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The term 'cost of poor performance' specifically refers to the costs incurred due to quality issues. This encompasses a range of expenses associated with ensuring a product or service meets established quality standards. When quality falls short, it can lead to defects, rework, customer complaints, warranty claims, and lost sales opportunities. These elements contribute to financial outflows that stem directly from inadequacies in performance and quality.

Addressing these costs is essential for organizations as it highlights how failures in quality can erode profitability and customer satisfaction. Understanding the costs associated with poor performance aids organizations in identifying areas for improvement, ultimately leading to better quality and efficiency. Thus, the focus on quality issues encapsulates the essence of 'cost of poor performance' in relation to software testing and overall business operations.