We are in the midst of a major change in how we will manage business, and the worldwide consumer is at the heart of it. American business is under increasing pressure from foreign competition, as well as American customers, to provide better products and service.
Consumers are fed up with the status quo. Many even believe things are getting worse. Recent articles in Time, Fortune and other periodicals emphasize increasing discontent with the products they buy and especially the service they receive. The Technical Assistance Research Programs Institute, Washington, D. C., found service operators of many companies are fielding more than twice the complaints they did in the 1970s.
Despite the rising tide of evidence, many managers underestimate the impact of growing consumer discontent. In part this is because they underestimate the impact poor quality products/service have on profits.
Recently the Washington Post reported that executives underestimate the cost of poor quality, claiming a majority of those executives surveyed say it accounts for 10 percent or less of gross sales. However, most experts on the "cost of quality" say the losses are more in the range of 20 percent to 30 percent for defective products. In other words, a company with $1 billion in sales could lose up to $200 million annually due to poor quality and consumer dissatisfaction.
Customer satisfaction is directly related to quality or lack of it. Increasing customer satisfaction is producing real rewards for those that recognize the opportunity. The Japanese reaped rewards through the improved quality of their products ranging from automobiles to computer chips. Currently America's best are responding by increasing the attention paid to the consumer's needs and desires. Ford, IBM, Hewlett-Packard and American Express are only a few of those at the forefront of putting the customer at the center of their strategy.
The increasing importance the consumer is playing in long-term business success has not gone unnoticed by the federal government. For years the Japanese had their Deming Prize. Today we have our own award that recognizes those that have mounted outstanding world-class quality efforts. The award, called the Malcolm Baldrige National Quality Award, was named after the former Commerce Secretary. Established by legislation in 1987, it is designed to promote national awareness of the importance of improving the quality of products and services as well as recognize quality achievements of U.S. companies.
Commerce Secretary C. William Verity commended three companies who received the first Malcolm Baldrige Awards. He said they were, "inspiring examples of what can be accomplished...in improving quality, strength and market position." The first awards were given to the Commercial Nuclear Fuel Division of Westinghouse Electric Corp., Globe Metallurgical Inc. and Motorola Inc. Motorola was the only large corporation to receive the award on a corporate-wide basis.
Motorola and other innovators are on the cutting edge of customer satisfaction and service. Their approach to quality and "total customer satisfaction" is a lesson well worth learning. Robert W. Calvin, chairman of Motorola Inc. noted, "While this distinguished award recognizes us for our outstanding quality management system, we realize that there is more to do."
Motorola, as well as a few other aggressive and competitive organizations, recognizes the importance customer satisfaction plays in becoming a world-class company. World-class companies are able to compete and win no matter who they are up against as a competitor. Today, these world-class competitors increasingly are organizing their business around their customers. It is not short-term profit that is the focus. Instead the central focus remains on their customers' satisfaction. These world-class organizations do not simply believe "the customer …