A convergence of factors have made it extremely tempting for businesses to reduce the quality of their manufacturing from inflation and supply chain issues to supermarket chains making it difficult for them to increase their prices. 

In 2023 conditions continue to be rocky for retailers across the board; as they set about slashing budgets, they are expecting manufacturers to bear the cost of their price reductions.

Consumer spending is slowing, and the number of brands that are trimming their manufacturing budgets are increasing. According to S&P Global data, global manufacturing output is dwindliing as cost-cutting begins in earnest.

But quality comes at a cost and brands must be prepared to pay for it unless they want to lose customers in droves. 

Of all the possible areas to cut costs, the last place businesses should look to trim their budgets is manufacturing. 

Most businesses can and should stand to whittle down their discretionary, comfort, and non essential expenses. From administrative fees to marketing, nixing expenditure on low value activities with little to no return is the first step towards getting the organisation into shape to withstand the economic downturn.

Manufacturing is not one of those areas.

As the very core of a business, it should never be skimped on if organisations want to live to fight another day. The simple reason is when consumers are spending less, they expect good value for what they pay. Higher expectations naturally arise from limited resources – those who have less to spend will spend more time shopping around for bargains.

A recent global PWC survey shows 96% of consumers intend to adopt cost-saving behaviours over the next six months. However it’s important to keep in mind that low prices don’t necessarily equal great value. 

Brands that have worked hard to build trust with their consumers must be aware that if they opt for underpriced manufacturing, they’re essentially shortchanging their customers who won’t be happy that they’re spending their hard-earned money on less product, and inferior quality for the same price.

And when they lose trust, costly and time-consuming action is required for brand repair to rebuild their customer base. Some consumers simply look elsewhere and never come back. 

Quality is king

Researchers have found there are eight quality dimensions which are broken down to performance, features, reliability, durability, ease of use, aesthetics, serviceability, and the quality of materials used in the product’s manufacture.

Aside from the basic expectation that manufactured products are fit for purpose, these tactile aspects are what sets them apart in the consumer’s mind. 

Customers’ experience of product quality – how they judge the overall excellence of a particular product relative to others – influence their future purchasing behaviour. Increasing their willingness to pay as well as their willingness to recommend a product to another consumer is crucial to a brand’s longevity.

Products that are high quality and pleasurable to use are simply more desirable and thus marketable to discerning consumers.

Partnership with manufacturers key to longevity 

Retail across all categories is down and the consumers who are still spending are receiving much less than before thanks to inflation. Rather than exacerbate the issue through underhanded tactics just to save a buck, businesses must strive to fulfill their promise of quality if they want to come out ahead in the long run.

The reality is everyone from suppliers and manufacturers to retailers and consumers will have to pay the price for underpriced manufacturing sooner or later. To skimp on quality now is to pay more later on to replace it when it inevitably gets broken. 

Sadly this impending crisis for product developers and manufacturers demonstrates how undervalued and misunderstood they are. Far too many businesses look at manufacturers as just a supplier, rather than a valuable asset or potential brand partner.

With their keen insights and unrivalled intel on industry trends, innovations, and supply chain efficiency manufacturers are an overlooked resource. In the past, they have been businesses’ secret weapon in weathering slow periods and gaining competitive advantages over their rivals.

Ultimately clear-eyed businesses should be wary of trading short term benefits for what will be a long term loss. A focus on shoring up goodwill and building customer and stakeholder relationships especially with manufacturers may just be what gets them over the line when the going gets tough.

Rohan Widdison is CEO of New Laboratories.