Business Operations

Know When You’ve Overinvested in Quality

Know When You’ve Overinvested in Quality
  • 31 percent of midsize businesses that devote “significant time” to competitive strategy say they do so in order to meet or exceed their clients’ needs in relation to the competition.1
  • 40 percent of midsize businesses say quality is the primary focus of their competitive strategy; of these, 63 percent say they fulfill this component by offering a superior product or customer support.1

Investing in quality may be a key step to satisfy customers and improve products, but there is a point at which investing in quality ceases to have a tangible ROI. In fact, some business owners risk allocating capital in the pursuit of quality that would be better served elsewhere.

So how do you know when you’ve reached the point of lowered returns?

The first step in the process is simply recognizing that choosing to compete on quality comes with measurable financial expenditures, and these costs are subject to evaluation and reassessment.

You should objectively review past and current projects using customer survey results, market information or other data you may have on file. Which projects were of sufficient quality? Were there any of insufficient quality? Exceptional quality? If possible, review the investments made in each of them, and see what costs were most instrumental in delivering the quality metric.

Most importantly, continue to track all expenditures related to quality improvement efforts, including all those incurred during testing, as well as time and money spent during defect detection and correction. Only by quantifying these costs can you ensure you are investing the proper amount to stay competitive (and profitable).

3 Barriers to Competing on Quality

Quality has become more important than ever as online product comparisons and user-generated reviews impact sales across industries in both the B2C and B2B spaces.

Here are three common barriers companies face when trying to compete on quality, and what you can do to ensure a focus on quality enhances your competitive positioning:

Barrier: Lagging technology

Tip: As demand increases, you’ll be tasked with increasing output without sacrificing quality. Investing in the latest technology and equipment to improve productivity can help you stay ahead of your competitors.

Barrier: Insufficient personnel

Tip: A workforce that embraces quality as a core value is essential in order to bring high-quality goods and services to market, but identifying and recruiting new talent can be costly. Consider acquiring a competitor that boasts a workforce with the skill sets you require to foster sustainable growth.  

Barrier: Maintaining an underperforming division

Tip: Improve your focus on quality by selling a division of your company that is not a key component of your portfolio or essential for long-term growth.

For more information on competitive strategy, read our complete guide. Or contact your SunTrust banker today to learn more about the resources available to you to support your strategy and strengthen your market share.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.


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