Here is the third post in our series of expert answers to your questions. This question was submitted to Ken Wong after the live presentation.
You often mention “quality” in your presentation (as do most people). What exactly do you mean by quality?
Ken’s response:
Quality is one of the most dangerous words in business strategy since it means so much…and yet, when left undefined, all the good intentions associated with it can be translated to misplaced, and costly, practices. So, when thinking of quality I advise people to consider three things: the criteria that defines quality; the relative importance of those criteria and how well one performs on each of the criteria.
1) The Criteria
I like to think of quality as EVERYTHING a buyer considers in making a purchase decision (or, in this case, in choosing a pharmacy). We refer to the list of such things as “buying criteria”. For example, criteria for selecting a pharmacy might be speed of service; provision of drug/health information; availability of front-of-store items and so on.
In addition, one should distinguish between those criteria that are “tablestakes” and those things that are “semi-discretionary”.
“Tablestakes” criteria are the things everyone expects when they choose a pharmacy. Consumers expect all competitors to do these things at an adequate level, and thus you are either acceptable or unacceptable. For example, while mistakes can happen, most consumers expect that their prescription will be filled according to the doctor’s specifications.
As a general rule, because buyers assume all competitors meet these tablestakes standards, they do not consider these criteria in choosing a supplier.
“Semi-discretionary” criteria are those things that do vary from one competitor to another. These are the criteria that consumers explicitly consider in choosing their regular pharmacy. For example: how long do I have to wait? How pleasant are the service staff? The criteria may be technical in nature or they could relate to the aesthetics of the store, the shopping experience or even the reputation of the pharmacy. These criteria can be provided to varying degrees depending upon how a pharmacy wants customers to see them.
While it may be tempting to identify a lengthy list of such criteria, the reality is that most consumers will base their decision on a small number, usually less than five and almost never more than 7.
2) Relative Importance
Different people will place a different emphasis on these criteria depending upon, for example, the circumstances surrounding their illness, their age or even frequency of visits to the store. For example, someone who only places one prescription per year will likely place a heavy emphasis on how conveniently located the store is. By contrast, a more chronic patient might be willing to travel farther in order to get specialized service.
One way to get specific about different types of people (called “market segments”) is to write down the names of the criteria on a sheet of paper. Then, across the top, write down the name of the customer groups. Now, on a group by group basis, allocate 100 points to indicate the relative importance of each criteria to each group. For example, if you think criteria A is 2 times more important than criteria B, it should get twice as many points. When you are done, each cell of your criteria x customer matrix will contain a number between 0 and 100 and the columns should sum to 100.
3) The Ratings
The final task is to “score” yourself and each of the competitors on each criteria. You might use a scale of 1 (weak) to 10(outstanding) with, say a score of “6” reflecting average. When you examine these scores next to your criteria x customer matrix, it will start to be clear why some people buy from you and others shop elsewhere.
Click here for a sample sheet that you can use to as an example in your own calculations.
There is a more detailed and sophisticated analysis you can do with this same data to figure out how to improve your quality…and we’ll talk about that in my next post.
We have a winner!
Rajeev Gupta of Castlemore Pharmacy is the winner of this week’s prize draw. Rajeev has chosen a subscription to the Natural Medicines Database, a one-year subscription to Canadian Business magazine, and a one-year subscription to Money Sense magazine for his prize package.
