Page 232 - Cambridge IGCSE Business Studies

Cambridge IGCSE Business Studies Section 4 Operations management
Brand image and customer
loyalty: see Chapter 12,
page 164.
Wholesalers and retailers:
see Chapter 13, page 180.
230
Product life cycle: see
Chapter 12, page 167.
TOP TIP
Make sure you understand why
quality is important for the
marketing of products.
■ Keep customers and attract new customers – this is known as customer loyalty.
When a business has a reputation for producing quality products it is easier for
them to keep their existing customers and attract new ones. The long-term success
of any business relies on getting customers to ‘repeat purchase’ – to keep coming
back for more of the product, for example McDonald’s, Toyota and Samsung.
■ Reduce costs, customer complaints and returns – products that do not meet the
needs and expectations of customers will be returned. The product will have to be
replaced or the customer may want the money they paid for the item refunded.
Returns from customers increase costs and reduce profits. If a large number of
customer complaints and returns are made then this could damage the business’s
reputation. Existing customers will stop buying the firm’s products and the firm will
also find it difficult to attract new customers.
■ Charge a premium price – many consumers are prepared to pay a higher price
for a product that is seen as being of better quality than similar products on the
market. If a business is able to charge a higher price for its product compared
to that of competitors then this may increase its profitability, for example Apple
computers.
■ Encourage wholesalers and retailers to stock the product – most manufacturers
need middlemen, such as wholesalers and retailers, to help distribute their product
to the final consumer. If a product is of good quality then both wholesalers and
retailers will want to stock the item because they know that consumers will want
to buy it. They will sell more of the product and this will increase their revenue and
profits.
■ Lengthen product life cycles – products that are good quality will continue to
meet the needs of customers. These products will have a longer life cycle than poor
quality products, which consumers will not continue to buy. If a product has a long
life cycle then it will stay in the most profitable maturity stage much longer.
Develop a
brand image
Lengthen a
Keep
product’s
life cycle customers
Encourage
wholesalers
Quality helps Attract new
and retailers to a business to customers
stock its
products
Charge a
premium price Reduce costs
for its goods Reduce
customer
complaints and
returns of
goods
Figure 17.1 Why quality is important to businesses