The Hindu Business Line : The hunt for the Holy Grail!

John Ruskin said, “Quality is never an accident; it is always the result of intelligent effort.” I think Henry Ford meant much the same thing when he said, “Quality means doing it right when no one is looking.” Both these statements imply that you have to consciously strive towards attaining your quality goals. However, quality itself is a relative concept, and there are many facets to it, as evident from the following.

I always vow that the one product that made the modern mother’s life so much more bearable was… the disposable diaper. I am a firm brand loyalist in this category – having suffered those “accidents” that ads for diapers and feminine hygiene products always talk about – my daughter was two, we were flying long-distance, the flight had been announced – and there I was – desperately changing the brat’s clothing because I had used a different brand of diapers!

What however made me realise an awful truth some time ago was the fact that there was a stark difference in the quality of the same brand depending on country of origin – the bulk pack that was imported was of much better qual ity; and the same brand manufactured in India seemed to be not as absorbent/ not with as good an adhesive as the other version.

I think, in defence of the manufacturer – this was clearly an attempt at wooing a lower per capita income population – this is a product to which customers would be very price-sensitive, and penetration is low. And obviously, when you lower prices, you do sacrifice quality.

But this actually brings me to the point of this piece. As Ruskin said, “There is nothing in the world that some man cannot make a little worse and sell a little cheaper, and he who considers price only is that man’s lawful prey.” The question here is, what is quality? Is it just that which is good? What is good? For whom? This is the classical marketing ‘segmentation – targeting – positioning’ exercise that is a 101 less on in all B-schools.

Basically, quality to different people is different things. Remember the (infamous) chocolate packaging-rat episodes? A case of packaging quality defined by a certain standard – and not meeting the storage conditions of the warehouses in India. So, till the rats got at it, the packaging was quality, but when tested in Indian conditions, that same product became sub-standard quality.

Every price point has an ‘acceptable’ quality level, and who defines what is acceptable? The customer set that you are targeting. The search is constantly on for that sweet spot – you can choose to attain it by a great ‘quality’ product at a very premium price, or a ‘low quality’ product at a lower/ mass price point.

So, do you want more people in India buying diapers because they are cheaper, even though they are not as good as the ones available abroad? Yes, maybe. Voila! There’s why my daughter had her ‘accident’.

This problem is actually equally aligned to the eternal hunt for volume vs the hunt for profitability – I remember years ago, when I worked with Gillette, their philosophy was a ‘Basic Minimum Profit Contribution’ from their products – the very criterion of pricing for a new product was that threshold PC, irrespective of its impact on the MRP! (I think the only place where they make the exception to an extent is the razors, but as we all know, the blades make up.) Of course, this automatically implied that the quality of their products was very good – and also that this remains a luxury product.

The second brand

This brings us to another interesting marketing angle – the second brand.

Many well-known organisations have branched off into addressing a completely different customer set from their traditional one. However, fearing a dilution of the existing brand’s image (and quality perception), they have launched/ acquired a different brand. A few good examples that come to mind are Titan (launched Sonata to address a lower price band set), Banana Republic/ Gap/ Old Navy (three different brands not only addressing different income classes with different price ranges, but also having acquired unique characters of their own), Louis Philippe/ Peter England (that very memorable ‘honest shirt’ campaign that made this very point about the quality-price equation) Coke/Thums Up, Electrolux/ Kelvinator ...

In most cases - not all - the price bands that these second brands operate in are very different from the initial one, and therefore, the quality connotations are also fairly different. (Of course, we see as many cases of brand portfolio consolidations as we see of extensions/diversification — following a global strategy, the recent consolidation of Rin Supreme with Surf Excel that we are currently witnessing is one such example.)

This price-quality conundrum exists equally in the professional services arena. In my very own start-up knowledge process outsouring (KPO) firm, we founders have often questioned our very dynamic value proposition. We like to believe that we have moved the standard KPO offering far beyond that offered by our competitors – it’s a new paradigm, almost, of ‘value’ — however, this ‘touching consulting quality’ that we offer should ideally command a price that justifies the costs that go into it.

Unfortunately, our client set in the US, suffering from a preconceived notion of a price plank that justifies offshoring, finds it difficult to rise above a certain threshold. This, of course, makes our value proposition unbeatably compelling — great work at low prices — but, of course, it’s a loss in opportunity when you look at profitability. When you think of it, the whole industry of outsourcing, and the IT/ ITES services behemoths that India can now boast of, have benefited from the quality-price trade off labour arbitrage

There are whole retail formats based on this equation. Our very own Big Bazaar is a case in point. “Nobody sells cheaper and better” is a very aggressive price-oriented platform. The “better” is obviously quality considered acceptable by many, and not so good by many others!

In fact, the pioneer of the ‘discount retailer’ format, Wal-Mart, is itself trying to acquire a more upscale image. It’s been beaten, especially in clothing and fashion by erstwhile competitor Target, which has, over the recent past, undertaken may initiatives to climb up. Then there are the brands that change the whole perception of quality/ price, and there can be no better example than the famous durables brand Akai. It pretty much turned the industry around with its aggressive exchange offer-oriented tactics. I think Chinese goods, while earlier known for shoddy workmanship at dirt cheap rates, are now, actually exemplifying this mantra as well.

The reverse case of a mass brand trying to become more premium also exists. Nirma is one such brand that comes immediately to mind. I think the climb here is tougher, and there are not very many success stories, simply because the consumer aligns the brand very closely with the lower price, and therefore quality image. Of course, the story is incomplete without a description of the really high-priced/ high-quality, premium or luxury brands – Lexus/ Harley Davidson/ Mont Blanc. These are almost iconic brands and all command their price. In fact, in many of these brands, quality as we know is much more than sheer performance, it’s the intangibles that go up to make quality/ image, and thus command the price.

In sum, I think William Forster’s modification of the first few lines of this article is a better version of the constant balancing act that a corporate has to endeavour when it talks quality vs. price. “Quality is never an accident; it is always the result of high intention, sincere effort, intelligent direction and skilful execution; it represents the wise choice of many alternatives.”

The author is Co-Founder and Managing Partner of Empower Research, a Bangalore-based KPO.

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