BENCHMARKING AND STRATEGIC QUALITY MANAGEMENT

Strategic Quality Management (SQM) or Total Quality Management (TQM), as defined by J.M. Juran, W. Edwards Deming and others, consists of a systematic approach for setting and meeting quality goals throughout a company. Just as companies have set out to achieve financial goals through a process of corporate business planning, so also can companies achieve quality goals by SQM or TQM or six sigma.

An overly simplified definition of TQM is "Doing the right thing, right the first time, on time, all the time; always striving for improvement, and always satisfying the customer." This requires a focus on customer needs, people, systems and process, and a supportive cultural environment. But this really is not any different from what the six sigma methodology proposes. The essential steps of the quality management process consist of:

Quality planning

• Identifying target market segments

• Determining specific customers' needs, wants, and expectations

• Translating the customer needs into product and process requirements

• Designing products and processes with the required characteristics (Competitive benchmarking can assist in this part of the process.)

Quality control

• Measuring actual quality performance versus the design goals

• Diagnosing the causes of poor quality and initiating the required corrective steps

• Establishing controls to maintain the gains

Quality improvement

• Establishing a benchmarking process

• Providing the necessary resources

It is important to note that the process:

• Is strategic in nature, proactive

• Is competitively focused on meeting customer needs as opposed to techniques of analysis

• Is goal oriented

• Is comprehensive in terms of level and functions

• Manages in quality, not simply defect reduction

The following are very closely linked:

• Six sigma

• Business strategic planning

• Strategy development (least cost versus differentiation)

• TQM

• Pricing strategy

• Benchmarking

The classical approach to benchmarking viewed as process ” which has become the de facto process ” has the following characteristics:

• Inspection to control defects is primary tool.

• Better quality means higher costs.

• Significant scrap and rework activity takes place.

• Quality control is found only in manufacturing.

• SPC is used as an example; other tools are used occasionally.

Top management commitment

• Level 5: Continuous improvement is a natural behavior even for routine tasks .

• Level 4: Focus is on improving the system.

• Level 3: Adequate money and time are allocated to continuous improvement and training.

• Level 2: There is a balance of long-term goals with short- term objectives.

• Level 1: The traditional approach is in place.

  Note that the Level 1 commitment is the status quo, and not much is happening. It is the least effective way of demonstrating to the organization at large that management commitment is a way of life. On the other hand, Level 5 is the most effective and demands change of some kind.

Obsession with excellence

• Level 5: Constant improvement in quality, cost, and productivity

• Level 4: Use of cross-functional improvement teams

• Level 3: TQM and six sigma support system set up and in use

• Level 2: Executive steering committee set up

• Level 1: Traditional approach

Organization is customer satisfaction driven

• Level 5: Customer satisfaction is the primary goal. More customers desire a long-term relationship.

• Level 4: Striving to improve value to customers is a routine behavior.

• Level 3: Customer feedback is used in decision making.

• Level 2: Customer rating of company is known.

• Level 1: The traditional approach is in place.

Supplier involvement

• Level 5: Suppliers fully qualified in all benchmark areas

• Level 4: Suppliers actively implementing TQM and aware of the six sigma demands

• Level 3: Direct involvement in supplier awareness training; supplier criteria in place

• Level 2: Suppliers knowledgeable about your TQM as well as the six sigma direction; supplier number reduction started

• Level 1: Traditional approach

Continuous learning

• Level 5: Training in TQM and six sigma tools is common among all employees .

• Level 4: Top management understands and applies TQM and the six sigma philosophy.

• Level 3: Ongoing training programs are in place.

• Level 2: A training plan has been developed.

• Level 1: The traditional approach is in place.

Employee involvement

• Level 5: People involvement; self-directed work groups.

• Level 4: Manager defines limits, asks group to make decisions.

• Level 3: Manager presents problem, gets suggestions, makes decision.

• Level 2: Manager presents ideas and invites questions, makes decision.

• Level 1: The traditional approach is used.

Use of incentives

• Level 5: Gainsharing

• Level 4: More team than individual incentives and rewards

• Level 3: Quality- related employee selection and promotion criteria

• Level 2: Effective employee suggestion program used

• Level 1: Traditional approach

Use of tools

• Level 5: Statistics a common language among all employees

• Level 4: More team than individual incentives and rewards

• Level 3: SPC used for variation reduction

• Level 2: SPC used in manufacturing

• Level 1: Traditional approach

The Malcolm Baldrige National Quality Award encapsulates the essential elements of Strategic Quality Management. The key attributes considered when making this award are listed below. Many agree that the criteria provide the blueprint for a better company. The urgency to win the award can accelerate change within an organization. Some companies have told their suppliers to compete or else. These are the criteria:

• Quality is defined by the customer.

• The senior management of a business needs to have clear quality values and build the values into the way the company operates on a day-to-day basis.

• Quality excellence derives from well-designed and well-executed systems and processes.

• Continuous improvement must be part of the management of all systems and processes.

• Companies need to develop goals, as well as strategic and operational plans, to achieve quality leadership.

• Shortening the response time of all company operations and processes needs to be part of the quality improvement effort.

• Operations and decisions of the company need to be based on facts and data.

• All employees must be suitably trained and involved in quality activities.

• Design quality and defect and error prevention should be major elements of the quality system.

• Companies need to communicate quality requirements to suppliers and work with suppliers to elevate supplier quality performance.

Achievement of the award requires extensive top management effort and support. All of the Quality Award winners have been in highly competitive industries and either had to improve or get out of the business. On a scale of 10 (best) to 1 (poor), how would you rate your company on each of these attributes? If you find yourself on the low end, there may be a need for benchmarking.

BENCHMARKING AND SIX SIGMA

Within the information and analysis part of the examination or survey, the practitioners of benchmarking look specifically at competitive comparisons and benchmarks. It has been reported in the literature that many companies do not do enough in the way of benchmarking. They compare themselves against other manufacturers but do not make comparisons with outside businesses or even "true" best-in-class companies.

A six sigma company is expected to describe the company's approach to selecting quality-related competitive comparisons and world-class benchmarks to support quality planning, evaluation, and improvement. The specific areas to address are:

• Criteria and rationale the company uses for making competitive comparisons and benchmarks. These include:

  • The relationship to company goals and priorities for the improvement of product and service quality and/or company operations

  • The companies for comparison within or outside the industry

• Current scope of competitive and benchmark involvement and data collection relative to:

  • Product and service quality

  • Customer satisfaction and other customer needs

  • Supplier performance

  • Employee data

  • Internal operations, business processes, and support services

  • Other

• For each, the company is directed to list sources of comparisons and benchmarks, including companies benchmarked and independent testing or evaluation, and:

  • How each type of data is used

  • How the company evaluates and improves the scope, sources, and uses of competitive and benchmark data

• The company must also indicate how this data is used to support:

  • Company planning

  • Setting of priorities

  • Quality performance review

  • Improvement of internal operations

  • Determination of product or service features that best predict customer satisfaction

  • Quality improvement projects

Specific uses of benchmarking are to assist in:

• Developing plans

• Goal setting

• Continuous process improvement

• Determining trends and levels of product and service quality, the effectiveness of business practices, and supplier quality

• Determining customer satisfaction levels

A closer review of the criteria indicates several factors that are essential for effective quality excellence and benchmarking activities within a company, including:

Customer-driven quality

• Quality is judged by the customer. The customer's expectations of quality dictate product design and this, in turn , drives manufacturing.

• All product and service attributes that lead to customer satisfaction and preference must be taken into consideration.

• Customer driven quality is a strategic concept. Why do people buy your product? How do you know?

• Leadership is crucial. A company's senior management must create clear quality values, specific goals, and well-defined systems and methods for achieving the goals.

• Ongoing personal involvement is essential. The attitude must be changed from a "management control" focus to a "management committed to help you" focus.

Continual improvement

• Constant improvement in many directions is required: improved products and services, reduced errors and defects, improved responsiveness, and improved efficiency and effectiveness in the use of resources. All of this takes time. If you do not have the time, do not start.

Fast response

• An increasing need exists for shorter new product and service development and introduction cycles and a more rapid response to customers.

Actions based on facts, data and analysis

• A wide range of facts and data is required, e.g., customer satisfaction, competitive evaluations, supplier data, and data relative to internal operations.

• Performance indicators to track operational and competitive performance are critical. These performance indicators or goals can act as the cohesive or unifying force within an organization. They can also provide the basis for recognition and reward.

• Participation by all employees is important. Reward and recognition systems need to reinforce total participation and the emphasis on quality.

• Factors bearing on the safety, health, and well being of employees need to be included in the improvement objectives.

• Effective training is required. The emphasis must be on preventing mistakes, not merely correcting them. Employees must be trained to inspect their own work on a continuous basis.

• Participation with suppliers is essential. It is important to get suppliers to improve their quality standards.

NATIONAL QUALITY AWARD WINNERS AND BENCHMARKING

Example ” Cadillac

To show the strong relationship between National Quality Award winners and benchmarking, we provide a historical perspective. The first example comes to us from Cadillac's approach to excellence. (Cadillac was the 1990 winner of the National Quality Award.) The brief case study that follows indicates the integration of business planning, excellent quality management, and benchmarking.

The Business Plan was the Quality Plan. The plan was designed to ensure that Cadillac is the "Standard of the World" in all measurable areas of quality and customer service.

The major components of the plan were:

• Mission

• Objectives

  • Quality ” Emphasis on six major vehicle systems:

    • Exterior component and body mechanical

    • Chassis/powertrain

    • Seats and interior trim

    • Electrical/electronics

    • Body in white

    • Instrument panel

  • Competitiveness

  • Disciplined planning and execution

  • Leadership and people

• Goals

For each objective, the following issues were addressed:

• What are the measurable performance indicators of quality and customer service? When answering, consider both the product itself and the management process that led to the improved product or service.

• What does the customer need or want?

• What levels are achieved by the best-of-class companies considering both direct competitors and any other company?

• What are the time-phased quality improvement goals?

Action plans

• Took appropriate and applicable action to fulfill all the requirements so that the customer could be satisfied.

A Second Example ” Xerox

In the early 1980s, Xerox realized that Japanese competition was selling products for less than the Xerox cost. Many of the required reforms focused on Xerox suppliers because the cost of purchases amounted to 80% of the copiers cost of goods sold.

Xerox asked suppliers to restate their company performance data so that the supplier could be compared with the best of class Xerox could find anywhere in the world. Some of the benchmarks Xerox used to measure operations proficiency included:

• Ratio of functional cost to revenue (percent)

• Headcount per unit of output

• Overhead rate (dollars/ hour )

• Cost per order entered

• Cost per engineering drawing

• Customer satisfaction rating (index value)

• Internal and external defect rates ( parts per million)

• Service response time (hours)

• Billing error rates

• Days inventory on hand

• Total manufacturing lead time (days)

• New product development time (weeks)

• Percent of parts delivered on time

• New ideas per employee

Xerox reduced its number of suppliers from 5,000 in 1980 to 300 by 1986 based on performance data and attitude. Suppliers were classified as: (a) does not think improvement is necessary, (b) slow to accept or manage change, and (c) willing to go for it and strong enough to be a survivor . Xerox reallocated its internal efforts to concentrate on the companies in the third group. Xerox provided extensive training to these companies, and defect rates in incoming materials dropped 90 percent in three years .

In addition to performance improvement, the suppliers were asked to participate in copier design, as early in the concept phase as possible, and to make suggestions so that overall quality could be improved and costs reduced. When this information was used, the cost of purchased material dropped by 50 percent.

Third Example ” IBM Rochester

IBM Rochester describes its quality journey as follows:

1981	Vision Goal	Product reliability Zero defects
1984	Vision Goal	Process effectiveness and efficiency All process rated
1986	Vision Goals	Customer and supplier partnerships Competitive and functional benchmarks Best of competition Over 350 benchmarking teams are in place; scores of benchmarking studies have been completed; strategic targets are derived from the comprehensive benchmarking process
1989	Vision Goal	Market-driven customer satisfaction Total business process focus Closed loop quality management system Total customer satisfaction
1990 “1994	Vision Goal	Customer ” the final arbiter Quality ” excellence in execution Products and services ” first with the best People ” enabled, empowered, excited, rewarded Undisputed leadership in customer satisfaction

Results:

• A 30 percent improvement in productivity occurred between 1986 and 1989. This was a period of extensive benchmarking activity.

• Product development time has been reduced by more than half, and manufacturing cycle time has been trimmed by 60 percent since 1983.

Fourth Example ” Motorola

Each of the firm's six major groups and sectors have "benchmarking" programs that analyze all aspects of a competitor's products to assess their manufacturability, reliability, manufacturing cost, and performance. Motorola has measured the products of some 125 companies against its own standards, verifying that many Motorola products rank as "best in their class." (It is imperative for the reader to understand that the result of a benchmarking study may indeed provide the researcher with data to support the assertion that the current practices of your own organization are the "best in class.")

BENCHMARKING AND THE DEMING MANAGEMENT METHOD

There is a very close relationship between the approach of W. Edwards Deming and that specified by the requirements of the National Quality Award. The potential role of benchmarking to implement certain aspects of the Deming approach is apparent.

Deming's fourteen points are summarized below:

1. Create constancy of purpose for the improvement of product and services.

2. Adopt the new philosophy that quality is critical for the competitive survival of a company.

3. Cease dependence on mass inspection, and create the processes that build a quality product from the start.

4. End the practice of awarding business based on price alone, and take into consideration the quality of products and services received.

5. Improve constantly and forever the system of production and service. This begins with product design and goes through every phase of business operations.

6. Institute training and retraining .

7. Provide leadership and the resources required to get the job done.

8. Drive out the fear of admitting problems and suggesting new and different ways of doing things. Get around the not invented here syndrome.

9. Break down interdepartmental barriers so that all departments can work toward the common objective of satisfying the customer.

10. Eliminate slogans, exhortations , and targets for the workforce without providing the ways and means for accomplishment. Do not tell people what to do without telling them how to do it and providing the systems and support necessary.

11. Eliminate numerical quotas. These often promote poor quality. Instead analyze the process to determine the systemic changes required to enable superior performance.

12. Remove barriers to pride in workmanship by providing the training, communication, and facilities required.

13. Institute a vigorous program of education and retraining. Help people to improve every day.

14. Take action to accomplish the transformation required.

BENCHMARKING AND THE SHEWHART CYCLE OR DEMING WHEEL

Plan

Study a process to determine what changes might be made to improve it. What type of performance is achieved by the best of the best? What do they do that we are not doing? What results do they achieve? What changes would we have to make? What does the customer expect? What is the customer level of satisfaction? Is the change economically justified?

Do

Determine the specific plan for improvement and implement it. This involves the development of creative alternatives by work teams and the conscious choice of a strategy to be followed. This may require internal or external benchmarking.

Study ” Observe the Effects

Was the root cause of the problem identified and corrected? Will the problem recur? Are the expected results being achieved?

Act

Study the results and repeat the process. Was the plan a good one? What was learned?

This approach amounts to the application of the scientific method to the solution of business problems. It is the basis of organizational learning.

WHY DO PEOPLE BUY?

Differentiation and quality management both focus on the need to meet customer needs, wants, and expectations. Why does a person buy a particular product?

• One view: (marketing based)

• A second view: (psychologically based)

How can we define quality? This is a very critical question and may indeed prove the most important question in pursuing benchmarking. The importance of this question is that it will focus the research on "best" in a very customized fashion from the organization's perspective. This is a question that must be addressed as early as possible.

ALTERNATIVE DEFINITIONS OF QUALITY

People buy a combination of products and services for a price that depends upon the perception of the value received. In order to conduct benchmarking studies relative to quality, it is important to define the elusive term "quality." Garvin (1988) and Stamatis (1996, 1997) provide various definitions of quality as follows:

Garvin's eight dimensions of product quality are:

• Performance ” Performance refers to the ability of the product to perform up to expectations relative to its primary operating characteristics. For example, a camera can be self-focusing and automatically adjust the lens opening. Products can often be ranked in terms of levels of performance, i.e., good, better, best. People's expectations differ depending upon the task to be performed. Products are designed for different uses. Therefore, a failure to perform might simply indicate another product class or market segment focus and not inferior quality.

• Features ” Features are secondary attributes that affect a product's performance. For example, the camera mentioned above can weigh less than two pounds . A car can have power steering as a feature. Features can often be bundled or unbundled. The distinction between performance and features is arbitrary. One person's performance characteristics can be another person's features.

• Reliability ” Reliability reflects the ability of a product to perform properly over a period of time. A car, for example, might perform without major repairs for 50,000 miles. Measures used to evaluate reliability are factors such as the mean time between failures, the mean time to first failure, and the failure rate per 1000 items.

• Conformance ” Conformance measures whether product quality specifications have been met. Is a shaft the required diameter? Are the parts of impurity per million within the specified limits? Individual parts can be within tolerance; however, there can be a problem of tolerance stackup. Four parts, each 1.000 inch wide plus or minus .0005 inch, when stacked up will not be 4.000 inches tall plus or minus .0005 inch.

• Durability ” Durability measures a product's expected operating life. Product life can be limited due to technical failure (mechanical, electrical, hydraulic, pneumatic), technical obsolescence, or the economics of continued repair. For example, a light bulb has technical failure when the filament burns out. An automobile has economic failure when the owner decides it is no longer economically advantageous to repair it.

• Serviceability ” Serviceability refers to the speed, ease, cost, certainty , and effectiveness of repair. Of critical concern are the courtesy of the repair people, the speed of getting the product back, and whether or not it is really fixed.

• Aesthetics ” Aesthetics are concerned with the look, taste, feel, sound, and smell of an item. This can be critical for products such as food, paint, works of art, fashion, and decorative items.

• Perceived quality ” Perceived quality is determined by factors such as image, advertising, brand identity, and word of mouth reputation.

Stamatis, on the other hand, has introduced a modified version of the above points with some additional points ” especially for service organizations. They are:

• Function ” The primary required performance of the service

• Features ” The expected performance ( bells and whistles) of the service

• Conformance ” The satisfaction based on requirements that have been set

• Reliability ” The confidence of the service in relationship to time

• Serviceability ” The ability to service if something goes wrong

• Aesthetics ” The experience itself as it relates to the senses

• Perception ” The reputation of the quality

To be effective and efficient, the following characteristics must be present:

• Be accessible

• Provide prompt personal attention

• Offer expertise

• Provide leading technology

• Depend ” quite often ” on subjective satisfaction

• Provide for cost effectiveness

What is interesting about these two lists is the fact that both Garvin and Stamatis recognize that design for optimum customer satisfaction is a design issue. Design, indeed, is the integrating factor. The designer has to make the tough trade-offs. Concurrent engineering and Quality Function Deployment suggest that the product designer, the manufacturing engineer, and the purchasing specialist work jointly during the product design phase to build quality in from the start. The focus, of course, is to design all the above characteristics as a bundle of utility for the customer. That bundle must address in holistic approach the following:

Image

• Transcendent view ” This view defines quality as that property that you will innately recognize as such once you have been exposed to it. Something about the product or service or the way it has been promoted/communicated to you causes you to recognize it as a quality offering ” perhaps an excellent one.

Performance

• Product-based view ” This view defines quality in terms of a desirable attribute or series of attributes that a product contains. A high-quality fuel product could have a high BTU content and a low percentage of sulfur.

• User -based view ” This view defines quality in terms of how well a product or service meets the expectation of the customer. If the product meets expectations, it is considered to be of high quality. Expectations vary widely, and meeting expectations may not lead to the best product. For example, a bestseller may not be the best literature.

• Manufacturing-based view ” This view defines quality in terms of conformance to manufacturing specifications. This view may, however, promote manufacturing efficiencies at the expense of suitability to the user. For example, problems of tolerance stackup are particularly noteworthy.

Value

• Value-based view ” This view, which is gaining in popularity, looks at value as the trade-off between quality and price. From this perspective, quality consists of all of the non-price reasons to buy a product or service.

To come up with reasonable definitions and actions for the above characteristics, a team must be in place and team dynamics at work. A very good approach for this portion of benchmarking that we recommend is the nominal group process:

The process features are as follows:

• Group size : five to nine core individuals

• Group composition: multidisciplinary and cross-functional

• Reflection ” 20 minutes: all participants allowed to express their views as to what the problem is and how the team should progress

• Sharing of ideas: Discussion of the presented ideas

• Voting: evaluation of ideas and selection of the "best"

• Tabulation: Final resolution of what is at stake and how to proceed so that success will result

The discussion and direction of the nominal process must not focus on price alone because that is a very narrow point of view. Some examples of non-price reasons to buy are:

Product non-price reasons to buy

• Ease of product use

• Performance

• Features

• Reliability

• Conformance

• Durability

• Serviceability

• Aesthetics/style

• Perceived quality

• Ability to provide a bundled package

Service and image non-price reasons to buy

• Speed of delivery

• Dependability of delivery

• Fill rate

• Fun to deal with

• Number/location of stocking warehouses

• Repair facilities and location

• Technical assistance

• Service ” before, during, and after sale

• Willingness to hold inventory

• Flexibility

• Access to salespeople

• Access to multiple supply sources

• Reputation

• Life cycle cost

• Financing terms

• Turnkey operations

• Consulting/training

• Warehousing

• Guarantees/warranty

• Services provided by salespeople

• Ease of resale

• Computer placement of orders

• Professional endorsement

• Packaging

• Up front engineering

• Vendor financial stability

• Confidence in salespeople

• Backup facilities

• Courtesy

• Credibility

• Understandability

• Responsiveness

• Accessibility of key players

• Flexibility

• Confidentiality

• Safety

• Delivery

• Ease of installation

• Ability to upgrade

• Customer training

• Provision of ancillary services

• Product briefing seminars

• Repair service and parts availability

• Warranty

• Image

• Brand recognition

• Atmosphere of facilities

• Sponsor of special events

The service and image features define the "augmented product." They answer the questions:

• What does your customer want in addition to the product itself? (the unspoken requirements)

• What does your customer perceive to have value?

• What does your customer view as "quality"?

In order to focus benchmarking efforts, it is critical to define the unique selling proposition or the product concept. A statement of product concept requires the definition of both attribute(s) and benefit(s). Attributes consist of both form and features (specific product or service characteristics) and technology (how they are to be provided). For example, a new brewing technique brings a double-strength beer to add to your enjoyment by capturing the taste of the 1800s (technology, form, benefit).

So what do you expect to get out of this team effort and integration? Simply put, you should get the answers to some very fundamental questions about your organization and the product/service you offer. Some typical questions are:

• What are the non-price reasons to buy your product? How do they compare with the product and service attributes listed above?

• How do your customers define quality? How does your company define quality?

• What is more important? Product or service?

• Can specific, measurable attributes be defined?

• How does your competitor define quality?

• How do you compare with your competitor?

• What other companies or industries influence your customer as to what should be expected relative to each of these characteristics?

• What does this suggest in the way of benchmarking opportunities?

For example, here are some non-price reasons to buy that might apply to a supermarket :

• Large parking lot

• Zoo in parking lot

• Lots of giveaways

• Makes shopping fun for the entire family

• Clowns

• Disneyland figures

• Well-stocked, attractive displays

• Rock hard containers of ice cream

• Complaint box (policy to respond the next day to the customer)

• Fast cash out

• "Forget your checkbook ? Pay next time."

• Trains all associates

• Uses Dale Carnegie courses

• Walt Disney people management

• One aisle that rambles through the store

• No question return policy

• Bus for senior citizens

• Customer focus groups every three weeks

• Associates who take the initiative to please customers

• In-store dairy and bakery

None of these, in itself, is earth-shaking. But they could make the difference in an industry that operates with a profit margin of less than 1%.

We cannot pass up the opportunity to address non-price issues for the WALMart corporation, which allegedly spends 1% of 100 details in the following items:

• Aggressive hospitality

• People greeters

• Associates not employees

• Tough people to sell to

• Weekly top management meetings

• Low cost, no frills environment

• Good computerized database

• Rapid communications by phone

• Managers in the field Monday through Thursday

• High-efficiency distribution centers

• Emphasis on training of people

• Department managers having cost and margin data

• Profit sharing if store meets goals

• Bonus if shrinkage goal is met

• Open door policy

• Grass-roots meetings

• Constant improvements

• Competitive ads shown in store

DETERMINING THE CUSTOMERS PERCEPTION OF QUALITY

Differentiation is uniqueness in the eyes of the customer. Quality is meeting the unique needs, wants, and expectations of the customer in terms of the non-price reasons to buy. But who is the customer? Depending on (a) defining the customer for multiple channels of distribution or (b) identifying the multiple buying influences in a business-to-business sale, the customer may be:

• User

• Technical buyer

• Economic buyer

• Corporate general interest buyer

Who is the competitor? Assume for example a recreation environment. Here are some questions you might ask that would help you to determine who the competitors are:

What is the desire I want to satisfy ? (Desire competitor)

• Recreation

• Education

What kind of recreation do I enjoy? (Generic competitor)

• Baseball

• Boating

What kind of boating? (Form competitor)

• Power boat

• Sailboat

What brand boat? (Brand competitor)

• Bayliner

• Boston Whaler

Once these questions have been addressed, now we are ready to do the competitive evaluation in the following stages:

Survey design

• Attributes considered

• Relative weight given to each

• Direct competitors

• Performance versus competition

Approaches to making the survey

• Internal

  • Sales force

  • Sales management (Remember, the more accurate data you have, the better the survey. For example: Colgate Palmolive audits 75,000 customers for all products. "People know what they want and will not settle for happy mediums.")

• External

  • Market research firms/universities

  • Attribution/non-attribution

  • Use of customer service hot line ” GE progressed from receiving 1000 calls per week in 1982 to receiving 65,000 calls per week with the installation of an 800 number answer center. The 150 phone reps need a college degree and sales experience. They have been effective in spotting trends in complaints as well as increasing sales. The increase in sales has been estimated at more than twice the operating cost of the center. (Did this trigger off a benchmarking candidate for you?)

Groups to be surveyed

• Current customers

• Lost customers

• Prospects

Survey frequency

Comparison of company internal view versus the customer view

QUALITY, PRICING AND RETURN ON INVESTMENT (ROI) ” THE PIMS RESULTS

Being perceived as being the best or having the product with the highest quality can have significant bottom line results. Buzzell and Gale (1987) introduced the PIMS (Profit Impact of Marketing Strategies) system, which is an elaborate benchmarking database developed by the Strategic Planning Institute in Cambridge, Mass. The database contains information for over 450 companies and over 3000 business experience pools in a wide variety of industries, including manufacturers, raw material producers , service companies, distributors , and durable and non-durable consumer products. Data are collected for independent business units, each with a defined served market.

The objectives of the Strategic Planning Institute and benchmarking are to help organizations in the process of becoming excellent organizations. How do they do it? By:

1. Using the statistical analysis and modeling of business experience

2. Isolating the key factors that determine return on investment (ROI)

ROI equals net income before interest and taxes divided by the total of working capital and fixed capital.

As a result the Institute can help organizations with:

• Understandability

• Predictability

of their own organization's behavior and their own products and services.

Of course, the choice of strategy depends upon several factors, including but not limited to:

• Market growth rate and product life cycle

• Current market share

• Price/quality sensitivity by segment

• Competitive response profiles

• Current and planned capacity

• Cost and feasibility of quality improvements

• Market perception of quality improvements

• Financial and marketing goals ” long and short term (The period described as "short term" and "long term" will differ widely among various strategies and organizations.)