The cost of maintaining quality: better inputs, trained staff and time spent checking

1. Keeping quality consistent costs money before it saves any, and the spending shows up in four places.
   1. Better materials: a boot built to last needs thicker leather and stronger stitching than a fashion boot, and the supplier charges more for both.
   2. Training staff: workers have to be taught the standard before they can hit it, and training hours are paid hours in which nothing is produced.
   3. Inspection or assurance systems: the quality control and quality assurance methods of the previous guide have to be paid for, in testing equipment and in the wages of anyone whose job is to check rather than to make.
   4. Time spent checking: an item held back for a check is an item not yet sold, so output per hour falls even when nothing turns out to be wrong with it.
2. All four raise the cost per unit, so a business that lifts its standards must either accept a thinner margin or charge a price customers will pay for the difference.

The cost of not maintaining quality: the bill that arrives later

1. Poor quality costs more than good quality, and the bill arrives in five places of which only the first two ever reach the accounts.
   1. Scrap and rework: a faulty item is thrown away or made again, so the business pays twice for one sale, once for the ruined materials and again for the labour that redoes the work.
   2. Refunds, replacements and repairs: consumer law gives a buyer the right to a remedy when goods are faulty or not as described, so the seller carries that cost whether it budgeted for it or not.
   3. Handling complaints: every complaint uses staff time on calls, emails and returns paperwork, which is time not spent making or selling anything.
   4. Lost repeat custom: a customer who receives a faulty order usually buys elsewhere next time, so the business loses not one sale but every sale that customer would have made for years.
   5. Reputational damage: one bad review sits online where every future shopper reads it, so sales are lost to people who never bought, never complained and never appear in any figure the business can count.

How quality turns into competitive advantage

1. Competitive advantage built on quality is a chain, and an answer earns its marks by saying every link out loud.
   1. Quality that is the same every time builds a reputation, because a customer knows what they will get before they hand over any money.
   2. That reputation makes customers pick this business over a cheaper rival, so demand holds up when a competitor cuts its price.
   3. Loyal demand lets the firm charge more without losing those buyers, so the revenue earned on each sale rises.
   4. A higher price on a similar cost base widens the margin, which pays for the materials, training and checks that hold the quality steady, so the advantage renews itself.
2. Quality also makes the rest of the business easier to run, because fewer faults mean fewer returns for operations to process and promotion can advertise a claim the product actually delivers.

Quality has to be right for the market, not the highest possible

1. The right level of quality is the level the customer is paying for, because spending past that adds cost the price cannot recover.
   1. Budget retailers: Aldi and Lidl compete on price with a narrower product range, so their target is food that is consistently fresh, safe and worth the money rather than the best version of every line.
   2. Premium brands: Dr Martens sells boots on durability at a high price, so a pair that fell apart in one winter would remove the whole reason for paying it.
2. Both models depend on quality and simply define it differently, dependable at low cost for the discounters and made to outlast the alternatives for the premium brands.