Quality: in the beholder's eye

Quality: in the beholder's eye

Roy Goni, Contributor, Jakarta

A number of managers from U.S. service industries appearing on
a CNN newscast in April 2000 voiced their concern over today's
business realities.

One of their statements raised the issue of good service amid
the general lack of attention to customers' needs, while others
complained about the fact that only relatively unqualified
personnel could be recruited.

The grievances in fact constitute a description of how the
market is currently undergoing a major upheaval, leading toward
what some experts call 'the new economy', a new reality that
reforms the norms of productivity, growth and profitability, and
at the same time demands a change in business management.

Many managers may not realize that the revolution of
information spreading over the business world since the 1960s
with the emergence of information technology, such as
computerization, has brought about a structural change leading to
a shift from the manufacturing to the service sector.

This phenomenon requires a service-focused approach in
business management. The problem is that the rates of
productivity in manufacturing are not the same as those in
services.

According to Prof. Roland T. Rust, director of the Center for
Service Marketing, Vanderbilt University, there are two reasons
for the difference. First, the productivity of services is very
hard to measure, indeed, no standard can be applied yet. Second,
computerization in the service sector was less efficient during
its early implementation phase due to slower computer operations.

A big change started in the 1990s when the information
revolution struck across the globe, bringing with it a great
impact on the world economy. In the past decade, the contribution
of service industries to gross domestic product (GDP) growth in
the US reached 75 percent. Likewise, in Asian countries such as
Hong Kong services shared 80 percent, and in Singapore, Japan and
Taiwan 60 percent, of GDP.

In Rust's view, in facing the new economy companies must pay
attention to three aspects. First, they should be outwardly-
focused in order to earn revenue; second, long-term orientation
is needed because relations with consumers are long term in
nature; and third, service excellence for the satisfaction of
consumers is the key to future success.

In response to this wave of change, management needs to revise
the paradigm of quality so far followed. Quality guru Philip
Crosby says that quality is free. His principle is that enhancing
quality through products with minimum defects can be achieved by
improved efficiency, which reduces costs and finally enables the
supply of goods that satisfy consumers' demands and encourage
repeat purchases.

The ultimate goal of this approach is a business model capable
of maximizing its quality promotion and therefore ensuring
consumer satisfaction, while optimizing productivity as well.
However, research conducted in Sweden through the Swedish
Customer Satisfaction Barometer has proved that the 'quality is
free' concept does not have any concrete impact on service
industries. Service companies attempting to replicate this
concept by maximizing quality/consumer satisfaction and
productivity at the same time tend to reduce their profits.

What is quality? In manufacturing, quality is always
characterized by standardization, or adjustment to
specifications, but in services it has the general aim of
accommodating the specific needs of consumers. So, in service
industries quality is characterized by customization, or meeting
customers' expectations.

The problem companies frequently face is how to make a
tradeoff between quality/satisfaction and productivity. In
reality they can adopt two strategies. First: the high-service
strategy, emphasizing revenue increases with prime service
quality and efficiently guaranteeing customer satisfaction.
Citibank is an example. Second: the lowcost strategy, stressing
minimum cost with minimum services at low prices, such as Makro
retail networks and Garuda Citilink.

Both strategies can perform well but in this new economy era,
also often dubbed the era of 'customer sovereignty' with great
emphasis on long-term customer loyalty, the high-service strategy
is more suited to companies planning to build strong ties with
their customers. The understanding of quality in this period
should be put in the context of customization, by translating the
specific needs of buyers into customer satisfaction.

From this perspective, corporate marketing strategies should
be reformed and placed within the paradigm of service-oriented
organizations.