Product Quality and Its Effects on Market Share - Research Paper Example

PRODUCT QUALITY AND ITS EFFECTS ON MARKET SHARE. Introduction Product quality refers to unique characteristics and features of a given product, which enables it to fulfil certain obligations. The quality of a product may depend on the producer’s specifications, or on consumer’s unique desires. Some of the common features and characteristics of most goods for sale include their desirability, durability, cost and quality. Often, most producers and manufacturers have assurance or product quality departments, which control, monitor and promote quality of their outgoing products. On the other hand, market share is the total sales that are earned by an organization over a given time period. Businesses evaluate their market share by dividing their total sales for a given period, with the total sales of the industry over the same period period of time. According to most analysts, with expansion of the market for a business products, the ability to maintain or increase market share signifies competitiveness of the business. Also, increase in market share might come from innovation, broadening demographic appeal, lowering of prices, or simply advertising. Marketers can use market share as the single most crucial measure of effectiveness of their marketing campaigns. Such efforts include advertising, product branding, and any other measures of improving product image and increasing sales. Market share serves as a crucial metric, since it provides a relative benchmark against external benchmarks. This provides a comparison of a business performance relative to their competitors. Most organizations only focus on internal metrics such as loyalty, satisfaction and revenue growth, while disregarding the product’s influence or share in the market. Unfortunately, most of these internal metrics can be quit misleading. They can result in short term satisfaction, but they can affect the company’s long term goals especially where it is performing way below it competitors. That is why many leading customer-centric organizations may be vulnerable to attacks by smaller competitors. Therefore, measure of market share remains as the most crucial metric of assessing any organization. It is essential for organizations to consider sales, revenues, and margins so as to assess its true market share. There are different ways of measuring market share. Measuring revenues or absolute sales against total units, sales, or revenues is the easiest. However, measuring absolute volumes per units sold or total sales may not present the full picture, which needs assessment of the market share. Nevertheless, the market share must go hand in hand, with the organization ability to generate revenues and sustain profitability (Saleem, 1999, P. 27) Background Various organizations are involved in manufacturing different types of products and avail them in the market. But, there arises a problem when it comes to commanding the market share. This is as a result of unsatisfactory quality that they offer to their customers. If the product quality is not improved and made superior, an organization is likely to acquire low market share and it’s also likely not to be having a competitive edge in the market. The quality, reputation, and any other feature of a product can be determined by the location it has been produced from. Place names in a given country, geographical indications, and some words that are associated with a place are mostly used to identify goods coming from these places. The negative perception that occasionally affects the consumers’ depend on various factors, which may include the time utilized when preparing and marketing of the products that are difficult in selecting the best deals for consumers. When it comes to conducting a product evaluation process, it may be complicated and time consuming. Additionally, it may also be a good opportunity to obtain enhancements for the market research strategies. Problem definition The reason why an organization commands a low market share is that, the raw materials that are supplied to manufacture the products are of low quality or of poor specifications which leads to low final product quality. It will also be considered in terms of what the customers consider to be ideal in terms of quality. Both high and low quality of products that the customers have not specified is considered as poor quality. Another problem could be that the quality system that is in place may be outdated which could lead to obsolete products. Poor packaging of the product could also lead to a company not obtaining a bigger market share because this is what sells a product. Technology is another problem. Sustainability of an organization depends on its ability to adopt fast, and move with the changing technology. Therefore, products may be of a poor quality if an outdated technology is applied during manufacturing process. Hypothesis The purpose of this study is to evaluate the hypothesis that good quality products will command larger market share than low quality products. It is also stated that not all good quality products will command a large market share. Quality is multidimensional, which is not easy to define or measure. Nevertheless, it is easy to differentiate between objective quality and perceived quality. Objective quality is the actual factors, which makes a product successful and is easy to measure and ascertain. On the other hand, perceived quality refers to consumers’ views on superiority or excellence of a product. Consumers’ perception of a product is worldwide, and it ranges from bad to good, and is an abstract measure, which depends on a given consumer setting. Perceived quality is very crucial in any business as it affects consumers buying intentions. Some scholars argue that there is a positive direct link between perceived quality and buying intentions, while others argue that the link is only indirect through satisfaction. According to Monroe, most goods exhibit the dual effect of direct and indirect perceived quality on purchase intentions, while study of services only shows single effects of indirect or indirect links (Monroe,1985, P10). Research question How does product packaging affect the market share? Does technology have a role in product quality and how it affects the market share? Does product branding affect the market? Significance of the study The main objective of the study will be to investigate the effect of perceived product quality on the market share and product involvement, consumers’ overall satisfaction, and purchase intentions. This investigation will confirm whether previous finding from various studies on the important role of perceived product quality on consumer behavior are true, and will also identify the effects that different levels of perceived quality have on satisfaction, involvement and buying intentions. These results and the findings will clearly show whether the three groups of products based on perceived quality that is the low, medium and high differed significantly from each other with regard to purchase intentions, overall satisfaction and involvement. Thus, the hypotheses of the study will confirm if perceived product quality determines customers’ tastes and preferences between the three groups. The group-mean scores will indicate whether the customer satisfaction, involvement of product, and buying intentions are either high or low depending on perception of quality. This study shows that consumers with low perception of products are less involved and or satisfied, and their future intentions are low as well. On the other hand, consumers with high product quality perception are highly involved and satisfied with them, which increases their satisfaction and ensures high intentions of purchasing the products, in the future. Previous studies shows that the differences between various groups on each dependent variable can be quite significant. As these studies shows, the largest difference within each group of variables exists in customer satisfaction. This study shows a low percentage difference in satisfaction, which confirms the close relationship in satisfaction using two constructs, as reported in early studies. Product involvement came second in difference, with buying intentions being the last variable. This study also did a pair analyses of the variables using low-high, medium-high, and low-medium of the three variables. According to the current study, all groups exhibit different results. However, products with high and medium perceptions did not show significant difference in regard to consumers buying intentions. This shows that consumers who perceive products as either high or medium do not differ so much in their intentions to buy those products. These results shows that there may exists a threshold for measuring perceived quality. Once consumers’ perception of a product exceeds the threshold, they shall have similar high intentions of buying it, irrespective of their levels of satisfaction or its involvement. This confirms why consumers frequently uses only particular products all the time. Young consumers consider product design and quality as the most crucial factors especially when purchasing sport shoes. Manufacturers must take into account consumers’ perception of quality of their products. This is vital in production and when implementing marketing strategies for enhancing brand image and market share. Consequently, manufacturers must enhance and increase their product perceptions, so as to sustain long relationship with their consumers. In addition, marketers must consider consumers’ perception of the quality of their products when developing marketing strategies. Understanding the effects of quality of service in relation to customer satisfaction, product involvement, and buying intentions can enable creation of effective marketing mixes, since organization is in more control of the quality of its products. Since perceived quality is subjective, managers should use or improve attributes relating to quality. External attributes such as brand name, price, and objective quality information can affect perception of product quality, and are essential for assessing consumers’ perception of products. Therefore, all marketing activities and advertising messages should be designed so that they emphasize on only the attributes or cues that can improve consumer’s perception of quality of products. There is a need for retailers to recognize product attributes and external cues, which affect perception of product quality. For example, since quality is crucial to young consumers of sport shoes, retailers should maximize their efforts on branded shoes, which these consumers consider as high quality. In addition, marketers should consider perception of product quality when segmenting or identifying consumer groups. Using a good segment basis for assessing a market can be essential in enhancing an organization competitive advantage. Moreover, the study shows that differences in quality perception (low, medium, high) also affects levels of consumer satisfaction, product involvement, and buying intentions. Therefore, targeting the most profitable and accessible segment can help achieve organization goals, and enhance competitiveness. Furthermore, perception of quality of products can help managers when positioning products in the perception map, and differencing them from competing products. Consequently, manufacturers should focus on design, quality and composition of their products, while marketers should focus on communication and promotional cues, which can help attract and retain customers and enhance profitability (Tsiotsou, 2006, P94) Limitations of the study Just like other studies, this study contains some limitations. The study focus on quality of a product and a consumer group (the market), which limits its application to many products and consumer groups. There is need to investigate many products and consumer groups, to reduce generalization without clear data. In addition, the sample size is small, although it is adequate for this analysis. Nevertheless, even with these limitations, the study provides direction and lays the foundation for further research on perception of products’ quality. This calls for more research on the impact of consumers’ perception on product quality. For instance, analysis of effects of perceived quality in different categories of products may help scholars and marketers learn how to manage and improve quality perception, and related constructs. Moreover, it can help in identifying other variables, which are crucial in buy-making decision. For instance, what role does external cues such as brand name, price, and warranty play on perception of quality, satisfaction, product involvement, and buying intentions? It is also essential to investigate the role that advertisement play on the three variables. Literature Review Product quality has been recognized as a strategic organizational priority for the past few years. There are many arguments claiming that quality of products is essential in enhancing organization competitiveness. As a result, most organization focus on quality of their products to enhance their competitiveness and profitability, and position their products. Previous studies shows that quality has been a keen part of organizations strategic managements, which focus on superior products and quality service to enhance competitiveness. Analysts posits that consumers increasingly recognize and expect high quality of any product. Consequently, they consider product quality as a crucial measure of an organization’s competitive advantage. Quality of products and services improve and sustain the market share. Improving quality of products reduce faults, which eliminate costs of returns and alterations. It also increase customers, especially repeat customers due to high satisfaction. This helps build and enlarge the clientele bases, through recommendations and referrals. Indeed, improving and sustaining quality can single handedly increase and sustain market share. As customers increase, the company not only increase its market share, but it also generates more revenues than before. Through systematic strategy and regular assessment, it is possible for any organization to increase quality of its products. This gives management superior control of the processes, and ensures the organization meets its legal and social obligations. Quality helps in examining all processes to remove non-productive and waste. If manufacturer maintain superior quality of their products, this can reduce wastes, defects and errors. Since most customers prefer superior products, improving the quality of products can increase market share and reduce sales returns. This means that highly reputable organizations have high quality products and large markets shares, which helps them to compete and grow. In other words, product quality plays a key role in earning of a good name and reputation for the company (Nyam, 2005, P58). Methodology The researcher will outline the various methods used to obtain and analyze data. The study on product quality and their effects on market share will be carried out by the use of various tools. The purpose of this study is to investigate and analyze the relationship that exists between product quality and the market share. Hence, the study covers research population of the study, sources of data, data collection, data analysis and presentation. The researcher has discretion over selection of the population for study. In this case, the researcher will study two companies; Company X and Y which manufacture the same product focusing on their quality and the market. The researcher will sample out two areas and that is, quality systems and technology applied by both companies. Market share Co. Y (high technology) Co. X (outdated technology) Quality This is the total group for a research study. The researcher will obtain data from two sources. That is; Primary source which shows the original data, which the researcher shall collect during the investigation. It will also provide the first-hand data collected at the source of origin. The primary source of data is more accurate, reliable and it gives relevant information that is required by the researcher. This includes interviews, questionnaires and observation. The researcher may opt to use the observation method. Observing and identifying the low quality products from the high quality products is easy and straightforward. The researcher will also be in a position to see which products are commanding a large market share. The researchers can also use secondary sources. A secondary source refers to the information that already exists, having been collected for another purpose that will be useful for the problem at hand. This data is collected from journals, magazines, newspapers, internet and textbooks. This data is readily available and cheap to obtain as compared to primary data. The researcher used secondary data to obtain more relevant information on product quality and market share. Although the data obtained from secondary sources may not be accurate but it is quick and saves time. The data collected by the researcher will be classified into appropriate classes so as to determine differences and similarities. This will also be done to remove irrelevant information and retain the relevant one to the study. References Goldsmith, R. & Emmert, J. (1991). Journal of Business Research. Retrieved from: http://marketingbulletin.massey.ac.nz/v16/mb_v16_n4_tsiotsou.pdf Saleem, N. (2003). Commerce Simplified. Gallarotti, M. (1995). The Managerial Incentive Structure and Columbia Journal of World Business. Retrieved from: http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1002&context=aabfj Mwalo & Wairu (2003). Focus on Business. Retrieved from: http://www.shvoong.com/business-management/human-resources/1955474-quality-importance/#ixzz30wSyRO82 Mwalo & Wairu, (2003). Focus on business Studies. Retrieved from: http://psychology.about.com/od/hindex/g/hypothesis.htm Read More