Pay More For Product Quality, Pay Less For Everything Else
When you sell physical products it’s sometimes tempting to cut costs by paying less for the products you buy from manufacturers.
If you can save $.27 per unit by using cheaper or thinner materials or cutting out some product feature that will delight customers, you just might.
Saving by skimping on product quality is tempting for merchants because the cost-cutting, ROI-improving, margin-increasing effects of the decision are measurable and instant.
Number Of Items You Intend To Sell X Per-Unit Savings = Extra Profit!
Of course, it’s not that simple. What looks like ‘saving’ is actually the decision to not make an investment in your company, and this leads to incurring many unseen, immeasurable, losses in the future.
Higher Customer Returns
Your faulty products will be returned more frequently. You’ll need to issue refunds and pay for return shipping for these items. More costs and more logistics headaches to deal with.
Higher Customer Service Costs
More returns and more customer complaints, requests, and questions means that your customer service managers will need to put in more time speaking with customers. You’re paying them for every hour! With a high-quality product like the iPhone, you don’t need to call the Apple support line very often!
More Money Spent On Marketing
Great products don’t sell themselves, but sometimes it feels like they do. Whether you’re selling in person or selling online, it saves time and money and is much easier to sell a product that’s obviously made well and that looks great. A salesperson requires less fake enthusiasm because real enthusiasm exists. Online pictures (assuming they aren’t fake) will look better and you can clearly articulate real benefits on your landing page without trying to tip-toe around product faults. (Higher conversion rates!)
Less Top-Line Sales Due To Anti-Marketing
On Amazon.com, more 1* reviews means that customers are less likely to buy today, and that your product will have less customers who even see it tomorrow!
Even if you don’t sell on Amazon.com, customers are still talking about your products. Every public Internet complaint, and every offline conversation with a friend means you’ll have less people searching for and buying your products organically. This leads to unseen losses as your business grows slower and potentially obvious losses as you spend more on marketing to continue being seen.
Less Customer Loyalty
Not every customer who enjoys your product will repurchase from you, but no customer who has a bad experience will ever buy from you again!
Some percentage of your customers could have become repeat customers, and you’ll never know how much your top-line revenue or company growth rate were hit by your mediocre product quality.
You May Need To Cut Prices
Saving $.27 per unit is great so long as you don’t need to later decrease your retail price by $2.7 as complaints come in and you’re seen as a cheap knockoff rather than the ‘premium quality’ option.
Often, paying just a few pennies extra to your manufacturers to ensure top-quality or add 1 more feature will lead to a 10X return in the higher price you’re able to charge for your products.
You May Take A Big Hit
If you don’t pay a little extra to ensure top-quality, you risk taking a big hit that totally wipes out potential savings and more.
You might end up with a warehouse full of junky paperweights that don’t work. If you sell on an online marketplace like Amazon.com you may have your product ‘blocked’ or ‘banned’ for causing a bad customer experience. Big companies who let quality slide sometimes are forced to recall their items from the market, an incredibly expensive headache.
The Big Immeasurable Benefits Of Product Quality
Your Peace Of Mind
When you’re selling products you know are good, you feel great about yourself and your company. You sleep well at night knowing that you’re being paid well for a job well done.
Rather than the company image degrading as customers complain, you’re building a trusted, valuable brand, which may be more valuable than all of the cash flow your business generates today. Coca Cola counts its ‘brand equity’ as high as 30% of the value of the entire company. This ‘brand value’ is mostly immeasurable, existing in the minds of your customers and not on your balance sheet, but the trust is real and results in more sales and goodwill from customers.
These Costs (And Benefits) Are Difficult To Measure
It’s clear why some merchants decide to take the guaranteed savings today, say $2,700 on your next purchase of 10,000 units, while disregarding the fuzzy uncertain benefits of basic product quality improvements.
In this blog post, I hope to make it clear that ‘saving’ is rarely saving when it comes at the expense of the quality of the products your company sells to customers.