The value of quality improvements

Purpose – The purpose of the paper is to present a proactive quality costs measurement methodology, which describes the value of quality improvements and the implication of this value on customers' perception regarding the value of the product. Design/methodology/approach – By describing the perceived customer value in a dynamic term, it becomes possible to derive an analytical model that recognizes the implication of a company's efforts to improve design quality and conformance quality on product value as perceived by the customers. Quality costs as a performance indicator of improved design quality and conformance quality (as the results of prevention and appraisal activities) can be expressed in terms of value (i.e. a trade‐off between benefits and sacrifices), where the benefits of the improvement include higher product quality and reduction of failure costs. The sacrifices include the costs to perform improvement activities (i.e. prevention and appraisal costs). Expressing quality costs in this way thus establishes a link between a producer's efforts to improve quality and the way customers perceive the value of the product. The developed methodology of proactive quality cost measurement has been applied for collecting, measuring, and reporting quality costs in a Swedish wood‐flooring manufacturing company. Findings – Transforming quality cost measurements into value provides a better explanation regarding the effect of prevention and appraisal activities on the quality improvement indicators. Thus, the value of quality improvements is a measure of return on quality improvements (ROQI), which indicates whether the quality improvement efforts gave higher, fair, or lower return. Originality/value – This paper develops and discusses a model of customer value by accommodating its relative nature, and presents a proactive way of measuring quality costs (i.e. value‐oriented and customer‐oriented).