By Christina Jackson, below, VP of Quality, Ideagen
UK inflation rates are up to a 45-year high, businesses rates remain a concern and SMEs in particular are feeling the crunch, with 78% believing the immediate cost-of-living crisis to be the biggest threat to their business.
Naturally, when times get tough, companies of all sizes find themselves walking the fine line between cost and quality. With raw materials and manufacturing processes becoming increasingly expensive, SMEs face some tough decisions regarding how they protect customers from rising costs, without affecting their bottom line.
So where does this leave quality? In such an uncertain environment, businesses may find themselves deciding whether to compromise quality to sustain profits. However, research suggests businesses cannot afford to cut corners when it comes to quality – consumers not only demand it, but it ultimately helps to create a competitive advantage and solidify trust.
A confidence crisis
The cost-of-living crisis and inflation are causing a dip in consumer confidence, which in turn is impacting purchasing decisions. Yet for many it is not as simple as cost over quality. Customers are increasingly conscious of what they put in their basket, and as they pay more for products and services, their expectations of quality are increasing.
According to research from Ideagen, the majority of people (58%) are more focused on the price of goods than they were 12 months ago, yet, nearly a third (31%) said that the quality of products and services are more important now than before the cost-of-living crisis. For younger generations such as Generation Z and Millennials, this demand for quality is even greater, with over half (54%) of 18-24 year olds and 43% of 25-34 year olds putting more emphasis on it than a year ago.
SMEs need to consider the relationship between cost and quality to survive in such a volatile environment, while many may be tempted to cut quality for profit, this is largely at odds with what customers are demanding.
From a longevity point of view, the importance of maintaining quality cannot be understated, even if it may result in some short-term profit loss. The consequences of not doing so can be felt for decades after. In fact, our data shows Brits are still aware of food quality scandals even up to 40 years after incidents have occurred. 65% remembered ‘Mad Cow Disease’, while two thirds (62%) had knowledge of salmonella and half (54%) were aware of the horse meat scandal which recently hit its ten-year anniversary. What’s more, of those aware of each respective event, a quarter (24%) of consumer purchases are still impacted by them.
A quality or safety related failure can have a long-lasting impact, and shatter brand reputation, which is essential for SMEs as they grow and develop their business. This puts into perspective how investment into quality management is worth it in the long run, even if it may compromise bottom lines in the short term.
How consumers determine quality
So, considering the importance of quality assurance – how can SMEs successfully achieve the balance between cost and quality? Firstly, it’s important to note that it’s not all doom and gloom. Some SMEs have the opportunity to use quality assurance as a key differentiating factor between them and their competition. Understanding exactly how customers are determining the quality of goods and services can help to better direct investment towards assurances that matter most to consumers.
It can be hard to know where to start. There are many avenues businesses can pursue to communicate quality, and with budgets tight they need to ensure a maximum ROI. Our research found that reviews rank low for determining quality, with 60% considering them the least important factor, while 76% of respondents pay attention to symbols of quality and safety when making a purchasing decision.
Third party assurances from established bodies are clearly a strong barometer for consumer confidence. This serves to exemplify the value of gathering nuanced insight and understanding into customer quality decisions, so SMEs don’t have to overhaul their operations to gain consumer trust, but focus on getting the basics right, amplify strengths and communicate these effectively.
Remaining competitive in a challenging marketplace
SMEs are constantly fighting with the challenge of how to differentiate themselves from usually more established high-profile brands and remain competitive. This only becomes more difficult in the backdrop of the economic crisis. Quality is a critical avenue in which they can achieve this, to build customer loyalty and safeguard brand reputation. Establishing a quality culture, comes from understanding consumer motivations, as well as directing efforts to achieving and promoting quality to them.