Return on Quality

Return on Quality

Roland T. Rust , Anthony J. Zahorik and Timothy L. Keiningham

1994, Irwin Publishing

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Endorsers

"Return on Quality (ROQ) is long overdue. This well-written book provides a valuable service by offering a solution for calculating Return on Quality. Further, this book is a wealth of sensible, not often heard advice, such as how focus groups should and should not be used; what the often used phrase, 'delighting the customer', really means; the problems with 'comment cards' and with administering customer satisfaction surveys in-house. They also explain common errors in measuring the cost of quality and in using the results. Of special value for people with strong interests in marketing are the chapters on designing and analyzing customer satisfaction surveys which combine current research with practical tips. The authors explain how the structure of a customer satisfaction questionnaire must be organized around the business processes that touch customers. This information alone makes the book worthwhile for the many organizations who seek the most from their customer surveys."- George Stalk, Jr., Senior Vice President, The Boston Consulting Group

"The competitive financial environment of the 1990s demands that quality improvement efforts be financially accountable. This book provides a framework for evaluating quality improvement as a quantifiable business investment. This sober but sophisticated view of quality is a requirement for the high performance business in today's business climate."- Charles R. LaMantia, President & CEO, Arthur D. Little, Inc.

"The importance of satisfying the customer is ingrained in the corporate culture of every successful company. These authors provide a solid basis for assessing the financial impact."- Minoru Furuta, President, Fujikura International, Inc.

How many of us can actually measure the return on quality? Is there really a link between customer satisfaction and market share? What is the link and how can you establish it in your business? To establish the link in your business you need to know exactly what your customers require for what they are willing to pay. A good customer satisfaction measurement program will give you the strategic intelligence you need. But just what do you have to do to get valid customer satisfaction data? How do you analyze the data to convert it into useful , actionable information? What re the proven ways to tie the information into process improvement programs and reengineering efforts? How can you integrate the information with effective strategic plans? If you can answer these questions, you know the linkage between customer satisfaction and marketplace success. If you can answer these questions, you can establish the linkage for your business and develop a strong, sustainable, competitive advantage.

The measure of success of a business is the value it creates for its owners. But the way to achieve success is to satisfy customers wit quality products and services at a price that represents the best value in the market. Customers really have all the votes. Because of this I like to say business organizations can only be successful if they (1) find the customers' needs, and (2) fulfill them better than any competitor can. Studying customer satisfaction and dissatisfaction over the years, I have found that no one person in any organization can totally satisfy a customer. But an one person can totally dissatisfy a customer. Completely satisfying a customer requires totally aligned and focused people. Someone once said that organizations exist to achieve together what cannot be accomplished alone.

For all the talk and bravado in the literature and corporate speeches today about customer satisfaction, there is a void on useful and practical ways to capture customer needs, determine how well you are satisfying those needs, and build actionable plans and measurements to help win in the marketplace. Customer satisfaction in most companies is more of a slogan than a practical science and art. This provides the information and tools to fill that void. It provides, I believe, the knowledge leaders of small and large businesses need to increase their chances of success. It explains in simple terms what works, what doesn't work, and why. It tells the reader not only what to do, but how to do it. In some respects it is profound. In other respects it is common sense. Albert Einstein once said, "The whole of science is nothing more that the refinement of everyday thinking." This book provides the everyday thinking business leaders need to win customer votes in the marketplace. -Raymond E. Kordupleski, Customer Satisfaction Director, AT&T

Abstract

The 1980s marked the beginning of a quality revolution for U.S. corporations. Hundreds of books were written espousing the importance of quality management and providing stories of firms that had achieved financial success through quality improvement. The U.S. government even began promoting the importance of quality with its founding of the Malcolm Baldridge National Quality Award.

As a result, virtually every large American corporation has initiated some form of quality-improvement program. Most of these programs, however, are not achieving significant results. Even worse, the failure of several acclaimed, quality oriented firms has demonstrated that quality is not a guarantee of profits. This does not mean that quality is not necessary to achieve long-term profitability. In fact, there is scientific evidence of a relationship between quality and profits. Instead, it suggests that businesses are not effectively evaluating and implementing their quality-improvement programs.

Currently, companies embark on quality initiatives without any idea of what the likely bottom-line impact will be. As a result, they have no way to determine which actions are most important or to predict if their efforts will actually benefit their firms. Thus, they are literally taking a journey without any map to guide them to their destination. What is needed is a way for firms to assess the likely profit impact of various quality-improvement alternatives.

Thanks to the work of many different researchers, most of the causal links between the company actions and the customer reactions as they pertain to quality improvement are well understood. However, no one has pulled this information together into a comprehensive quality impact measurement system. The purpose of this book is to show managers how to tie this information together so that they can measure their Return on Quality (ROQ).