The TQM JournalPlanning for competitive customer valueTito Conti

Article information:To cite this document:Tito Conti, (2013),"Planning for competitive customer value", The TQM Journal, Vol. 25 Iss 3 pp. 224 - 243Permanent link to this document:http://dx.doi.org/10.1108/17542731311307429

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VIEWPOINT

Planning for competitivecustomer value

Tito ContiOrganizational Fitness, Ivrea, Italy

Abstract

Purpose – Good quality planning methodologies were developed in the last decades of the twentiethcentury that are still widely used. But competition is getting harsher and harsher and the search formore effective approaches to planning for competitive customer value can never stop. The purpose ofthis paper is to offer an alternative method for planning for customer value that is the result of his longexperience with large organizations, both in manufacturing and service.Design/methodology/approach – The paper summarizes the approaches followed and the resultsreached. It also rationalizes such experience with the support of figures. Such process may require mentalefforts to overcome conventional thinking in managing for quality, which should be accepted. Apreliminary condition is understanding the author’s quality vision, which quite often is at odds withtraditional visions. For that reason the first part of the paper is dedicated to the illustration of the quality-related concepts that are at the basis of the following discussions. Such concepts are based on the systemsview of the organization, on a definition of quality as both doing the right things and doing things right,on accepting that the word quality is neutral and acquires a positive or negative meaning only whenassociated with the concept of value. The above concepts are not accepted by all quality experts today.Findings – The following are the most significant conclusions: the “customer-perceived value vs,performance” curves look rather different from those that are mostly used today; consequently, the“quality life-cycle” presents some significant differences if compared with the Kano Model; extensive useshould be made of time-related curves, which happen to be the most significant in relation to planning;proximity to users (not just own customers) is more important than questionnaires in relation to criticalplanning decision; both satisfiers and dissatisfiers are important to understand customer/stakeholderperception; the proposed combination algorithm for the two may look conceptually difficult to those wholook for simple solutions; but sometimes difficulties look unavoidable.Originality/value – The paper is original inasmuch as it challenges conventional wisdom in thisarea. But, if the experience of the author finds confirmation in a wider context, it can be of significantvalue for those companies that operate in high competitive sectors. It can also stimulate organizationalinnovation in the fundamental area of value creation.

Keywords Customer proximity, Customer satisfaction, Customer value, Fitness for purpose,Planning, Product qualities, Innovation, Business planning

Paper type Viewpoint

IntroductionPlanning for customer value cannot be done in global, generic terms. Whatever theproduct[1] offered to the market, value planning should be done in specific, analyticalterms. Customer value perception is in fact a complex construct of the specificsatisfactions and dissatisfactions, related to the different “qualities” exhibited by theproduct, each of them associated with different levels of importance and valueexpectation. Rarely users[2] – consumers in particular – follow rational, rigorous andconscious processes to combine the different elementary satisfaction anddissatisfaction perceptions into a global value judgment. Only the most carefulcustomers – the B2B in particular – manage to resolve the product’s fitness for use intoits components, to make more rational purchasing choices. But, even if the user doesnot, the producer is bound to do that. The more the producer is able to unfold those

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The TQM JournalVol. 25 No. 3, 2013pp. 224-243r Emerald Group Publishing Limited1754-2731DOI 10.1108/17542731311307429

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product qualities the target users are interested in – and the values expectationsassociated with them – the more it will be able to satisfy users’ (even latent) expectations.

The aim of this paper is to illustrate an approach to planning for competitivecustomer value that in the author’s long experience has proved to be effective. Some ofthe assumptions and conclusions that will be presented in the following may soundsomehow at odd with methodologies that are widely diffused and have shown theirlong time validity. But they are not intended to contradict any other theory; their intentis trying to look at the reality from different perspectives and to complement someexisting well-known approaches, such as quality function deployment (Akao, 2004;Hauser and Clausing, 1988) and the Kano customer satisfaction model (Kano et al.,1984; Walden, 2003; Shen et al., 2000; Shain and Zairi, 2009; Chen and Lee, 2009). Thesemethodologies have been widely used by the author and from their use came the mainstimuli to further research and experimentation in this area.

The paper focusses on concrete planning strategies, where striving to know therelations between changes in performance and the corresponding changes in customervalue perceptions for each product quality is fundamental. But such relationsdepend on time, on user inurement to the offered value, on scarcity or plenty of it.To describe the complexity of the relations, multidimensional diagrams, including thetime dimension, should be used; to simplify the process a number of bi-dimensionaldiagrams are used. Particularly important in planning are historical diagrams thatplot competitors’ trends in time. Such trends are also helpful to suggest choicesbetween incremental and quantum leap improvement. The cost and price aspects tooare important variables to consider in planning for customer value.

But, before starting our discussion – that is centered on value, customer perceivedvalue in particular, and takes for quality the broad definition of “doing the right thingsand doing them right” – a digression to illustrate the author’s “quality vision” isnecessary. The reader is invited to carefully read it, to avoid misunderstandings.

Quality and customer perceived valueThe concepts that lie behind the quality-related vocabulary are not the same for allthose who, as practitioners or academicians, are involved in “managing for quality.”It is then opportune to preface the discussion by specifying the author’s view anddefinitions (Conti, 2004).

The word “quality” has different etymological roots in different languages, whichsometimes create concept-tuning problems in the dialogue between experts belongingto different cultural/linguistic stocks. Historically, Aristotle was the first to face theproblem of a formal definition of the concept of quality (Aristotle, 350 B.C.E.a, b).Thanks to the diffusion of the Greek and Latin cultures such concept rapidly spread inthe western world. Other thinkers further elaborated it (Locke, 1690; Hobbes, 1651)from the philosophic, philological, esthetic, ethic perspectives. Its penetration into themodern industrial culture was the latest step, which entailed a de facto reduction inscope of the concept, accompanied by a concomitant increase in depth. The deepeningwas not related to the concept of quality itself but to the ways the planned quality couldbe generated. That created a new discipline: “managing for quality.”

Aristotle defined “quality” as “a family of concepts” that have the common propertyof answering the following question (related to a person, an object, a situation:all entities that display a plurality of characteristics): “Which characteristic(s), orproperty, or attribute, or nature, are we considering?” Such question starts with“which” – qualis in Latin – the adjective that in all Latin-derived languages is at the

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root of the word “quality” (in Greek, the Aristotle’s language, the corresponding wordsare: poios and poiotes, which remained, however, confined to Greece). Historically,it was then the Latin language that, thanks to the diffusion of the Roman Empireand its culture throughout Europe, allowed the transmission of the concept and itsetymology to our days[3].

The word “quality” is then, by itself, neutral. It does not imply any value judgmentabout the “quality” (i.e. the characteristic) that is the object of our attention. The valuejudgment (always expressed by people) derives by the association of an attribute (high,low, mediocre, excellent) to the word quality. Such attribute qualifies such word inpositive or negative terms, in relation to the perceived value[4].

In time, in the common language, “quality” has become a synonymous of “goodquality.” But that is a synecdoche, or a verbal short cut; dangerous, because it generatesambiguities. What qualifies in positive or negative terms a quality judgment is the valueassociated with it. More precisely, “the value that is perceived by the person who isqualified to express the judgment”: for example, the potential buyer in a commercialtransaction; or the user, in the post-purchasing phases. In the first case, the “value formoney” perception is a decisive factor for the purchasing decision. In the second case the“value for money” judgment – based on experience and intended as the ratio of theexperimented use value to the cost of ownership (or better: price of acquisition plus post-purchasing ownership/use costs) – will be the main customer satisfaction determinant[5].

In modern times the industrial revolution – with the associated mass production –strongly influenced the quality concept, often reducing its reach. Role distinction betweenplanning and execution, that characterized management science’s early development, ledto a separation between those who define the product specifications and those who makethe product. In defining the product characteristics, the former did not talk of qualities butof features and performance. Quality management – intended in the restricted sense ofmeeting specifications – was seen as a manufacturer’s responsibility.

The quality crisis that hit many western industry sectors in the 1970s led toa rediscovery of the full, original meaning of quality. The first consequence wasextending quality management back (along the product lifecycle) to product design;then, albeit more reluctantly, to product planning (defining product specifications).In the “golden age” of quality (the last twenty years of the twentieth century) therevolutionary concept of TQM emerged. It was focussed on the customer (and then oncustomer value) and intended to cover all the organizational/managerial factors (the“enablers”) that, also indirectly, contribute to generate competitive customer value.That meant in fact not only involving the whole organization, but also extending thescope to its “transactional environment,” that is, its stakeholders and customers.Unfortunately, decline followed success and the scope of the quality managementconcept suffered from it, missing much of its strategic content. Today, many qualitypractitioners as well as students tend to identify quality management with defectreduction (doing things right). The increasing emphasis on statistics, variation,Six Sigma, accompanied by a lowering emphasis on the organizationaland management system and its fitness for purpose, is a proof of that. The authorsees that as “a quality suicide.” Unless it wants to harm itself, managing for qualityshould cover the difficult chapter of “doing the right things” too; that is, thewhole cycle of conceiving, planning, producing and delivering competitive customer/stakeholder value. Conceiving has much to do with innovation: only by making“customer value” the focal point of all company activities the quality mission willbe complete. And it will be consistent with the organization’s fitness for purpose.

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By doing that, if ever possible, quality will regain the relevance it enjoyed a fewdecades ago and now has lost.

The subject of this paper is “planning for quality,” that is, how to get to competitive“value propositions.” The key concept for that process is user value or better user valuefor money. In the case of commercial transactions the expression “value for money”covers, as noticed above, both the purchasing disposition (determined by how theproduct looks attractive to the potential customers) and the customer satisfaction withthe purchased product. The concept of user value for money should be the beacon thatguides those suppliers who look for mutually profitable, long-term business relations(in the case of non-commercial relations – as well as in bartering – the more generalexpression “value received for the value given” should be used).

Incidentally, we may note that a conception of the managing for quality’s mission asindividuation, generation and delivery of competitive customer value – not just defectreduction – would eliminate misunderstandings like those emerged a few years ago inthe discussions aroused by the paper “Too much of a good thing? Quality as animpediment to innovation” (Cole and Matsumiya, 2007). Cole analyzed the causes ofmarket share losses by high-tech Japanese companies. From that paper emerges thatJapanese companies had been damaged by the priority given to defect reduction withrespect to innovation and time to market. If quality is identified with defect reduction tothe minimum levels allowed by technology, then it is right to conclude that the pursuitof quality may stand in the way of innovation. But that is a narrow view of quality(which unfortunately is still widely diffused). If quality is intended as customer valuesuch misunderstanding may be avoided. In the specific Japanese circumstance, talkingwith customers would have made the supplier aware that early product availabilitywas deemed more valuable (at least by the more advanced users) than waiting forlower defect rates. If at product level such view can manifest itself in the priority givento defect reduction with respect to time to market, at the company level it normallyappears as rigidity, subjection to standards, lack of innovation. Such attitude can makethe company unable to timely understand – and adapt to – market changes.

In conclusion, the popular concept of quality management as pursuit of minimumdefects may negatively affect the product’s fitness for use. But, even worse, it surelymay negatively affect the organization’s fitness for purpose – and as a consequence,everything it does. Changing from an organization whose purpose is minimizingdefects (doing things right) to an organization whose purpose is delivering competitivecustomer/stakeholder value in a changing environment (doing the right things anddoing them right), is a discontinuous, radical, difficult transformation. The profile ofthe organization’s “critical for success qualities” is bound to be identified and caredabout. A right balance between innovation, incremental improvement and stabilizationcapabilities should be dynamically achieved – depending on the nature of theorganization and the market/social environment it operates in.

Proximity to users increases the capability to understand product fitnessfor purposeIn a time characterized by increasing acceleration of change, keeping the organizationfit for purpose requires full immersion in the environment where the receivers ofthe organization’s “products” operate. Customer proximity – to understand what isvaluable for customers – becomes a fundamental organizational quality.

Among the steps forward that Dr Juran contributed to make, interpretation ofquality as “fitness for use” was certainly one of the most important. By seeing and

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understanding the use that customers make of own products, the supplier can in factdiscover ways to increase its offer’s value.

Should fitness for use be intended in literal terms, some important customer valuescould be missed, like those pertaining to the spiritual, emotional, symbolic realms (seethe cases of works of art, naturalistic or cultural tourism, rare books, jewels). It seemsthat the expression fitness for purpose is more comprehensive. However, also theformer may be used, if the word use is intended in a wider sense. What is important isnot confusing use value, with exchange value.

Economists are more focussed on exchange value, practically identifying it with price.They consider use value too, but in strictly economic term ( Jevons, 1871; O’Hara, 2008).From the quality perspective the focus is bound to be on use value. That in relation to theproduct; but customer perceived value goes beyond the product. The “soft” dimensionsof the supplier-customer relations are important. We can call such dimensions meta-economic (beyond the economic dimension). Value dimensions that pertain to the humanand social sphere strongly influence business relations and then economic results.

If we move inward from the supplier-customer relations to the internal relationsbetween the supplier’s active stakeholders (those who generate customer value: employeesand partners), human and social values become predominant. That because they stronglyimpact stakeholder motivation and satisfaction, finally affecting the organization’s fitnessfor purpose (Orestano, 1942; Lazslo and Wilbur, 1973; Herzberg et al., 1959; Herzberg,1966; Hirshman, 1982; Maslow, 1987, 1998). Any relation can be fully understood andproperly managed only by considering people and the organizations that they create intheir wholeness, not just as economic entities (Conti, 2003a, b). The habit of consideringthe whole spectrum of values (not just the economic – and within them those related touse) becomes also a precondition to successfully extend quality management conceptsand methods to non-business organizations.

In commercial transactions, buyers have value expectations in relation to thoseproduct qualities, material or immaterial, they are sensible to. To satisfy them, they areready to give value in exchange: value appreciated by the supplier, who too has valueexpectations (money, normally). Buyer satisfaction depends on “value for money,”seller satisfaction on “money for value.” In non-commercial relations satisfaction canbe measured in terms of value for value (i.e. the value received for the value given).What the author since long has proposed is to call a commercial transaction (or moregenerally a relation) a “quality transaction” (or a quality relation) only if it aims at a fairsatisfaction of both parties’ expectations. That is not an ethical dream: it is meaningfulas well as practically possible because the values expected by the two parties arenormally different. In the case of commercial relations the buyer is normally concernedwith use value, the seller with exchange value. In the case of non-commercial relations(as well as in the case of barter) both partners are concerned with use value, butone party’s use is generally different from the other party’s – and not conflicting.We maintain, then, that among the different kinds of relations, only the win-winrelations deserve the “quality” attribute.

No doubt that win-lose relations seem to prevail in the real world; sometimeseven “lose-lose” (typical is the case of wars). But such relations do not deserve theword quality, even if they use the most sophisticated quality tools (to improve theirvalue destruction capability). The win-win approach should particularly be pursuedin social and political relations, from the local community to the international level.In such relations, predatory, win-lose relations negatively impact the quality of life.Quality of social life can be reached in fact when laws and behaviors impose duties

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(where each one loses something) to allow wide freedom spaces, self-fulfillmentopportunities and peace flourish (where everybody’s gains largely compensate losses).

At this point we have reached the link between the general considerations and thespecific theme of this paper. The producer, who, in competition with others, pursuescustomer satisfaction and loyalty, is bound to identify, trough proximity and dialogue,those qualities (i.e. features) that are critical for the target users (particularly thosethe users themselves are unaware of, or give for granted) and decipher what kindsof customer appreciated values could be associated with them. Here the author’sexperience suggests to use the method of the face to face dialogue with significantusers, instead of the questionnaires that risk ambiguity and incompleteness (Walden,2003). Direct dialogue is irreplaceable to detect the unaware, latent expectations, whichoften hide themselves behind inconveniences, difficulties, resignation, high costs.Getting to pondered evaluations of the relative importance of the different qualities toois something irreplaceable. Getting deeper understanding to decide if incrementaladded value or innovative solutions should be pursued is also important.

Questionnaires are useful in a subsequent phase, to test the reached value propositionhypotheses. Such questionnaires should be extended to a larger user population to testthe hypotheses and get to meaningful statistical data. By elaborating and discussing theinterview and questionnaire results, more solid hypotheses can be drawn on the relativeimportance of the different qualities, on the customer appreciated values associatedto them, on their interdependences, on their links with costs – and with prices, sincecustomer judgments and choices are mostly based on the perceived value for money[6].Ambiguous results should be re-discussed with appropriate reference customer.

A simple representation of value-adding and value-subtracting qualitiesand their evolution in timeFigure 1 is a simple representation of how a product’s value adding and valuesubtracting qualities evolve in time under competitive pressure. It was used for the firsttime by the author in 1992, in the already mentioned book Building Total Quality (Conti,1993). Later on, the representation was improved and used as an elementary introductionto the concepts of positive and negative quality, satisfiers and dissatisfiers. It can alsohelp in introducing the discussion on planning for competitive value, and more generallyin managing for customer satisfaction.

The upper part of the figure represents the “positive quality” (or satisfaction) area,where the product qualities which users are interested in are associated with positiveuser value; that is, they generate satisfaction. The lower part is the “negative quality”area, where those qualities the users are sensitive to are associated with negativecustomer value; that is, they generate dissatisfaction. The arrows in the figurerepresent improvement paths. Most users’ sensitive qualities are present both in theupper and lower parts of the figures: that is, with reference to the Kano diagrams, theirperformance/satisfaction curve develops from the negative satisfaction area (below thehorizontal axis) to the positive (above that axis). The zero level is, for them, just atransit point, since entering the positive, competitive area, is the target. But there arealso qualities that are present in the lower part of the figure only: they can carrynegative or zero perceived value only. We will deal with them in the following; they aremainly – or only – dissatisfiers. The arrows for them terminate at the zero level:bringing the negative value as close as possible to zero is in fact the target (not anabsolute target, however, since, we will see, identifying the right trade-off betweensatisfiers and dissatisfiers, when in conflict, is a strategic issue in planning).

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For those qualities that span from negative to positive, the zero level could be taken,in the first instance, as coincident with the lower limit of acceptance by users. Howeversuch limit is somehow undefined, so we do not represent it by a line, but by a strip.In this lower part of the competitive area we find, for example, consumers who aremore concerned with price than with value; and suppliers who, being not competitiveon value, choose – or are bound – to compete on price. The competitive area, in thefigure, extends upwards to the present best in class level.

Defining one’s own position in planning obviously depends on the company’smission (to be among the leaders or among the followers) and by realisticallyconsidering one’s own technological and innovation capabilities. For each specificquality own position will then be defined based on its importance to the customer, thereference competitors’ position and the relevant costs. The extension of the competitivearea will obviously be wider for the secondary qualities, narrower for the primary ones;for the latter in fact the need to get as close as possible to the best in class is generallyfelt by most competitors. Figure 1 also tells that those suppliers who want to keepleadership positions will aim at overcoming the present best in class level by enteringthe upper space, which has no limits, and where the imperative is to excel throughcompetitive differentiation, both incremental and innovative.

A last comment about Figure 1: the horizontal lines delimiting the competitive areaare bound to shift upward continually, thanks to competition. Whatever the position

Different value adding qualities(area of satisfaction)

Different value subtracting qualities(area of dissatisfaction)

Issue: reducenegative valuefor each quality

as close aspossible to zero

Minimum acceptancelevel for each valuecarrying quality

Best in class level

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customer valuethrough

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Qualities that extend from the negativeto the positive value areas

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Figure 1.Reducing dissatisfiers andincreasing satisfiers

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reached, through incremental improvement or innovation, it is destined to be sooneror later exceeded.

The relations between changes in performance and the correspondingchanges in customer value perceptionsWhile Figure 1 represented all the product qualities, the following Figures 2 and 5aim at representing in more detail the relations between changes in performance andthe corresponding changes in customer value perception for each type of productquality. Figure 2 represents the first type, obviously the most common and important:the positive quality, or the quality that is intended to bring positive value to the user,where competitors strive to be chosen by offering users more value for money thanthe competitors.

Competition takes place in the upper right quadrant of the figure. The presentcompetition range is between the threshold level (TR) and the best in class level (BIC).The lower tail of the curve, which extends into the negative area, is clearly outside therange of competition and should be considered in planning only to prescribe urgentrecovery actions. The positive part of the curve below the TR relates to those supplierswho choose – or are obliged – to compete on price, compromising on quality.

The curve in Figure 2 may be compared to the Kano’s “one-dimensional” diagram.It differs, however, in the following: instead of a straight line, a curve is taken, asa more general case[7]; the same type of curve will be used for any competitive quality;that is, to represent both the incremental improvement and the innovation based(leading, the latter, to quantum leap increase in customer-perceived value); the point ofcrossing of the curve with the functionality axis is not fixed at the zero customersatisfaction (or value for money) level, but moves rightwards, as the curve moves

Customer perceived value vs functionality. The case of positivequalities – or “satisfiers” – destined to bring value to the user

Notes: The figure relates to a specific quality that brings value to customers and is thensubject to competition. The cross-point between the two axes is not taken as the 0/0 pointas usual, but as the 0 point for value and F0 point for functionality. F0 becomes thena defined, measurable level of performance, not linked to perceived value, which does notdepend on functionality only, but also on customer inurement. F0 is the present level of Fthat leads to 0 perceived value. The present competition area is between TR (threshold)and BIC (best in class) levels

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Figure 2.Customer perceived valuevs degree of functionality

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downwards, with the increase in customer expectations. The downward shift is anecessary consequence of customer inurement on one side and competition vivacityon the other side.

The choice of not tying the curve to the crossing point of the axes makes the “degreeof functionality” expression more meaningful, since it refers to a well defined,measurable degree, that we call Fo (e.g. the initial functionality level, when the currenttype of technical response to the customer expectations was first introduced, or, evenbetter, the minimum degree of functionality that we conventionally agree to consider).Notice that by doing that, the curve never reaches the bottom-left quadrant; so that wecan reserve it to pure dissatisfiers.

Figure 3 describes the evolution of the curve of Figure 2 in time: what Kanocalled the lifecycle of quality. “Yesterday’s” curve’s competitive range spans fromTRy to BICy and today’s curve, from TRt to BICt. A higher customer satisfaction levelis reached (BICt) in time, despite the downwards drift of the curve. The competitiverange normally shrinks, due to user’s increased value demand and a consequentcompetitors’ cramming at the top. Continuing such trend, some qualities may reachthe level described in Figure 4, where customers give it for granted that gettingtop functionality is just normal. We have reached the situation that Kano calls “mustbe quality” (see also Figure 5).

But, before discussing Figure 4, let us complete our analysis of Figure 3. Whathappens when a competitor finds a new solution that significantly increases user valuein relation to a quality that up to now followed the trend described in Figure 2?In competitive environments, that often happens. In fact, when the competitive curvesinks down and flattens, the opportunity to innovate occurs – and innovativecompetitors may catch it. In the figure, such discontinuity in value offer is representedas a lonely star on the vertical axis. The innovator is in fact alone with the newsolution; there is no competition curve yet. A period of instability appears where

The quality life-cycle: the competition curve moves downward in time.New innovative solutions may start a new cycle

Notes: The star indicates the irruption of an innovation that brings in a quantum leapin customer value (V*). Being new, it is alone; there is no curve at the moment.The curve (indicated by the dotted line), will start to show up soon, as the responseof the competitors

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Figure 3.The continuous linerepresents today’ssituation, the dashed line,yesterday’s (meaninga defined time ago,e.g. last year)

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customer expectations grow to the new level. The growth rate and the diffusion dependclearly on the importance of the relevant quality in the context of all the other productqualities. Some players will look for opportunities to add improvements to thecompetitor’s innovation – and often the opportunity exists, when the innovator rests onits laurels and neglects the necessary product stabilization and improvement. Thecurve start to take shape, as indicated in Figure 3 (dotted line, “tomorrow”). It developsmainly on the right side, because the most significant competitors will follow the newapproach to value generation and will add some improvement.

Coming now to Figure 4, which may be compared with Kano’s representations of the“must be qualities” the difference with Kano’s representation is that some positivevalue differential can show up beyond the threshold point. We consider the “must be

Must be quality: a positive quality becomes a quality that hardly contributes tocustomer satisfaction

Notes: That is an example of “must be quality.” Another example is mandatory quality,like in the case of safety standards. Even if intrinsically a positive quality, then,value is prevalently in the lower right dissatisfaction quadrant

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Migration of thecustomer perceived

value vs functionalitycurve downwards – dueto customer inurnment

and/or “the marginalutility law” – may make

customers indifferent to avalue (that they in fact do

appreciate) until suchvalue is lacking

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New attractive solutionexceeds present customer

value expectations

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No more- or marginal--competition.

Competition range:

Threshold Degree of functionality

“Must-be” quality

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Figure 5.Life cycle of those qualities

which are intendedto carry positive

customer value, fromthe stage of attractive

to the stage of must be

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quality” concept extremely important, but we also believe that under Kano’ definition (thequality element which is taken for granted when fulfilled but results in dissatisfactionwhen not fulfilled), different situations are (or can be) in fact grouped. The classic situationis the terminal stage of the “quality lifecycle” (see Figure 5). As the author pointed out inthe already mentioned paper on quality and value (Conti, 2004), such cycle is conceptuallyrelated to the issue of “relativity of values,” which in turn leads to a very interesting andauthoritative confirmation from the realm of economics. The quality lifecycle says that thesame level of performance (i.e. delivered value) leads to different and decreasing levelsof perceived value in time. Factors that influence perception are the continuous increase inthe offered value due to competition and user inurement (human beings are sensitiveto value variations, less to absolute values). Value is then a relative concept.

In the field of economics, relativity of values was first advocated (in the ninetiethcentury) by the “Austrian School of Economics” (Menger, 1874) and by the Britisheconomist and logician W.S. Jevons. They defined the so called “Marginal utility law,”based on the concept of “final degree of utility.” The marginal utility law states that valueof a thing varies according to scarcity or plenty of it in relation to needs; that the“marginal” value of each new unit depends on the number of units already existing inrelation to demand. Then value decreases for each additional unit, reaching zero when itbecomes superfluous. A classic example is water, highly valuable when scarce, barelyappreciated when abundant. A more actual example is the rapid fall in price of successfulhigh-tech consumer products due to oversupply by a multitude of competitors. Lookingto the problem from our quality perspective we can say that the perceived value of aproduct with certain levels of functionalities varies accordingly to scarcity or plenty ofsuch functionality levels in the suppliers’ offers; and we can add that the marginal utilitylaw applies not just to the whole product but also to each of its “qualities.”

If one quality cycle terminates, a new one can be started, thanks to competition (seeFigure 3 above). It happens in fact that a particularly attentive supplier conceives a newmore comprehensive and resolving way to respond to the users’ needs – and a new wave ofcustomer value can revamp the quality that seemed to be asleep in relation to competition.

Another type of must be quality is that derived from mandatory product standards,typically those related to safety. From a quality/value perspective, they are certainlydefined according to the state of the art of the time they are issued, but their evolution intime is necessarily discontinuous; attentive suppliers can find it convenient to anticipatethe standard’s evolution and publicize that as a positive differential (typical is the case ofthe European standards for car exhaust emission in relation to air pollution, where theproducer is bound to respect them, but it can give more than requested and publicize it toget an image advantage). That is the reason for the emergence, in Figure 4, of the must bequality curve above the horizontal axis into the positive area.

Figure 5 represents a complete quality lifecycle.

The “dissatisfiers”The whole area below the horizontal axis relates to dissatisfaction. However, thosedissatisfactions that we have examined till now relate to inadequacy in generating thepositive value that users expect today in relation to the different value-adding productqualities. But, as we have seen in Figures 3 and 5, what was considered adequateyesterday may be inadequate today and the curve progressively moves into the lower-right dissatisfaction area (as we noticed above, the lower-left area may be disregardedin the cases presented in the previous section, due to our definition of Fo). In case ofinadequacy of his own value proposition, the issue for the supplier is either to improve

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his present approach to escalate the curve and reach the competitive area, or toinnovate, that is conceive a new approach that leads to a higher value generating curve.

There are, however, some qualities that are negative by nature, that are not intendedto carry positive value, but emerge despite the supplier’s efforts to curb them. Typical arefailures and errors, which may cause the loss of significant parts – or the totality – of theproduct’s performance. Such regrettable events look as pure dissatisfiers. Quite oftenthey are not associated to a specific quality but affect a number of qualities or the totalityof them. Certainly, we can talk of them in positive terms, like increasing reliability anddependability; and we can treat them as must be qualities. But – apart from the fact thatthey do not fit the Kano’s must be quality definition, since on them competition is strong –that is the supplier perspective and language. From the user perspective they cannever be positive. The issue for the supplier is bringing them as close as possible to zero.

Failures and random errors, as noted above, often impact a plurality of functionalareas (if not the totality of the product functionalities) because of the architecture ofmodern systems, were many functions share the same processor and/or memory. If thelatter units fail, the whole system, or important parts of it, can be affected. That is whyfailures and errors are the users’ be#te noir; they are intrinsic dissatisfiers, they are notperceived as inadequacy of value but as purely negative value. They cause disturbanceand additional costs and make the organization that proposes positive values withoutfirst eliminating them not trustworthy. That is why we recommend making a specificanalysis to identify the possible dissatisfiers and their impact on customers. The impactfrequently depends on the combined effect of satisfaction and dissatisfaction factors.

We use for intrinsic dissatisfiers also a definition that may look quite odd but isfull of meaning: “must-not-be negative-qualities.” In fact, as the definition “must bequalities” identifies those positive qualities that must be present at full performance, ourdefinition identifies those negative-value carrying qualities that ideally should disappear;that is, they must not be there. In Figure 6 they are positioned in the bottom-left quadrant.

Degree of dis-functionality

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Notes: The must-not-be negative quality curve is derived indirectly starting from Vp(perceived value in absence of dissatisfiers); then estimating the reduction ΔVx due todis-functionality Dx. The resultant perceived value is Vr. Moving to the lower quadrant,ΔVx is the ordinate of the must-not-be negative quality curve that corresponds todisfunctionality Dx

+

“Must-not-be” negative-quality

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Figure 6.Example of must-not-be

negative quality in thebottom-left quadrant

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In Figure 6 the bottom-left quadrant is represented as slightly separated fromthe bottom-right one, for the following reason: the “degree of dis-functionality” ofthe leftward-pointing horizontal axis is, according to our definition, conceptuallydifferent from the “degree of functionality” of the rightward-pointing horizontal axis.It relates to dissatisfiers, as failures and random errors, which have their ownmeasurement parameters, different from those which measure functionality.

Can we build the bottom-right quadrant curve directly, by measuring customerdissatisfaction as a function of dis-functionality? We believe that it would make littlesense. Dissatisfaction, in fact, is not independent from satisfaction. Dissatisfaction, aswe define it, is always a negative side of a positive thing – a subtractive element of apositive whole. For that reason we start from customer perceived value in absence ofdissatisfiers (VP in Figure 6). Then, together with the reference customers, we estimatethe reduction in such perceived value (DVx) caused by dis-functionality Fx. Theresultant customer perceived value is Vr, while the indirectly measured dissatisfactions(like DVx) allow to build the “must-not-be” negative quality curve.

What we have done till now leads in reality to the division of the perceived value vsperformance space into two parts: not horizontally, as it is traditionally done, butvertically. The right-hand part is dedicated to the value-adding qualities (with theirnegative tails that must be minimized), while the left-hand part hosts the valuesubtracting qualities (lower quadrant) and can host their combination with the valueadding ones (upper quadrant).

Combining satisfiers and dissatisfiersFollowing the introduction made above with the help of Figure 6, we will discuss here inmore detail how to combine the effects of the planned satisfiers and the unwanted but tosome extent predictable dissatisfiers. The problem is particularly relevant for companieswho are leaders in innovation, since reliability problems may emerge from it. Innovationsin fact may de-stabilize the system – and it takes time to bring it back under control. Thequestion then often arises: shall we wait for product stabilization before startingcommercialization, or can we anticipate delivery, to fully benefit by the innovation?Ultimately, the issue is: finding the right balance between time to market and residualdefectiveness. We maintain that only open dialogue with lead and significant users canconduct to reliable evaluations and decisions. Figure 7, that expands and completes whatwas introduced in Figure 6, is conceived to facilitate such dialogue.

A warning is opportune before entering the satisfier/dissatisfier combination theme.From Figures 2 to 6 we have represented the relationship between functionality andcustomer value perception for those elementary product qualities the customer issensitive to – and perceptions can be surveyed. We can and should use the sameapproach and representations for higher level quality aggregations; the same “tree”aggregations that are planned for the customer satisfaction surveys, up to the wholeproduct level. That is particularly important for the combination process, becausemust-not-be negative qualities often relate to high-level aggregations; level that shouldbe the same for satisfiers and dissatisfiers.

Figure 7 illustrates the satisfier/dissatisfier combination process of in two cases:incremental (small scale) and quantum leap improvement. Important cases because,in front of a possible innovation, its benefits, costs and risks should be comparedwith the lower benefits, but at the same time lower costs and risks, of incrementalimprovements. We already said that customer perceived value’s reduction dueto negative added value (dissatisfiers) depends on the customer satisfaction level due to

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positive added value. Let us try to understand more about such dependence. We takepoint P1 (perceived customer value V1) as our present position. We have to decide ifaiming at point P2 (perceived customer value V2) through incremental improvements,or striving to reach point P3 (perceived customer value V3) through an innovativesolution. Since the latter may imply time and significant investments, key to thedecision is getting to a reliable forecast of the real competitive advantage in terms ofcustomer perceived value that results after the combination.

According to our experience, the best way to quantify and compare results for thetwo options is providing for open and deep discussion between internal expertsand selected lead users. They should first estimate the increase in customer perceivedvalue in both cases, ignoring dissatisfiers. They should then analyze the natureand effects of dissatisfiers, particularly in the case of innovation, where the burstin performance is supposed to generate a burst in value perception (which,however, does not last long, because competitors do not sleep). The next step is aquantitative estimate of the reduction of the customer perceived value for differentlevels of dis-functionality. Apart the quantitative aspects, that depend on the specificcase, Figure 7 tells us that the higher the added value due to satisfiers, the higher thetolerance to dissatisfiers. In fact, the v3 curve shows a slower decline and a laterfall than the v2 curve. It is then important to explore the tolerance to dissatisfiersof the pursued innovation before deciding about the tradeoff, keeping in mindthat customers are ready to accept initial reliability limitations provided they areinformed and confident that the supplier is ready to assist them and problems willbe overcome in due time.

Area of emipiricalcombination ofsatisfiers anddissatisfiers ΔV3/1

ΔV3/2

V3/2

ΔV3/1

d2

–

d3Dissatisfiers’area

Notes: Two cases: incremental improvement (from P1 to P2; i.e.: value from V1 to V2)and innovation (from P1 to P3; i.e.: value from V1 to V3). Curves v3 and v2 are built indialogue with reference users. Curves d3 and d2 are obtained, respectively, as differencebetween the horizontal line V3 and curve v3 and the horizontal line V2 and curve v2.Curves v3 and v2 say that innovation is more tolerant to dissatisfiers than incrementalimprovement

ΔV3/2

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In conclusion, the most productive way to combine satisfiers and dissatisfiers is notusing sophisticated algorithms but putting together experts from the producer andthe user sides and letting them discuss in concrete terms, considering the product, themarket, the competitors[8]. The benefits of a consolidated habit of dialogue withcustomers extend beyond the specific issue of value planning. It may also help indemolishing consolidated certainties, linked to the company culture and traditions.If the idea that quality management coincides with defect reduction has dominated thecompany for a long time, close relations with customers will help to change the mindsetand come to think in terms of customer value.

The irreplaceable role of historical trends in planningIn the author’s experience, graphics that describe trends of performance and valuein time are extremely useful in planning. In such graphics, positive trends revealimprovement in customer perceived value – and the curve slope (DV/Dt) thecorresponding improvement rate. The following figures relate to the whole product,where value for money can be taken as the most significant final indicator. Butperformance and perceived value for each key product quality should also besystematically monitored, through appropriate measurements for the former, throughspecific questions in the customer satisfaction questionnaire for the latter.

Figure 8 represents, in its upper part, the history of the value for money perceivedby the customers for the examined company and product, over a period of three years.Measurements were conducted every six months. The continuous line relates to theconsidered organization (which we call “our company”), while the dotted line relates toits main reference competitor. The graphic in the lower part represents the weightedcombination of the internal measurements that our company regularly carries outon those product qualities that impact on the customer value for money perception.The weights are derived from the relative importance attributed by representativecustomer samples to the specific qualities. Internal measurements of competitorperformance for benchmarking are obviously made using the same criteria.

From the lower graphic of Figure 8, we see that in the first two years of the consideredperiod our company essentially relied on incremental improvement. But customersatisfaction naturally tends to decline in time as a result of inurement and competitors’alignment, unless improvement rate overcomes such decline. For the reference competitor,customer satisfaction was lower in the first two years, even if the gap with respect toour company shrank progressively. Unexpectedly, after time t2, our company realized –first by word of mouth then through a targeted survey on competitor’s customers(at time t3) – that the reference competitor had made a big leap forward, clearly fruit ofinnovation. Customer satisfaction for our company dramatically fell in the t2-t4 period,producing a shock – and a reaction. In the t4-t5 period our company introduced the sameconceptual changes of the competitor, but with significant design and productionimprovement. Reliability was pursued as a competitive advantage, since users, aftercashing the big value wave, wanted stabilization. The competitor made the mistake ofresting on its laurels, instead of reinforcing its position by working on the change induceddissatisfiers. So it found itself again in the follower role. This is a proof that, to keepleadership in customer value, both capabilities are needed: doing the right things anddoing them well – and understanding when it is the right time to put more emphasis onone or another. It was a lesson for both companies. Our company needed to reinforce itsinnovation capabilities, and the competitor needed to reinforce product stabilizationcapabilities following innovation. The future will tell who was a better learner.

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Another graphic is needed when planning: the improvement associated costs in time.Figure 9 presents such diagram in its lower part (the upper part diagram is simply arepetition of the lower diagram of Figure 8, to allow easy correlations betweenperformance improvement and cost). Notice that improvement associated costs showthe typical investment trend, with a peak followed by cost reduction and then a returnon investment, the duration of which can be calculated. Clearly, in the case ofinnovation a price increase is often feasible in the first phase, when the performancegap with competitors is high – compensating for the induced costs.

Awareness of innovation opportunities (favored by proximity to users butelicited by the sagacity and capacity of the producer) can emerge at any timeand in any situation, but is generally stimulated by the perception of an existingimportant gap between expectations and offerings. Flattening of the upper curveof Figure 8 in time for all competitors can be an indicator that innovationopportunities should be explored. The attentive supplier’s policy is to continuouslysearch for innovation opportunities, stepping on the accelerator when theright time comes.

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Figure 8.Performance

measurement (lowerdiagram) and customer

satisfaction (upperdiagrams) in time

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Classification of product qualitiesFigure 10 gives an example of product qualities’ classification and rating in accordancewith the above presented concepts. In this case the product is a car; service-relatedsatisfaction is not considered. Such classifications and comparative ratings are usefulat any time of the product lifecycle but particularly in planning. The upper part of thefigure is related to satisfiers, those qualities that are intended to contribute to customersatisfaction. The lower part is related to both must be qualities and dissatisfiers.Customer satisfaction data (upper part) derive from surveys made by the planningcompany (that we call “our company” in the figure) on both own customers (black dots)and the reference competitor (white dots).

The qualities are represented in descending importance order, proceedingfrom left to right. Qualities that impact on people and environment safety areconsidered the most important (extreme left). We can see that our company is ratherweak, particularly in crash tests (must be qualities, lower part of the figure).The reference competitor instead is well positioned in that area and can make of the

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Figure 9.Performance (top) and cost(bottom) measured orassumed trends are veryuseful in the planningphase

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crash-test robustness a strong point (upper part, satisfiers). Actions to improvecrash protection look urgent.

Moving rightwards, to the primary functions/characteristics, our company isbetter positioned in relation to failure rates (lower part of the figure). It shouldpossibly capitalize more on that point, given the importance that reliability hasin relation to cars. With respect to positive qualities (upper part), our company isbetter positioned in gas mileage and visibility, while actions to make the car morecomfortable are desirable.

ConclusionsThis paper is based on the author’s personal research and practical experiencein customer value planning, does not want to set up his approach against others’,but to present it as a further contribution to the critical subject of planningfor customer value.

The dynamics of customer value is complex; understanding and mastering it is acritical factor for success in the market place and the more so in the case of highlycompetitive market sectors. Many ambiguities, mainly in terms of language, ought tobe eliminated, as for example the improper use of the word quality when the focus isin reality on the value associated to a quality. Even the expression “quality planning”or “planning for quality” should be replaced by “planning for customer value.”In fact, quality planning is often intended as a corollary of product planning, aimed atcurbing defectiveness and enhancing reliability. If the expression planning forcustomer value is used – where such planning refers to all product qualities that areperceived by users as significant, it becomes clear that we are addressing the coreplanning issue: making winning value propositions, and then deliver the promisedvalue through effective and efficient execution processes. The two aspects, quality ofgoals and quality of execution, are the two faces of quality: more innovative the first,more traditional the second.

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Notes

1. In this paper we use the term “product” in the wider sense: manufactured product, service,information, etc., more generally any material or immaterial entity that a subject (individual,association of individuals, organization) generates in response to the needs/expectations ofother subjects.

2. We use the term “users” to indicate those who use the considered type of product, independent ofthe supplier they are customer of. We use the term “customers,” in relation to a specific supplier.

3. A more complete definition of quality can be the following: a propriety that characterizes aperson, an animal, an object, a situation – or an organic ensemble of them – as a specific way ofbeing, mainly in relation to particular aspects, conditions, activities, functions or utilizations.

4. In the following, we will often use the synthetic expressions “positive quality” and “negativequality” to indicate that the customer perceived value associated with the examined quality is,respectively, above or below the indifference level. Such expressions were shared and appreciatedby Dr Juran, in his introduction to the author’s book Building Total Quality (Conti, 1993), inas muchas they make the discussion on customer value and customer satisfaction more clear.

5. Keeping in mind that the “value for money” expression has a more general meaning than“customer satisfaction,” since it refers to both customer satisfaction and purchasingdisposition, we will give in the following preference to the former.

6. For many products, typically cars, marketing strategies tend to incorporate only those thatare considered as basic qualities in the “base model.” The others are treated as “optional.”Only for the latter the buyer can formulate precise individual “value for money” judgments.For the features incorporated in the base model the “value for money” judgment andcomparisons with others are clearly rougher, since they are evaluated globally.

7. An example can explain the rationale for such choice. Human senses have response curves: beyondcertain limits user sensitivity to improvement of a LCD screen diminishes, and so does the DCS/Dperformance curve, that tends to flatten (saturation). The same applies for sound reproducers.

8. In addition to the time to market case, we can mention others where the trade-off betweensatisfiers and dissatisfiers is important and critical – and requires full transparency towardthe customer. Let us take, for example the case of customer safety in tourism, when trips areorganized by tour operators. There are tourist destinations in the world that, for theirnaturalistic and/or cultural value are strongly attractive and promise high satisfaction levels.They are, however, often allocated in parts of the world that present risks, either becausemeans of transport are primitive or not properly controlled, or the social environment isturbulent and unsafe. In such cases – and more generally whenever personal safety is atrisk – the supplier should clearly present the customer the type and level of risk – and thelatter should formally recognize and accept it.

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Further reading

Bartikowski, B. and Llosa, S. (2003), “Identifying satisfiers, dissatisfiers, criticals and neutrals incustomer satisfaction”, Working Paper No. 05-2003, Euromed – Ecole de Management, Marseille.

Corresponding authorTito Conti can be contacted at: conti.tito@gmail.com

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