Quality improvement trade-off.

• Position: Marketing News - Brief Article

The conventional wisdom is that improvements in service quality should be structured to do two jobs: enhance revenue and reduce costs. A new report from the Marketing Science Institute suggests, however, that that might not be the best approach. "The empirical results show that, counter to the conventional wisdom, firms that adopt the revenue expansion emphasis perform better than firms that try to emphasize both revenue expansion and cost reduction simultaneously."

Although standardization improves quality in a manufacturing environment, the report concludes, customization is often the key to quality improvement in a service industry--and that means higher, rather...