nking, became aware that quality must be emphasized in their operations if they are to retain their customers bases and remain financially viable.
Retention of a bank's customer base is just one advantage associated with improved quality (Bankers learn, 1989, pp. 7374). Operating profits may be expected to improve along with productivity, as quality levels rise. Banking organizations that embrace quality have an edge of up to tenpercent on every sales dollar over rivals. The general estimate is that profitability rises after each customer retention rate increase of fivepercent. Improved customer satisfaction is the route to greater customer retention, and, in the 1990s, greater product quality is the best way to build consumer satisfaction levels.
Improved quality costs money in the shortrun (Port, Carey, Kelly, and Forest, 1992, pp. 6674). In the longrun, however, improving quality generates greater profitability. Poor quality means poor revenues in the longrun. Therefore, expenditures on quality promotion may not be looked at as some sort of addon cost. Rather, expenditures in the promotion of quality must be considered as integral production costswhether the product being produced is a good or a service. Return on investment has been found to be more a function of product quality than of price, regardless of the type of activitymanufacturing, banking, and so forth.
Quality control refers to a system, by which assurance is sought that the output produced conforms to specific parameters that define product or service quality (Walton, 1988, p. 248). An effective quality control program enhances the ability of a banking organization to both reduce costs and improve productivity. As a consequence, effective quality control has a positive impact on a banking organization's profitability.
Quality control, in order to be effective, must be integrated throughout the production process, whether the outpu...