What incentives does a company have to deliver high quality services or products?

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lizedwards eNotes educator| Certified Educator

There are three primary motivations for developing a business model that includes the delivery of high quality goods and services: market reputation, customer loyalty and retention, and customer satisfaction. These three benefits can contribute to a business model that is both sustainable and profitable.

Customer Satisfaction
A customer who is satisfied is beneficial in that the satisfied customer is unlikely to seek to return the product or receive a refund for unsatisfactory services. The customer then keeps the product and does not burden the company with customer service costs and in many cases inventory loss. Customer satisfaction is the starting point before the benefits of market reputation and customer loyalty/retention occur. If a customer is unsatisfied, the following two benefits will not occur.

Customer Retention and Loyalty
Customers who receive high quality products and services from a company are more likely to stay with or revisit that company. By providing excellent products, a company can ensure that when a customer has need of their product or services again, the customer will return to them and not a competitor. Low quality products, and even mid-quality products, are unlikely to encourage customer loyalty, as these options are often widely available from a variety of competing businesses. 
 
Market Reputation
With a continued history of delivering an excellent product, a company develops a reputation for excellence. That reputation translates into value because that company can comfortably maintain a price point that reflects the quality of the product or service. Additional value is added with the attraction of new customers. New customers can confidently interact with the business as a result of the reputation that precedes it. With a strong reputation for quality, a new customer can expect that the products will be good. In a time when customer reviews are widely available on the internet, reputation is increasingly important, as many new customers will not approach a company if it has a reputation for poor quality.
 
Ultimately, the goal of a business is to generate revenue. These three benefits of a quality-centric organizational model, when wielded prudently, can lead to profit and stability within a business.

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