impact on an organization's profitability.
The Advantages of Improved Product Quality
Retention of a company's customer base is just one advantage associated with improved quality (Harrington, 1990, pp. 145 146). Additionally, operating profits may be expected to improve along with productivity, as quality levels rise (Hammonds and DeGeorge, 1991, p. 34). "Companies that embrace quality have an edge of up to 10( on every sales dollar over rivals," according to General Systems Co. management (Hammonds and DeGeorge, 1991, p. 35). The general estimate is that profitability rises after each customer retention rate increase of five percent (Armstrong and Symonds, 1991, p. 102). Improved customer satisfaction is the route to greater customer retention, and, in the 1990s, improved product quality is the best way to build consumer satisfaction levels (Armstrong and Symonds, 1991, pp. 101 102).
Improved quality does cost money in the short run (Armstrong and Symonds, 1991, p. 101). In the long run, however, improving quality generates greater profitability. Poor quality means poor sales in the long run. Therefore, expenditures on quality
control may not be looked at as some sort of add on cost. Rather, they must be considered as integral production costs whether 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 activity manufacturing, service, construction, and so forth (Miller and Camp, 1985, p. 88). Data pertaining to the relationships between quality, price, and return on investment are presented in Table 1, which may be found below on this page.
Return on Investment As A Function of Quality and Price
(((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((((
Relative Quality ((((((((((((((((((((
Relative P...