A piece that puts off would-be entrepreneurs from starting a business is there’s never ever a promise of running it profitably. It’s not that the perfect business plan, smart and charismatic people, and sufficient funding aren’t enough. Risk is defined in many ways. We’ll simply say that it’s the likelihood of plans not panning out as hoped. How does product quality, then, impact profitability? Does product quality guarantee business success?
Although product quality has been found to have a positive impact on profitability, it still does not guarantee business success. There’s more to it than just superior product quality, and these include proper marketing, sufficient demand, and market timing.
Page Contents
Product quality and profitability
Before anything, let’s emphasize one point and make it clear: Product quality has a strong correlation with business profitability. (See Quality Magazine) In general, better quality leads to better customer satisfaction, a boost in demand, lower costs (most of the time), and improved profitability.
All things the same, a business should be mindful of product quality.
But the fact remains, product quality does not always convert to business success. Here are 5 reasons why a hyperfocused strategy on quality might not be enough.
5 Reasons product quality does not guarantee business success
All things mentioned here assume ceteris paribus, or holding all things the same. Some of these reasons don’t preclude your business from success. But they do hold you back and it’s always best to anticipate and address them early on.
1. Your marketing fails to reach the ideal audience
“If you build it, they will come” just isn’t true. At least not in today’s age where targeted advertising is the norm and is probably done by your competitors.
A product that doesn’t reach its audience’s eyes does not sell.
Keep in mind that platforms such as Facebook, YouTube, and Google allow businesses to customize their advertisements and reach their targeted demographic. If you’re competing with a company that sells a product with less than stellar, but acceptable, quality, and they’re able to reach your audience, then you’re missing out on important prospects.
Even word-of-mouth, a marketing strategy that builds on product quality, needs a boost to start. Point-blank, you need to reach your ideal audience before they get a chance to buy your product.
2. There’s a gap between the product’s perceived and actual quality
Reaching your audience is the first step. Being able to communicate and align your product’s quality, with the customer’s perceived quality, is the necessary next step.
A marketing strategy that fails to relay the important information is almost as bad as not reaching your audience. Why? Because you’ve spent the budget on marketing with no returns to show for it.
Granted, the ideal customer (assuming it’s truly the customer that wants or needs your product) will need little convincing. But effectively communicating your value proposition converts mere impressions to actual payments.
Here are some ways to increase the perceived quality of your offerings from Chron.com. Be careful though with price increases. They may or may not increase sales. (Related: Does Lowering Prices Increase Sales? 2 Ways Math Says Yes and No)
3. It’s not economically feasible
The best product quality occasionally (most of the time) means expensive materials, increasing the cost of production.
This is an arguable point so let’s be clear. I’m not talking about using quality materials that last longer vs. subpar materials that need replacing and end up costing more. Quality materials, more often than not, do reduce costs in the long run.
But sometimes, the technology for the product isn’t mature enough to make production commercially feasible. This causes fixed costs to push up, driving the product’s break-even point to unachievable levels.
It’ll be a challenge to weigh the pros and cons of making the absolute best product possible. But the use of break-even point (BEP) analyses helps assess viability. Visit these posts for details on calculating and lowering your BEP: Using the break-even point to assess business viability and 25 ways to lower your break-even point and profit faster.
An example is when solar-powered technology was introduced to the market in the early 2000s. The cost to produce solar was 7x (Lazard.com) than what they are now.
This brings us nicely to our next point, timing.
4. The timing isn’t right
As mentioned, product quality might be a moot point if the timing isn’t right.
Adverse or bad timing might be due to several causes. These include technological constraints (and therefore exorbitant costs), social stigma, or even political reasons.
Even Google, one of the most powerful and influential companies of our time, hasn’t been spared from this. I’m not one to doubt Google’s proficiency when it comes to product quality, so I’ll assume the Google Glass was a quality offering. (If there were bugs, they would’ve been easily fixed like all the other beta products.) But even that failed.
Aside from being expensive, the Google Glass made the wearer look funny. But think about self-balancing scooters. They, too, looked ridiculous at inception. Now we see them everywhere. So it’s not exactly about how it looks, but rather about the timing and general acceptance of the public.
Here are 10 products that failed because of poor market timing from Business.com.
5. Best quality is not what the market wants
Sometimes, the market just wants the cheapest available option, even if it means substandard quality and frequent replacements. This could be for many reasons.
When Alibaba sells cheap knockoffs, for instance, consumers have grown accustomed to the chance of it breaking. The cheaper option is, at times, more economically useful despite accounting for replacement costs.
If you’re in a market where consumers don’t mind the low lifespan of a product, then you could lose out on a lot of sales.
Conclusion
Business endeavors are inherently risky. It is this risk that puts off a lot of people, and why entrepreneurship isn’t for everybody.
While product quality and profitability have a strong correlation, the positive relationship just means there’s probably a good chance, not a guarantee. In fact, there’s never a guarantee. Even excellent product quality offers no reprieve.
We’ve talked about some of the reasons why that is. Is there anything I missed? Share your views in the comments section below.
