Quality, Class and Competition

The approach of this paper brings together the conceptual view of quality in manufacturing with the multi-attribute product positioning and customer preference models of marketing. In industrial manufacturing applications, "quality" is often defined as conformance to specifications or as meeting expectations regarding the performance of the product. In the marketing and economics literature, "quality" often refers to the performance level or "class" of the product. Here a product is described by a vector of performance attributes, and the population of produced units is assumed to display a distribution on these attributes. The attribute levels (means) are taken to define the class or positioning of the product. Quality in the sense of conformance is then conceptually identified with some measure of the absence of variation of the population around the mean. It is further assumed that buyers of the product have a cardinal utility function defined on the vector of attributes and price, and that customers maximize expected utility. Product manufacturers are assumed to face a cost of producing a given population distribution. Under specific assumptions regarding costs and utility functions, models of monopoly and perfect competition are formulated, The model clarifies the distinction between class and quality, identifies the sources of quality improvement, and provides an economic framework relating issues of product positioning, process control, quality function deployment (QFD) and customer preference estimation