'Quality' in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for.

A product is not 'quality' because it is hard to make and costs a lot of money.

Customers only pay for what is of use to them and gives them value. Nothing else constitutes 'quality'.

Any manager who asks, 'What do our customers really buy?' and finds a way to supply it, will be a winner.

Gillette's safety razor

Gillette did not 'sell' their razor. They practically gave it away. But it was designed so it would only take Gillette's patented blades. So what they sold at a profit were the blades. But what they were really selling  to millions of men all over the world who bought Gillette's blades was the 'shave'. The customers were happy with the blades and with the price – they were paying for what they bought, that is, for a 'shave' rather than a 'thing'.

Xerox copiers

When Xerox, known as the Haloid Company in Rochester, New York, began to make copying machines, it was thought that no business would pay $4,000 for 'a gadget to help the secretary'. Besides, that amount would need capital expenditure approval by the board. So it did not sell the machine, it sold what the buyer wanted and what the machine produced – copies! At five cents a copy, this could come out of petty cash!

Lubricant for heavy machinery

A medium-sized oil company in America's Midwest supplies about half the special lubricant needed for large earth-moving and mining equipment in the area. It is in competition with some of the largest oil companies but it is profitable because it doesn't sell lubricating oil at all! It sells what is in effect, insurance. What is of 'value' to the customer is not lubrication, it is the operation of its equipment. The company offers a maintenance program for the machinery with an annual subscription price, and guarantees the machines will not be shut down for more than a few hours per year. Of course they buy the lubricant, but they are buying a trouble-free operation, which is extremely valuable to them.

These examples may seem elementary but it is what marketing is all about. Unfortunately very few suppliers act on it.

Anyone who supplies what the customers see as 'value' is very likely to acquire leadership in an industry or a market.

Source: The Essential Drucker, Peter F. Drucker