In an interview published in today’s Economic Times, Peter Moore, Corporate Vice President, Interactive Entertainment Business of Microsoft’s Entertainment & Devices Division, was asked whether the early manufacturing glitches found in the Xbox 360 gaming console have been addressed by now. In response, he said, “When a product is complex, you may have some instances of defects, which is unfortunate.” We agree. But, he went on to add, “But the defect rate was in low single digits and we are happy that the necessary steps were taken immediately to redress the issue.”
Defect rate in low single digit? In the world of Six Sigma, where defect rates are kept less than 1 in a million (i.e. 0.000001 or 0.0001%), defect rate in “low single digit” (i.e. 1 to around 5%) is just too high.
In the same interview, Mr. Moore stated that products sold in the gray market are not “authentic” and that they lack the “benefit of warranty and after-sales-services.”
Now, lack of warranty and after-sales-service is the constant pitch that leading manufacturers of electronic goods use to try and stop their prospective customers from going to the gray market where prices are typically 30-40% lower (barring a few exceptions like Nokia, which has been following a very aggressive pricing strategy in price-sensitive markets like India). Yet, a certain segment of the market still keeps going to the gray market, with the casual shrug, “Okay, we know that we might not get warranty or after-sales-service if we buy from the gray market, but we buy only reputed brands and nothing goes wrong with them”. Very often, they are right: after all, reputed brands typically have defect rates of “one in a million”.
But, when defect rates shoot up to low single digit percentages, people will surely regret their decision to buy from the gray market, where they are left with no warranty or after-sales-service, let alone free replacement.
Defect rates in low single digit, but immediate replacement for customers walking in with a defective product … good strategy to fight the gray market?