In this way, they can influence the type of customer who enters the restaurant and so maintain an influence over the kind of service their customers will experience.
A further consequence of inseparability is that unlike most goods, which can be checked before they leave the factory services cannot be checked. If there is a problem with a good it is unlikely to reach the customer. In fact, some faulty goods do get through to customers, but usually these can be returned and replaced.
If you go to a hairdresser and your hair is not cut as you want, you cannot ask for it to be returned to the way it was. Often the service cannot be separated from the personality of the seller. Consequently, the provider’s reputation is frequently a key factor in the decision to buy a particular service.
However, services are often sold by people representing the seller. In the case of an insurance company, an agent will promote the service that the company provides. Inseparability means, therefore, that the firm producing a service needs to establish high-quality and reliable training programme for employees, as it is the employees who will be delivering the service.
It is not just the people who buy a product who need to be considered as customers. The general term ‘customer’ includes two kinds of people:
Most commercial organisations tend not to make a distinction between customers and consumers. This is because they have to satisfy the needs of both groups with their products or services.
Pet food manufacturers, for instance, have to make sure that their food is nutritious and tasty for the cat, and they also have to package it and present it in a way that is attractive to the owner. The distinction is still important as it is the customer who has to be encouraged to complete the exchange process with the organisation, and they may want something different out of the exchange from the consumer.
There is a further distinction. In some households one person may shop and pay for the pet food with their own money, but their partner may have told them which pet food to buy. For the pet food company, the person who makes the decision or recommendation that leads to the exchange of money is also a customer.
Some organisations have to deal with quite different groups of customers and consumers. Many charities raise money from government funding, donations and sales in its shops, and from financial investments. The people who buy products in the shops and give donations can be called customers, yet what they receive from the exchange process is not the service that the charity provides.
Some customers may benefit from a ‘feel-good factor’ as they buy the products because they wish to support the charity. They are not interested in any help that the charity can give them.
For charities and most public services, it is the consumers who do not pay for their services who are paramount. These consumers have needs which have to be met in order to satisfy those customers - taxpayers, funders, donors - who pay for the services.
Organisations will have several different groups of customers and consumers, who all expect different things from their relationships with organisations. We can take this even further and introduce other parties who neither buy nor directly use an organisation's services. We use the term ‘stakeholder’ to mean those who have an interest in an organisation because they can affect, or be affected by, what it does.
The survival of an organisation depended on its effective management of a broad range of stakeholder interests. Satisfying the multiple and often conflicting stakeholder expectations is the role of every manager within an organisation.
Each of the stakeholders in an organisation will want something from it, and it is important that managers understand what these things are.
However, our main focus here is on customers and how to deliver value to them. When trying to deliver value to customers and also fulfil the requirements of stakeholders, managers may have to compromise and seek to balance their activities.
Stakeholders can be defined as those who have a stake in the organisation's performance. Customers are those who buy, pay for or recommend a product or service. This definition includes people both inside and outside an organisation.
Customers are concerned with decisions about the quality and availability of goods and services because they wish to obtain those goods and services and use them, or give them to others to use.
Consumers, if different from customers, are also directly interested in the quality and availability of an organisation's products and services.
Other stakeholders are concerned about the quality and availability of goods and services only in so far as they affect or are affected by the organisation's performance. The distinction is important, as ISO 9001:2015 outlines the importance of both.
In the exchange process an organisation offers a product or service and the customer offers a sum of money in return. The amount of money is nearly always determined by the organisation, and the customer must decide whether they think the product or service is worth what is being asked.
The same is true when someone is offered a job. An organisation specifies an amount of money it is is prepared to pay to obtain that person’s services, perhaps after negotiation, and they must decide if they are willing to provide their services for that sum.
The assumption is that both the customer and the organisation value what the other has to offer. If they did not, then one or other would go elsewhere, if they could. The essence of the exchange is mutual value; there must be a belief on both sides that the exchange is fair and equitable.
If the customer does not perceive it as such, they are unlikely to take part in the exchange. It is also possible that a customer will take part in the exchange but decide later that it was not fair or of mutual value, in which case they will be unlikely to come back to the organisation in the future.
Customers need not give money to an organisation; instead they may provide time, skills or other resources. Volunteers can be seen as customers of a charity organisation. They may perhaps give their time to provide a service or lend their skills in organising a fundraising event. In some circumstances goods may be bartered rather than exchanged for money.
There is inevitably a tension in this exchange. The organisation will try to provide what the customer wants and values at the lowest cost to itself. It will not try to provide more than it needs to, as this will be likely to cost it more for no greater return.
If the customer will buy something without any extra features, there is little point in the organisation adding them. However, the customer will always look for better value, and if another organisation offers it, the customer may be encouraged to change supplier.
So an organisation must always try to keep the exchange balanced, but also make sure that the exchange it offers is better than any offered elsewhere. This idea of mutual value, or balance and equity, in the exchange is likely to lead to customer satisfaction and possible repeat purchases.
However, many organisations recognise that they may need to do more to encourage customers to buy from them on a regular basis. If your customers are internal and are obliged to use your services, you may think that this idea of an exchange does not apply to you. How often have you heard people at work complaining about the service offered by another department?
Often these conversations end with someone saying, ‘we'd be better off doing it ourselves’. The same principle of exchange is at work here. If you are not providing something of value, and your customers do not perceive that there is a fair exchange, they may look elsewhere.
If you work in a public sector or non-profit organisation, you may think that customers will continue to come to you and your organisation because they have no choice. However, the government, or whoever funds your service, may decide that you are not delivering what they want. They could choose to stop funding your service or pay some other organisation to provide it.
Thus the principle of an exchange process remains valid: in this case it is between those who hold the resources and those who provide services that meet the needs the resource providers identify.
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