Lower quality = lower cost

Can you save money by providing a lower quality service?  The answer is yes, well err no, or perhaps.  It all depends upon what you mean.  It seems like a good idea and it is a popular notion, especially in these straightened times, to consider limiting the quality of service that you provide on the basis that it is the best that you can afford.  Everyone knows that providing excellent service costs money and there must be a link between cost and quality. Isn’t there?   As money gets tighter it must make sense therefore that a lower level of service will cost less to provide.  For example, if it costs you so much to fix a percentage of a certain issue within a set time it must be more cost efficient to set your sites lower and reduce the fix percentage that you are aiming to achieve.

This premise holds true if you consider your organisation in its component parts, customer contact, design, production and sales etc.  Reducing the number of people who answer the phone in your contact centre for example will certainly reduce the cost in that department and could well lead to a reduced level of service.  But the premise won’t hold true if you consider the effects across the whole organisation.  Reducing service levels in one part will lead to increased activities in another.  Reducing quality in production will lead to increased activity in rework and increased complaints which in turn will lead to increased management activity in trying to respond to angry and dissatisfied customers.

And of course if you rely upon income directly from your customers then a reduction in quality is likely to lead to a reduction in the amount of spend which will lead to pressure to reduce selling prices to maintain market share.  To meet these new price points costs will need to be addressed again which has the potential to start the whole viscous cycle over again.

The truth is paradoxical.  It is more costly in the long run to provide a lower quality service than a high quality one.   Organisations need to identify what is important to them, their value chain and focus on ensuring that quality is built into it at every step.  By focusing on cost only, your eye is taken off quality and costs are pushed around the organisation only to pop up in parts which had not expected to have to deal with them.  Anyone who has ever dealt with an organisation that has outsourced their customer contact will be reminded of how things can go horribly wrong.

Achieving high quality is costly, agreed.  Beware however; settling for lower quality in the name of saving money may well end up costing you your business.

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