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Maintaining quality in a tough economy

May 1st, 2009 / By: / Feature, Management

0509_f3_1So you’re known for your quality…Great! But how are you supposed to sell quality in this economy? That’s the challenge manufacturers face: persuading discount-seeking buyers to pay a premium for top-of-the-line goods. It’s not so easy.

“Prices are really becoming the selling point that we’ve noticed this year, and it probably will continue,” says Angela Goodrich, marketing manager at Polo Custom Products, a division of M-C Industries Inc., in Topeka, Kan. What should you do? Keep pitching quality to prospects who are intent on haggling, or cut corners, cut prices and risk soiling your reputation?

Don’t skimp

That’s the wrong question, according to Bud Weisbart, IFM, vice president of AR Tech and AR Industries, divisions of A&R Tarpaulins Inc., Fontana, Calif. “Those aren’t the only two choices,” Weisbart says. Cutting quality means “you’ve sharpened the knife that’s going to slit your throat.” But what if it comes down to cutting your quality or going out of business? Weisbart stays adamant. “Cutting quality,” he says, “is the same as going out of business. It’s just now or later.”

Weisbart and like-minded business people are uncompromising advocates for quality. Some fabric makers have little choice. Weisbart must adhere to ISO standards under which his company is certified. Some companies make custom products for military, aerospace or medical markets that have rigid standards.

Polo’s fire-retardant and chemical-resistant materials must meet industry standards. Materials meeting these regulations are costly. Customers know it—and know they must pay.

Work with me

Even so, dickering is the new order. Providers strive to hold the line on quality while trying to give ground on price. “We’ll work with people a little bit,” says Suzanne Joseph, owner of Ortega’s Canvas and Sail Repair in Carlsbad, Calif., which makes everything from restaurant patio covers to slings for rescuing stranded whales. Profits suffer, but quality still counts. Even with narrower margins, Joseph wants her customers to have a product that will last them five or 10 years rather than a year. “We don’t want to get a bad reputation,” she says.

0509_f3_2It’s quality that still sets you apart even in a reeling economy, argues Kevin Kelly, MFC, IFM, CPP, president of Globe Canvas Products Co., Yeadon, Pa. “Not just in this environment,” Kelly maintains, “but in every environment, quality is the dominant differentiator.” How does he sell quality? “If it’s a repeat customer, you use the durability of the product you supplied last time,” says Kelly. “If it’s not a repeat customer, you make the same argument, although they don’t have the benefit of experience.”

Others take the same tack. Ask prospects to mull over how much a lower-priced, lower-performing product will cost over time, versus a better-performing product that costs more up front. Cheaper products can cost more long-term because of repair and earlier replacement. “If it lasts longer, the cost is less,” says Weisbart. “If it lasts three years instead of one year and you only have to buy it once instead of three times, it costs less.”

Better and cheaper

However, top quality manufacturers can compete on price, Weisbart insists. He rejects the premise that lower price means lower quality. “Sometimes providing a better product will result in a lower charge,” he says. Lean production and smart materials buying can minimize price without touching quality. Good equipment helps as well. Weisbart’s new computerized cutting machine “allows more precision and more rapid production, which results in greater quality assurance at a lower price based on a lower cost to us,” he says.

Other manufacturers are also confident they can compete on price without budging on quality. Polo’s in-house design services may propose changes to customer concepts—things that cost less but don’t affect performance, such as a different color that is more readily available at a lower price. In some cases, a strategic retreat on quality is in order, lowering price without affecting performance. For example, if a slightly less durable material is for use in a benign setting where it will suffer little wear and tear, a 600-denier fabric may suffice in place of a 1,000-denier weave.

It’s a fine line, of course. Will it come back to haunt you if your product fails to meet the high expectations you’ve established for yourself? “In my opinion it would,” says Linda Delgado, MFC. “Word-of-mouth is your best advertisement and speaks a lot about the quality of your work.” Delgado is president of The Needle Loft Inc. in Kemah, Texas. Her firm makes interiors and canvas for yachts. But yacht owners wouldn’t quibble on price, would they, even with Wall Street seriously sagging?

Delgado’s situation points out that not everybody is in the same boat. It started with Hurricane Ike, which struck the Gulf Coast of Texas in September 2008 and flooded her building. She lost 10 weeks of business, but Delgado’s customers are wealthy big-boat owners who won’t skimp replacing damaged fittings, or the whole boat—especially if insurance helps. “For the people who have those kinds of boats,” says Delgado, “price is just not the number one priority.”

You’re worth it

If they want to hear it, however, Delgado will tell her affluent customers what she tells price-conscious owners of smaller boats: she offers better foam for comfort, Dacron-wrapped to give the cushion a crown and help fill out the corners. She serges seams to prevent raveling. She uses nonrusting buttons and plastic zippers instead of metal, which corrodes at sea. She buys her material from vendors who “stand by their product”—who offer a warranty, or at least have a long-term record of quality she knows firsthand.

In short, your own experience always adds value, and in challenging times like these, what you know may be invaluable. It can help you hold the line on quality and may let you give a little on price. “For us, that’s not something that just gets done on a whim,” adds Kelly. “It’s a routine. It doesn’t matter what sales are like. It doesn’t matter whether we’re growing or shrinking.” That goes double when customer spending tightens, he maintains. “If all we’re doing here is selling price,” says Kelly, “then we’re going to have a very difficult time.”

Keeping the wind in your sails

Recession narrows the market, but that makes quality more important, not less, and when business is becalmed, extra skill is required to keep moving forward. “Light-wind sailors are the best sailors,” says Spencer Tankard, who owns Baytex Manufacturing Co. Ltd. in Mount Maunganui, New Zealand—thousands of miles from many of his customers. Like other successful companies, Baytex quality assurance extends to customer service, cleaning and repair—a challenge for an exporter. Distance aside, Baytex faces the same challenge as his peers: Can you sell quality when money is dear?

“I think it is less about selling quality and more about selling value,” Tankard corrects. “People aren’t generally afraid to spend, it’s just the amount they spend and what they spend it on that changes. The challenge is to keep your product in this revised basket of goods that your customers may want to buy.”

Meanwhile, product performance still sets you apart. “Quality is even more important when times are tough,” Tankard says. “The perception is that when customers are short of money they won’t spend on quality on the assumption that quality costs more. I maintain that customers, when money is tight, will pay more attention to value for money than price itself. Even in the good times, customers still want cheap. Quality is not cheap, but it doesn’t have to be expensive either.”

The challenge for Baytex’s commercial tents, marquees, alloy framed structures and tensile membrane canopies is always to add the most value from the customer’s point of view. That means quality first. “There is never an excuse for not making a better product,” he says. “How much you can charge for it is a separate issue.”

No corner-cutting, though Tankard knows Baytex gains “significant cost savings through clever design and effective sourcing of materials.” At Baytex, production staff checks quality “at each production stage and often through to delivery and installation,” he adds. They also check regularly with customers to find out if products perform as expected. “Customer feedback is a critical part of our product performance and evaluation process,” says Tankard. Such regular checks, he adds, definitely lead to word-of-mouth referrals.

For light-wind sailors, every little gust counts.

Marc Hequet is a freelance business writer based in St. Paul, Minn.

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