12/11/2013

The Objective is Quality

The growing role of services in the global economy provides relevance to the ethical behavior of economic agents. The dominance of the economy and the role of companies (given the size of some) in the affairs of the world lead to the development, after that of quality and performance management systems, of management systems for the protection of the environment, and finally of systems for social responsibility management (sustainable development). But how does one develop a vision? How does one plan, deploy, manage and account for all these actions? This is the role of social responsibility and related management systems, largely inspired by the ISO system. The ISO organization has edited an ad hoc norm on global sustainability, ISO 26000.


Distinction between products and services

It is customary to divide the services of a company, organization, institution or individual into two types :
• a tangible product (e.g., toothpaste, radio, car);
• a service that is consumed as it is produced (e.g., haircut). But this distinction is artificial because a product is only purchased if it provides a service :
• toothpaste is purchased not only because it cleans your teeth, but also because it provides a feeling of well-being, gives good breath that is pleasing to the people close by, while protecting from dental caries that spoil a smile, and thus the power of seduction;
• a car is acquired for rapid transportation from one place to another, making it possible to vary pleasures and giving a taste of freedom (via est vitae, omnipresent);
• a radio can provide information and music, but can also satisfy a need for being connected and gaining knowledge (omniscient).

A product is therefore a form of service that is not fully consumed in a single use. Accordingly, gaming software, loaded on your PC from the internet, is not a service because it can be used repeatedly at no extra cost. Conversely, a railway ticket is not a product because it is only a physical representation of a service; in this case, transportation of a client. This definition has the consequence that all services that meet the same implicit and explicit expectations of their beneficiaries are interchangeable. Here, one expectation is the price as paid as working hours according to the beneficiary’s hourly wage (which represents a perceived sacrifice). At the same level of satisfaction, should one then choose a product or a service? Again, we must analyze whether we really get the same level of satisfaction from these two objects; for the same price, the tangible product can satisfy our desire to own and consolidate external signs of wealth, both promoting social recognition and thereby well-being. In other situations, the tangible product costs valuable time or corresponds to an asset that provides no satisfaction, because social recognition can be acquired by other means (scientific reputation, army rank, normal or luxury car rental with or without driver, leasing, etc.). There is a corollary to this assertion: the same tangible product can satisfy different expectations, which may lead to its diversification/differentiation (multiple products) implemented by marketing. Thus, in prehistoric times, obsidian shards were used as knives, arrowheads, ornaments and religious objects …

A hierarchy of needs, Maslow’s pyramid

Personal expectations arise when one or several desires are left unsatisfied. Abraham Maslow’s work consists in classifying these needs into five or six levels. This classification corresponds to the order of priority in which they appear to the individual; only when the needs of the first level are satisfied are we concerned with those of the next level. The motivations of people, their desires, can bloom only if the first three levels of needs (physiological, security and social needs) are largely satisfied. Maslow expressed this principle in 1943, but it had already been discovered and put into practice by the Salvation Army1 during the second half of the nineteenth century. A service/product can be addressed towards a beneficiary to meet the needs/desires of one or more of the levels of the pyramid:

1. Need (physiological) for the maintenance of life: air, food, excretion and hygiene, maintaining body temperature, rest and sleep, bodily contact, sex.
2. Need (psychological) for security, protection and property: physical and psychological protection, employment, family and professional stability, to own things, to have places to oneself, and to have at least some power over external matters.
3. Need (social) for love and belonging: to be accepted – as we are – to give and receive love and affection, to have friends and a good communications network, to be recognized as being valuable, belonging to a group or hierarchy.
4. Desire for self-esteem: expressed by the desire for strength, achievement, merit, mastery and competence, for self-confidence to face others, for independence and freedom.
5. Desire for self-realization: to increase knowledge, develop values, do new things, create beauty, achieve the fulfillment of being a “natural” human being and of the ego. This desire must be balanced with the unmet needs of the other stages. The person must be in a favorable environment and be able to negotiate in stressful situations. According to Maslow, there are few people who reach the full development of this level. Some people add a last stage:
6. Spiritual aspirations: development of the inner life, spaces for meditation, reflection, writing, asceticism. Temporarily achieving this level moderates the appetites and desires of the previous stages: proceed with caution according to the maxim: “Man is neither angel nor beast, and the misfortune is that he who would act the angel acts the beast”.

Quality, definition

The quality of a product or service is defined here as the level of satisfaction of its beneficiary (a customer in the market economy) in relation to the expectations expressed or implied in the different stages of Maslow’s pyramid or any other frame of reference. These expectations are listed in the form of specifications, standards and reference values that play a role in the world of quality. For purchases of capital equipment, this frame of reference may be more objective specifications, even if the sales services of these companies know how to target the different levels of Maslow’s pyramid in potential buyers. The world of quality belongs to the world of management, defined as implementation of certain functions to obtain, to allocate, and to use human (personnel, supervision) and material (raw materials, energy, components, etc.) resources to accomplish a goal in line with the needs of a company. Management has two dimensions: the act of managing resources and the art of handling them (with patience, discipline, rigor, efficacy and efficiency). Quality management has interfaces with organizational theory. The world of quality is therefore based on four basic assumptions of management, called myths or even beliefs yet often verified in economic reality:
• Assumption of rationality, for which an action is essentially a choice that has consequences
– the human mind finds an optimum choice among a variety of actions that are evaluated by comparing their future results, the rationality of certain previously set preferences or criteria.
• Assumption of a hierarchy, of which the basic idea is that the problems and actions can be decomposed into elements, which in turn consist of sub-problems and subelements, and so on. Consequently, the responsibility to perform a complex task can be delegated within a system of subordination where the highest level controls and integrates the solutions and actions of the lower levels. However, this assumption generates illusions about the real possibilities of control and accountability.
• Assumption of the importance of the individual leader, i.e., that the major developments in management are attributable primarily to the abilities and actions of a few exceptional heroes (Henry Ford, Alfred Sloane, etc.).
• Assumption of historical efficiency, which postulates that history will follow a path that leads to an equilibrium determined solely by the initial conditions, and produced by economic competition. This myth contains the idea of natural and fair competition where the best survive.

Quality and its place in the Marketing Mix

How important is quality in business? One answer is provided by the marketing mix. To reach the objectives of revenue from the sale of a product or service, one conceptual tool available to marketing divisions is the marketing mix. It is also called the 4P’s of marketing (as described by E. Jerome McCarthy in 1960:
• Price,
• Product,
• Place (in linear and distribution networks), or Positioning for services,
• Promotion.
In everyday activities, price and promotion usually play the most essential roles. The marketing mix gives marketing directors the means to verify that all elements of a product’s definition are represented in a logical and transparent manner. The marketing mix is a generic tool for all marketing strategies. Some critics highlight the small financial implications of this model (margins, returns to shareholders), but it is a robust approach in the definition stage of a product.

The marketing mix means optimal use of the levers used in marketing:
• product or service (definition of its functionality and intrinsic quality); position in the existing portfolio;
• price (and any variation following distribution channels);
• deployment of sales forces;
• definition of the services associated with the product;
• how to use a brand policy;
• definition of distribution channels → transport and logistics;
• promotion policy, communications, advertising and advice to consumers, lobbying.

Optimization of the marketing mix also involves taking control of different variables: financial (such as return on shareholder investments), legal, technical, temporal (products for summer, Christmas or current season), human (social, demographic, cultural values), political, competitive, consumer and environmentally friendly. These variables affect the definition of the quality of a product, its standard and its specifications (including packaging). However, quality is only one element in the issues associated with a product. Quality is one of several business functions, such as manufacturing, research and development and marketing. Research and development are closely related to the quality approach, which begins in the early stages of design.

The quality cycle of a product

The role of marketing is to find and identify client expectations, define and produce a service according to these expectations, and to the role of R and D as well as manufacturing. These
relative roles make it possible to define four types of quality in a quality cycle of a product:
• The expected quality, which is a summary of the expectations of the beneficiary, developed by the marketing team. It can, for example, be determined through surveys, group meetings or market analysis.
• The desired quality, which takes the form of a prototype (virtual; specifications) developed by the R&D team, determined under the assurance of quality, subjected to quality control, and protected from external changes and fluctuations by quality management. It involves site manuals, quality standards defined by the organization, operating procedures, instructions, checklists and recordings.
• The obtained quality after manufacturing and logistic operations (packaging, transport, storage, placing on shelves) have been performed. This objective and quantifiable measure of quality is what is actually delivered to points of sale, for instance.
• The perceived quality is what the beneficiary feels with his five senses (and a sixth sense: the mind and memory, which can create associations of ideas) when using the service for the first time. For a tangible product, functionality and ergonomics, ease of use, appearance, harmony, and material selection are essential ingredients.

The difference in beneficiary satisfaction, which indicates the degree of quality achieved, is the sum of the achievements of R&D, production, marketing and communication teams. To this we add a third factor that is not included in the figure: the various achievements of marketing in the search for explicit and implicit beneficiary expectations. The ideal scenario is when the expected quality, the obtained quality and the perceived quality are identical or largely overlap. Control of the perceived quality is key to the sustainability of a product or even the company. If the perceived quality satisfies one or several of the higher stages of Maslow’s pyramid, the intangible part of the product is very important, and the cost to the customer increases because the price is part of the perceived value, in the same way as an advertisement refers to its use by movie or sports stars. Thus, the price of major-brand perfumes (Chanel, etc.) is irrelevant to the costs of design, development, manufacturing and delivery, for two reasons:
• the price is part of the positioning: everything that is prestigious is expensive and vice versa;
• the costs of design, advertising, and brand positioning are high.

To learn more

From The Objective is Quality
of Michael Jaccard
Published by The EPFL Press

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