The Economics of Quality

The Economics of Quality

I was under the impression that everything was rooted in consumer purchase cost. I thought people buy the cheapest item on the shelf; like non-domestic cars which had serious issues, just to save a few bucks. We buy third world country consumer goods over domestic American goods (Canada and US). We betray our employers, our neighbor’s employer and even our children’s employers to save a few dollars. What happened to quality? Does no one care if a product is functional or has a long life? Do we only care about the cost of an item? I thought so, but my faith in humanity has been renewed recently.

I am seeing a push from consumers demanding quality in the items they purchase. People are actually willing to pay for quality. Take for example A and W restaurants. They are second only to McDonald’s now and their tremendous growth rate is continuing. An A and W franchise just took over the defunct Burger King next to a local McDonald’s. If I were McDonald’s I would take notice. Those Mozza burgers at A and W are something special, sorry but Big Macs just don’t compare. Not even close.

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…..free of additives and preservatives—just 100% pure beef. We call it the A&W Pure Beef Guarantee, and it’s about doing our burgers right and doing right by you.”

The public appears to be controlling who succeeds and who loses in retail. Restaurants not producing quality food at a reasonable price are having setbacks while quality oriented organizations such as A and W are on the podium.

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Another example of the American consumer pursuing quality is Telsa. I predicted some time back that their cars would not sell due to high cost. But, I guess people are willing to pay for quality.  The disposable cheap foreign car still its place as does the dollar store and its goods, but it is nice to see people caring about quality.

Tesla

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Telsa is selling cars at an unprecedented rate and their stock is going up like a rocket. When something is good, and reasonably priced we buy it.  Have you seen the Tesla Model 3?

I was wrong in thinking that we pursue cheapness over quality. Cost is not the true barrier, the cost/quality ratio is the barrier that must be satisfactory to the consumer. The consumer will buy an inferior product if it is at a low enough cost. If something is high in quality then we’ll agree to pay correspondingly more.