The bitterness of poor quality remains long after the sweetness of low price is forgotten!

I was recently reminded of this old proverb: The bitterness of poor quality remains long after the sweetness of low price is forgotten!

Another way to look at this is "The Common Law of Business Balance." A phrase first coined by Thorstein Bunde Veblen (1857 - 1929) - meaning that low prices of a product or service by necessity represent a compromise in quality or benefit. Veblen, of Norwegian descent, was a leading intellectual at the time. 

But is the law correct? Well, yes and no. 

In the manufacturing of commodity or near commodity products, the law mostly holds. For example, I recall a customer who bragged about his top-line PC laptop's screaming performance. But just six months into his ownership, many of the keyboard keys had lost most of their legend. While my Apple laptop, at twice the price, five years old at the time, did not have any quality issues whatsoever. My customers' laptop lost its keyboard legend because a company selling a commodity must focus a lot on cost control; in the example above, too much. To the point, they used sub-par components to sell at a competitive price and still maintain a sufficiently high margin. On the other hand, Apple can use better quality components because they differentiate themselves in meaningful ways to a portion of the marketplace. A market segment willing to pay higher prices for Apple's differentiators. 

If you manufacture a commodity product, what will you do? Differentiate your company and product(s) or draconian cost control to the point quality will suffer?

Per Sjofors

Founder

Sjofors & Partners