Customer Dissatisfaction as A Source of Entrepreneurial Opportunity1

Customer Dissatisfaction as A Source of Entrepreneurial Opportunity K.Ramachandran Indian School of Business

K.Ramachandran

K Ramachandran joined the Indian Institute of Management, Ahmedabad, in 1986 soon after obtaining a Ph.D. from the Cranfield School of Management, UK. He was an academic advisor to the Satyam Computer Group on e-business during 2000-2001. Since July 2001, he is a Professor of Entrepreneurship and Strategy and Head of the Wadhwani Centre for Entrepreneurial Development at the Indian School of Business, Hyderabad. He has been teaching on short and long duration programmes, including MBA and PhD since joining IIMA. He ahs done research on entrepenreurship and strategy and has published extensively in reputed Indian and overseas journals including the Journal of Business Venturing, Small Enterprises Development Journal, Entrepreneurship & Regional Development, Venture Capital, Keio Business Review and Vikalpa. He has presented papers on entrepenreurship and strategic management at national and international conferences. He has also published three books and has contributed chapters to books on entrepenreurship, global strategy and research methodology. His strong areas of knowledge include all aspects of entrepenreurship and strategic management with special focus on growth strategies, customer satisfaction, resources management, innovation, corporate venturing

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Customer Dissatisfaction as a Source of Entrepreneurial Opportunity

Abstract Millions of dollars are wasted every year in failed and less successful new products and ventures. This is universally true. Not much success has been made so far in solving this problem, though identifying an attractive investment opportunity has been one of the determining factors of firm success. Methodologies to spot an opportunity have been scarce and weak. This paper discusses a simple but highly effective framework to fill this gap. This is based on the logic that customers buy new products and services if they are dissatisfied with the existing and if the new offering is better. Here customer need may be explicit or latent. Two implementable frameworks are discussed. One, CriticalityDiscontentment Matrix for opportunity identification and, two, Customer Dissatisfaction Elimination Chain to refine business strategies and thus to achieve zero customer dissatisfaction for any business. A number of case studies from globally known firms have been referred to illustrate the frameworks.

How to Identify Entrepreneurial Opportunities Fact • most ventures fail for want of customer support, with higher mortality at start up • most entrepreneurs ‘click’ once or twice, not always • most venture capitalists do not hit the base every time they swing the bat.

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ost often entrepreneurs rely on their intuition; they do not use any clear reliable framework to check the power of an idea. They do try to check the attractiveness of the idea in terms of the overall demand and entrepreneurial capabilities to exploit it commercially. After tracking the history of ninety new ventures from the US, Europe, Japan and Asia, representing a number of industries at different stages of growth and operating under different economic conditions, we seem to have created a simple, basic framework that can predict the possibilities of success of a new product in the market. This has been refined and validated further and

Fundamentally, firms do not sell products or services. They offer solutions to customers’ problems. Customers pay for them based on their perceived confidence in the ability of the product or service to solve their problems. In that sense, customers always look for a better alternative to eliminate their

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discussed here. Building on this matrix, we have developed another framework that enables firms to refine their product market strategy and constantly meet changing customer needs.

Customer Dissatisfaction: the source of opportunity

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dissatisfaction; if one product is found better than another, they buy that. The search for an alternative arises either when customers are dissatisfied with the existing products (including services) or when customer needs change under the influence of a number of stimuli such as age, income, habits, interests and knowledge about things available elsewhere. In that sense, customer needs are dynamic and firms have to understand the changes in needs constantly to eliminate customer dissatisfaction entirely. Conventional wisdom suggests that dissatisfaction is uni dimensional. However, a closer, analysis would show that this is not true. The extent of dissatisfaction is not the same for all products and services even if they are equally poor on all features. Similarly, the extent of dissatisfaction is not the same for the same product under different conditions and at different points in time. For instance, the extent of dissatisfaction with the quality of a TV channel is not the same when we watch an important programme and at other times. Similar are the feelings with Internet connectivity or the quality of drinking water supply, depending on their importance to us. We did a content analysis of customer comments on their level of dissatisfaction with a number of different products which showed that dissatisfaction has two dimensions. One, the extent to which customers are discontended with the features of a product and processes involved in its purchase and consumption. Two, the level of criticality of specific features and processes to customers. These are independent dimensions of customer dissatisfaction. However, such bifurcation of dissatisfaction has not caught the attention of researchers on customer satisfaction so far, though there have been a number of excellent papers in this area, (Singh and Wilkes 1996; Bearden and Teel 1983; Olshavsky and Miller 1972). Parasuraman, Berry and Zeithaml (1985) had identified customer need as one of the three factors determining customer expectations and resultant satisfaction in service organizations. They confirmed the

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importance of customer desires as a determinant of satisfaction. Homes (2000) has also discussed the relationship between customer expectations and dissatisfaction. It is useful to remember that the purchase decision of a customer is influenced by a number of factors (Teare 1994; 1998). They include: consumer’s preference structure, information search behaviour, prior product experience, extent of product involvement, feeling of perceived risk, extent of role specialization and the role of decision rules in choice. Mittal and Kamakura (2001) concluded that customers with different characteristics have systematically different thresholds and response biases. This helps to explain why a customer’s level of satisfaction with the same product changes over time. In all these references, there has been no serious effort made to study what constitutes customer dissatisfaction. It is common knowledge supported by research evidence that the level of dissatisfaction rises when importance of the need goes up. For instance, Goodman and Fichman (1995) studied the relationship between customers’ evaluation of core and peripheral factors in their transactions and customers’ overall satisfaction. They concluded that customer dissatisfaction with peripheral factors (such as help on product use) may make them more dissatisfied with the overall performance of the product. They too have not categorized the peripheral factors as more and less critical needs, though they seem to admit that not all factors, core or peripheral impact the customer equally. In essence, when needs are expressed as desires, which are either not met in part or in full, entrepreneurial opportunity arises. Interestingly, the relevant entrepreneurship literature focuses heavily on the strengths of the entrepreneur and not so much on customer need. This includes exploration of opportunities based on technological innovations (Colarelli and Rice 2001; Choi and Shephard 2000) and the entrepreneurs’ previous work experience and area of expertise (Hench and Sandberg 2000; Kickul and Gundry 2000; Melyrath and MacMillan 2000; Hills and Shrader 1998; Kirzner 1997). Christenson and Peterson (1990) concluded

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that specific problems and social encounters experienced / observed by entrepreneurs are sources of venture ideas. This probably is one of the few studies capturing the essence of opportunity in customer problems. A few studies (Henard and Szymanski 2001; Kleinschmidt 1987; Cooper 1979) on industrial products have concluded that the key to success in industrial products remained unknown. However, introduction of unique and superior products, unique customers benefits and solving customers’ problems were identified as factors contributing to new product success. From an entrepreneurial angle, this means reduction or elimination of existing customer problems and dissatisfaction revolving around them. However, this stream of enquiry has not captured much attention in recent years. It is in this context that this paper becomes relevant. Since discontentment and criticality are two independent variables, we need to examine their influence on the level of customer dissatisfaction and resultant entrepreneurial opportunities. As shown in Exhibit 1, this Discontentment – Criticality Matrix is the heart of entrepreneurship opportunity identification process. Customers are most dissatisfied when they are most discontended with the features and processes of buying and consumption for a product which is very critical to them (Quadrant 1). Customers are least dissatisfied if the discontentment level is very insignificant or nil for a product which is not at all critical to the customer (Quadrant 3).

Exhibit 1: Criticality-Discontentment Matrix

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Quadrant (1) offers the most attractive market opportunity to anyone who offers solutions to customers who are most dissatisfied. Since customers in this quadrant eagerly look for new products, firms will have to make minimum marketing efforts as there will be a natural pull coming from customers. The reason for the rapid success of a number of products including Barbie doll, Dominio’s Pizza, Dell Computers and the Harry Potter series of books can be attributed to the high level of customer dissatisfaction that existed at the time of their entry, with the available alternatives. These experiences are elaborated below. 1. Barbie Barbie doll’s wonderful success story reinforces the criticality – discontentment argument of opportunity made here. Barbie doll made Mattel Toy’s sales to go up to $96m in 1964, compared to the pre-Barbie sale of $9m in 1959. Ruth Handler got into toy business in the early 1940s, and introduced the UkeA-Doodle musical instrument in 1947, and a toy piano with black and white keys and real scales a few years later. During the 1950s, Mattel became the third-largest toy company in the world. Handler noticed a basic play need in a child when her 9-year-old Barbara imagined adult features for her paper creations; stewardesses, secretaries, or college coeds. She noticed in her daughter the existence of a critical need to have dolls that enabled her to fantasize an adult life (beyond being a mother). She also noticed that the existing products did not have the features to eliminate the discontentment that existed. She built on some adult dolls collected from a Swiss holiday, and redesigned to make them look like the current day Barbie. She hired a hairdresser to experiment with hairstyles, and a dress designer to design a complete wardrobe of clothes. The trader perception that children always wanted to be mommies and hence little girls wanted cuddly bobby dolls got shattered when Barbie galloped the store shelves. It took Mattel three years to eventually catch up with the burgeoning 25

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customer demand. Barbie met two kinds of customer needs. One, an already high critical need to fantasize an adult life, and two, a need to be like others. Since there were no real alternatives for these dolls, the existing level of dissatisfaction was very high [quadrant (1)]. 2. Domino’s The success of Domino’s Pizza from a borrowed $500 and one shop to a $3.4 billion international company with 120,000 employees in 2,000 outlets across the world demonstrates the discontentmentcriticality link very clearly. Domino’s Pizza’s phenomenal success can be attributed to its initial ability to spot a segment of the market, which was highly dissatisfied with the then existing possibilities for cheap but high quality food. In 1960, when Tom Monaghan and his brother bought Domino’s Pizza in Vpsilanti, Michigan, his largest customer segment consisted of students of the University of Michigan and the Eastern

Michigan University. Pizza was a highly critical product for the students of Michigan because of its high quality, delicious taste and low price combination. At the same time, they were dissatisfied not with the product features but with the processes involved in their purchase. Monaghan realized that students were reluctant to go out for pizza, particularly during their examinations, though it was one of the best and cheapest sources of food for them. Besides, students, most without cars, could stay in the dorms and order pies to share with their friends. Pizzas also provided them with some respite from the drab and predictable college food. This observation about exam days also implied that students would not go out whenever they are busy, which is most often the case. Yet another implication was that the total potential market was much larger than the numbers who came to the shop to eat. The moment Domino’s removed all the hurdles to their having pizza in their rooms, the demand zoomed.

Box 1: Good /Bad Opportunity Illustrations Disney When Disneyland was started, and customers were highly dissatisfied with the existing alternatives Walt Disney met a critical need for amusement. In Disney’s own words, “existing amusement parks are neither clean nor amusing, and offered nothing for Daddy”. Disneyland became a roaring success because it shifted the speed and size of the thrill to the show element. Their attractions were seen by visitors as extensions of the already famous Disney movie experience with visitors taken out of their seats and placed in the middle of the action. Disneyland has always been an attraction for the entire family, and has been kept clean always. VISA/Master Cards The concept of a credit card, with guaranteed payment by a banking organization began in the 1940s. The phenomenal success of Master and Visa Cards in the subsequent decades can be attributed to their meeting a critical need for which the existing alternatives were not at all satisfactory. In the absence of cards, people had the option of carrying money (often in large quantities to meet specific requirements) with the associated risks and discomforts. Those without adequate cash had to either abandon shopping plans or postpone them. Cards eliminated most of the high levels of discontentment associated with possession of liquid cash as the means to buy. Since the need to have cash or its equivalent is critical for all, credit cards met a critical need. In some cases, it enabled maturing of latent need for a number of products, as it facilitated easy payments in multiple instalments at a later date. Later card companies introduced variations including debit cards, ATM cards and cobranded cards to eliminate customer discontentment in some other areas of financial transactions.

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Gilbert Toys Gilbert Toys, which was known for educational toys with solid craftsmanship made a foray into mass market plastic toys in the 1960s. Though the need for new toys such as the slot-car racing sets had become quite critical for every child to have, there were several players in the market offering good quality product; so, customers did not have much dissatisfaction of any kind. Gilbert’s entry would have had some impact, had it eliminated some pent up dissatisfaction. It did not offer anything new. On the contrary, its poor engineering, shoddy construction did not impress buyers, and word regarding its poor quality rapidly got around.

Electric Cycle Sir Clive Sinclair, pioneer of pocket calculator and pocket TV, took advantage of a 1983 law in the UK that permitted small electric vehicles on the highway without road tax, a license or compulsory insurance. Sinclair imagined that availability of an electrically assisted cycle would create new dissatisfaction with the existing geared cycle. In 1985 he introduced C5, an open-top, single seater, lightweight three-wheel buggy, powered by a lead acid battery and foot pedals. Unfortunately for him, instead of eliminating any dissatisfaction on the CDE chain, it created more when many customers found the vehicle too low, too slow and too limited in range. Customers were extremely disappointed with the poor technology and lack of sophistication. Stores selected for selling vehicles often did not have enough space to give demonstration rides to buyers, besides being familiar with its workings. Also, it was priced much higher. It was seen more as a fun machine rather than a serious, everyday, all-weather transport.

Ford Edsel Edsel, introduced in 1957 in the US market, was designed as a “smart” everyday transport solution for young executives and families on the way up. Ford was able to create great expectations in the minds of the target group, and dissatisfaction about the existing competing cars through a massive ad campaign. Unfortunately, the result was disastrous. Ford failed to meet the hype surrounding its launch that led people to believe that it was a major motoring innovation. Customers did not like its styling and the fancy failed to work satisfactorily. Also, most of the cars in the initial lot had something wrong with nearly each one of them, with overpowering as a basic problem.

The market for pizza could thus be divided into customers for whom belonging to different combinations of levels of criticality and discontentment existed as shown in Exhibit 1. The most attractive segment has very high criticality of need and high level of discontentment with the existing options for eating pizza type of food. Those who went to the shop to eat reflected only a tip of the potential market size. When Domino’s offered home delivery of pizza, it was able to mop up all the customers who were at the high criticality-high discontentment point in the matrix. Their offering of high quality, fresh, tasty pizza at reasonable price eliminated all kinds of pent up discontentment customers had about food. Domino’s continued to offer traditional pizzas with different toppings for almost

30 years. They covered more geographical ground but with the same target group of high criticality-high discontentment customers who wanted fresh, tasty and cheap food [quadrant (1)]. Domino’s had two options to grow. One was to focus on the less dissatisfied and less critical market segments in Michigan itself by expanding capacity of their first store further. Since the level of criticality would be lower for the other customers, Domino’s would have had to contend with lower level of market pull. This is a situation when both criticality and discontentment are low. An alternative would have been lowering prices. This would have resulted in lower level of profits particularly when the level of discontentment also is lower.

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The other option was to target the same segment elsewhere. They went for the second option. Focusing on the section of the society whether students or not, which wanted tasty, hygienic and low priced pizzas delivered at home they set up stores in different parts of the US. Everywhere, Domino’s became the home-delivery pizza people. Domino’s continued with the time tested traditional pizzas for almost three decades before introducing product innovations in the nineties. It is when firms continue to offer products, which are highly critical to the customers, but also the absence of which will create high level of discontentment that they tend to become immortal. This is amply illustrated by the experiences of a large number of successful and failed products across the globe. Michael Dell met the so far unmet needs of a category of computer customers who wanted a say in the configuration of their systems, which was critical for them. He also eliminated a lot of discontentment that existed in terms of price and delivery. Dell is now one of the largest PC manufacturers in the world.

The Harry Potter series of four books made J.K. Rowling a household name all over the world with her books getting translated and distributed in most parts of the world. These books met a highly critical need of the children to fantasise with excitement in a world full of magic, with a lot of positive suspense built in. Yet another of children’s critical needs is to be like other children. There has been no writer since Enyd Bliton who has captured the imagination of children so well. Quadrant (2) represents customers who are highly discontended with the existing products which are not critical to them in terms of importance: for instance, poor public transport in a town where everyone travels by own vehicle. Customers there are indeed discontended with the quality of local public transport service, but do not bother so much because it is not critical to their movement. On the other hand, poor quality of service of local trains would become a major public issue in any large city because of the criticality of the service to the public. Poor quality of peripheral features of many products also belong to this quadrant. E.g.

Box 2: Structure of needs and dissatisfaction Dynamism in needs This is a function of a number of variables such as income, habits, trends in the society, and personal likes and dislikes. For people at lower levels of income the more important needs are the basic needs as identified by Maslow and would include food, clothing and shelter of a basic nature. For higher income people the ingredients and the quality of much basic needs would vary. There are also possibilities of higher needs of a societal nature. For instance, products used for daily subsistence a will be most critical for all people but non-essentials will be less critical. Because of the dynamism in need, today’s non-critical products may become very critical tomorrow. High prices as perceived by customers, can also be a source of dissatisfaction. Some of these sources of dissatisfaction do influence each other. For instance, new knowledge about better products can lead to dissatisfaction with existing product features. The criticality of a need is also influenced by habits such as for food and clothing. Disregarding levels of income and social contexts of living, most people prefer to have their traditional food. This is true with Indians, Chinese and the Spanish in Europe or the U.S. The extent of criticality can also be influenced by fashion trends in the society for items such as for clothing or furnishing. This is particularly so for youngsters. Individual likes also determine the extent of criticality. This could be for music or even food. The need for fun may be momentary, as is the case with some kind of food. In short, a close analysis of the factors influencing the dynamism in customer needs would enable managers to know where on the criticality continuum their products lie.

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Elements of Discontentment When products fail to meet customer expectations, they feel discontented. The four key sources of discontentment are: product features, process involved in buying and consumption, and intangible external variables. Most often deficiencies in product features are major sources of discontentment. This could be design related or manufacturing related. In a world where most products are getting standardized at least in terms of their core features, the challenge to understand the customer needs for peripheral features is enormous. The key processes involved in buying start with collection of information about the product. This could include level of discontentment with reference to adequacy of data. During the process of buying, customers may get discontented for a number of reasons such as lack of interest shown by sales people, ambience of the location (shop/ restaurant) particularly in the case of service business, and the extent to which confidence in the product is built during product demonstration. With respect to delivery, there can be discontentment due to delays, damage in transit and arrogance of deliverers or service people. This can be particularly so for services such as courier and products such as furniture or decorative items. Consumers may get discontented for want of adequate training and instruction on the use of the product as can happen in the case of a washing machine or a product to be self assembled. Internet connectivity for want of band width and physical breakdown of gadgets can also be sources of discontentment. Yet another source of discontentment could be limited number of choices for customers, often for want of competition. In that sense, availability of choices can eliminate discontentment. Toys are a category where children always love to have new toys rather than using the same toy again and again, disregarding their price. One of the intangible sources of discontentment is customers’ knowledge about better products offered elsewhere but denied to them. Discontentment may also be due to knowledge about improved processes existing elsewhere for buying and consumption. Thanks to the Internet and other communication facilities, knowledge dissemination is faster now, creating opportunities for some and threat to some others.

customers do not bother much about the poor quality of wrapper of a mineral water bottle if the quality of water inside the bottle is very high. However, level of criticality of such needs may also undergo changes over a period of time, and quality of wrapper may also become a determinant factor of brand preference. Introduction of products into this market will not be easy and new venturists have to carefully identify niches for which such items may be critical (and hence falling into quadrant (1)) and the commercial viability of such a decision. For customers who belong to quadrant (2), substantial marketing efforts will be required to make impact, if any. This could include efforts to change customer needs. Quadrant (3) represents customers who have currently no discontentment with products which are any way not critical to them. This is the least attractive part of the market as considerable marketing efforts are required to create demand, if any. It may, however, be possible to move the

In dynamic external and internal environments, customer needs keep changing, some faster and more substantially than others. In that sense, the level of criticality for a product also changes over a period of time. (There is likely to be new customers entering any given market segment at any given point in time). As the criticality rises, latent need also matures, and market pull goes up (please see Box 2 for how latent need matures). For innovative products, growing level of criticality also means growing discontentment with the existing since the existing alternatives fail to meet the new needs. Over a period of time, customers with such critical needs and discontentment will travel through the

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customer into quadrant (1) through the discontentment-criticality tunnel as shown in Exhibit 1.

Discontentment– Criticality Tunnel

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Discontentment-Criticality Tunnel to reach the farthest point in quadrant (1) as was experienced by Kellogg’s in many countries; for instance, it took about 25 years for Kellogg’s to break-even their operation in Japan and Mexico. Kellogg’s has been following this strategy of deep investment and long wait for customer needs to slowly change through promotions, and making their products critical in almost all developing countries. Here Kellogg’s is trying to change the levels of discontentment and criticality of not any breakfast item but specifically of cereals. The speed of change and influence of such attempts on specific factors determining criticality obviously vary from society to society. In essence, they are trying to shift people from quadrant (3) to quadrant (1) and offer cereals to bring them to (4), and reduce competition. Entrepreneurs who enter the market with solutions for customers who are at lower points in the tunnel may have to make a significantly higher level of effort (and substantial investment) to possibly make some impact in the market. For instance, Iriddium failed in the market because despite some of the best promotional efforts, Motorola could not make its targeted customers feel critical about it, nor have high level of discontentment with the existing situation. Ford Edsel failed when the company brought out a car with features which were neither critical to customers nor eliminated any discontentment. Unlike Kellogg’s which proactively work towards creating a change, there are instances of some firms spotting changes in the level of criticality of some customer needs under the influence of either external or internal factors. These changes on the criticality front could also lead to a rise in discontentment level. This movement of customer from quadrant (3) to (1) through the Discontentment-Criticality Tunnel creates new opportunities, as is being experienced by toy maker Jakks Pacific. Jakks Pacific is one of the Fortune 100 Fastest Growing Companies since 1999 when the ranking was introduced and is one of the Forbes 200 Best Small Companies in the US since 1999. Its strategy has been to grow through new

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product introductions in tune with the dynamism on the level of criticality to customers. The company went public for the first time in 1996. Its net sales grew from $12m that year to $42m in 1997 and $85m the next year. Total revenue for 2000 was $210m, and $310m for 2002. Net income also registered attractive growth ($1.2m in 1996, $2.8m in 1997, $6.4m in 1998, $26.6m in 2000 and $36.5m for 2003). The overall toy industry in the US is estimated at $15 billion in sales per annum. Jakks Pacific manufactures a new array of toys, the most popular among them being action figures of the World Wrestling Federation (WWF). In 1998, it introduced 100 new products under the WWF category. Many of these products were made interactive in 1999. The others are ‘American Muscle’ category cars, animated animal toys for babies and dolls of adolescent age ‘Charlie’s Angles’ coming with fashion accessories and additional clothing. Jakks Pacific brought out about 700 products in 1999, all categories put together. Jakks Pacific’s toys are different from others in two ways. One, they have introduced a new range of toys bringing in a novelty element which is important for toy business. This is based on the fact that children always want change and look for new toys. Once the novelty disappears, the consumer looks for a change. Here the need will be maturing in tune with the changing socio-cultural profile of the society. It is in this context that the second dimension becomes relevant. It is useful to understand the sociocultural factors contributing to the rise in demand for these characters. Prowrestling is becoming big business in the US with the two privately owned organizations (World Wrestling Foundation and World Championship Wrestling) accounting for annual sales revenues of US$1 billion generated from sales of action figures, T-shirts and matches broadcast. Obviously, there are direct and indirect commercial dimensions to the promotion of this violent ‘game’. Each of these businesses supports the promotion of the concept and thus the other businesses indirectly. There are also training

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schools across the US to train people to be ‘professionals’. The rapid growth in viewership for programs organized by the ‘pro-wrestling’ organizations could be interpreted as a reflection of the changing social values. In any case, that has led to a change in the preferences of children for toys. They would like to possess models of their icons from this field and create their own boxing ‘rings’ at home. Jakks Pacific exploited a maturing latent need for such products without changing any of the processes involved in toy purchase, except for the introduction of an online store. They offered solutions to customers who had moved up from a low discontentment medium criticality position ]in quadrant (3)] to a high discontentment – high criticality position [in quadrant (1)]. It is interesting to note that when they noticed signs of a fading interest in the wrestling characters, the company quickly jumped on to selling Harry Potter craft sets in 2001. Building on the ‘Harry Potter’ brand, they have got into licensing agreement for introducing Harry Potter characters. In this case, they are exploiting an opportunity in the high discontentment – high criticality zone of the matrix. The company is launching a line of girls fashion accessories based on the hit TV show ‘American Idol’ and a toy line for Nickelodeon’s’ The Fairly Old Parents, both in 2003. Quadrant (4) reflects customers who are highly contended with the existing options available to meet their critical needs. It is very difficult to penetrate into such markets with new offerings. The challenge gets compounded because customers do not work out the best solution always; they tolerate variations in performance within a range, which is called the ‘tolerance zone’(Kasper, Helsdingen and Vries jr, 1999). For most critical items, the tolerance zone is narrower compared to less critical items. This argument applies to other quadrants as well. We should remember that a dissatisfied customer may not always offer an entrepreneurial opportunity easily. Customers would not like to switch brands

because of the perceived risks involved if such a change is insignificant. Customers do not switch brands not because they are loyal to any brand, but because of the uncertainties associated with untested experience of using an alternative. Customers do not want too many hassles and there is a zone of ‘satisficing’ (Simon, 1959) or ‘tolerance’ (Zaithaml, Berry and Parasuraman, 1993) within which they would prefer to stay. Therefore, minor deficiencies in the mix of offering are not likely to result in a shift in brand for a customer. This should not be misunderstood as pure loyalty to any brand. Also, the level of discontentment for a given brand will be lower, if substitutes exist. The strategic implications to existing firms are: one, they have to constantly identify changes in needs and modify the features accordingly, as is done by many airlines. The other option is to create new needs by terminating an existing product before it completes its life cycle. For instance, Intel’s Pentium chips are upgraded before their demand matures. Gillette upgraded its Sensor XL the same way with the offer of Mach 3 razor. Introduction of colour TV to substitute black and white TV and email replacing fax and surface mail are examples of creation of discontentment (moving the customers to quadrant 1) and reaping benefits. For new entrants into the market, the challenge is to develop something that can create discontentment with the existing. That requires identification of maturing latent needs. Apple Computers became a run away success with its PCs because of its ability to identify a maturing latent need to have more comfortable and convenient computing. Disruptive technologies are found to achieve this by challenging existing market leaders.

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Where to enter: This framework can be used to predict potential attractiveness of an opportunity, whether for start up or existing firms. An understanding of the dynamism in criticality and discontentment will enable managers to

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identify entrepreneurial opportunities. As shown in Exhibit 1, maximum market attractiveness lies where both discontentment and criticality are high and currently existing, which we call Today’s Star. At the other end, when both are emerging, the opportunity is indeed promising, but not immediately (Distant Star). When only one of the dimensions (either high discontentment or high criticality) is existing now and the other is only slowly emerging, it can be an Opportunity for Tomorrow. Making a success out of products falling into quadrant (4) is not very easy. It calls for challenges in innovation. Managers and entrepreneurs have to constantly watch the movement of a product idea on these dimensions to exploit the opportunity at the appropriate time. This analysis can enable managers to determine when changes are required in product features. Firms will find easy entry and quickest success for products which provide solutions to highly critical customer p ro b l e m s b u t f o r w h i c h e x i s t i n g s o l u t i o n s a re h i g h l y i n a d e q u a t e (quadrant (1)). Maximum returns can be made with minimum effort in this case. As soon as the product concept is sold, customers would lap up such products. Buyers will have limited bargaining power, and several firms can manage operations with negative working capital. Sales would peak once the possible process hurdles related to discontentment such as information availability and distribution are removed. This situation is similar to a waterfall f ro m a v e r y h i g h p o i n t w i t h o u t obstructions on the way down, creating maximum impact. Such a strategy will also ensure quicker cash flows and market feedback. An analysis of the v a r i a b l e s a ff e c t i n g c r i t i c a l i t y a n d discontentment and where different segments of customers are located on Exhibit 1 would be very useful to formulate product market strategy in detail.

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Where are the opportunities? Entrepreneurial opportunities exist wherever the level of criticality and extent of discontentment peak. These cover not only products but also services required to consume products, traditionally called value chain. According to Michael Porter (1985), value is created in a product through a series of activities in the organization involving all the resources in different degrees. Extending the logic, the sources of dissatisfaction are also some or all of these value links. In other words, the role of this chain is to eliminate customer dissatisfaction, and is, therefore, called Customer Dissatisfaction Elimination (CDE) Chain. An analysis of this chain enables us to identify a number of entrepreneurial opportunities in both manufacturing and service sectors. These can be any link on the CDE Chain. A close look at any link would show that it represents a Criticality-Discontentment Matrix. For instance, outsourcing of house keeping services. In terms of criticality, it is not very high, but it can be a major source of discontentment for internal customers and hence the decision to entrust it with specialists in that area. It becomes a commercially viable opportunity for a new firm when many firms realize this logic in outsourcing such services. Courier services and IT enabled services are examples of such opportunities. With the rise in intensification of attitude, skill and knowledge for success in eliminating discontentment in each link, their role, significance and structure have undergone changes rapidly. Modifications in the structure of the CDE Chain is a reflection of the methods used to eliminate dissatisfaction on the Chain. New links may be added, which can eliminate discontentment easily and profitably. The key steps involved in the use of the matrix to determine attractiveness of an opportunity are listed in boxes 3, 4 and 5.

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Box 3:

Applications of the Tools Some of the useful applications of the tools discussed here are the following: • • • • • •

Level of attractiveness of an opportunity can be predicted fairly accurately. Identify where new market opportunities exist. The customer Dissatisfaction Elimination chain argument opens up possibilities of identifying opportunities anywhere on the CDE chain. Possibilities of modifying or creating new attractive links on the CDE chain can be explored more accurately. Product positioning, brand building, advertisement and promotion strategies can be formulated by choosing areas of criticality – discontentment. Determine when to make changes in product features. Since the stage in the life of an industry will influence the extent of attractiveness of an opportunity, the criticality discontentment framework can be used to formulate and evaluate entry strategies.

Box 4:

Applications of the Tools Customer-route and product-route can be the starting point to be iteratively linked to each other.

Customer-route: This route is appropriate for entrepreneurs who have not invested in the development of a technology as of now. 1. Observe customers to identify things, processes or prices with which they are dissatisfied. This may be with special focus on certain industries or skills in which the entrepreneur is interested. 2. Construct the CDE Chain and locate the links, which are the sources of dissatisfaction. 3. Develop a Criticality-Discontentment Matrix for each such weak link and plot the source of discontentment on it. 4. Assess the extent of attractiveness of this as an opportunity in terms of the location on the Matrix, and the level of dynamism in criticality. The more the dynamism, the greater the challenge in reminding customers about their dissatisfaction with the present. For instance, for ‘fun’ products, the level of criticality is more dynamic than for a staple food, and the sources of fun may be the products and processes. 5. Examine the extent of match between the identified opportunities and entrepreneurial resources (existing and that can be created) and overall corporate or personal strategy. This is to determine the entrepreneur’s capabilities to develop solutions to the problem links already identified.

Product-route: This route is advised for those with a product or process already developed, and who are looking for an attractive application. 1. Identify as many applications of the product / process through a brain storming session. 2. Plot each of the above on the Criticality-Discontentment Matrix for different customer segments. This can be iteratively done to fine tune and focus on customers groups in quadrant 1. 3. Evaluate the techno-commercial implications of implementing each of the most attractive opportunities.

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Box 5: Measuring Criticality and Discontentment Criticality Observing and/or interacting with customers who are dissatisfied with the present can determine the level of criticality of a need. Accordingly, rate the criticality on a 5-point scale. To revalidate this rating, ask the customer the level of criticality in the immediate need set. For instance, criticality of need for bottled mineral water my be rated as 5 on the scale. Ask the customer, “in your overall need for a journey, how critical is this water compared to the level of criticality for class of journey in the train, snacks on the way and so on?” This additional question is to make the customer think more logically, rather than intuitively, and enable the entrepreneur to determine the level of criticality more objectively. It is important to determine the level of criticality of each of the links on the CDE chain separately, where the entrepreneur is either creating a CDE chain afresh, or the quality of other links on the CDE chain is important for the success of the opportunity already identified.

Discontentment Broadly the sources of discontentment are product features, processes of buying and consumption, and price. Customers can rate the extent of dissatisfaction on a 5-point scale through observation and or interaction as discussed under criticality. Recent performance of conjoint method in identifying customer preferences in a number of situations is very promising. It is possible to validate the findings quantitatively.

An entrepreneur / manager has to constantly identify existing and emerging sources of discontentment and level of its criticality, and then keep offering solutions, all to retain customers and create new ones. Each link in the CDE chain plays a unique role, high or low on criticality.

A close look at the sources of discontentment would show that a number of factors contribute to it, besides those identified by conventional wisdom. When products are becoming increasingly standardized with given core and peripheral features, many process involved in linking the firm and the customer

Exhibit 2: Customer Dissatisfaction Elimination Chain

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becomes sources of discontentment. This would include information collection, buying, paying, delivery, consumption, return of unused products if necessary, after sales service and disposal of waste after use. Each one of these or their subactivities is a possible new entrepreneurial opportunity; the level of attractiveness of course depends on a number of technocommercial dimensions. Information Collection Process: One of the most critical steps in the buying process is collecting information not only about a specific product but also about alternatives. This remained a major challenge until the arrival of the Internet. Firms such as ebay, Amazon and Google eliminated most customer dissatisfaction on this count when they made it possible to collect information on a variety of things quickly and reliably. Buying Process: Amazon.com became a run away winner because it eliminated customer dissatisfaction that existed in the process of going to a bookshop at a time when it is open and buying a book from among titles available there, as against scanning all possible titles in the area of interest and deciding in a few minutes from anywhere in the world, all using the Internet. For most book buyers, while the buying process is very critical, they are not particular about seeing the product as it is standardized in terms of shape and looks. This is not the case with many other products where touch and feel are important. Boo.com failed as an Internet garment firm for this reason. For such items, firms have to ensure wide distribution through a number of channels/outlets to eliminate customer dissatisfaction. Payment Process: This is yet another critical process, but has created much customer discontentment until credit/debit cards came on the scene. Customers had to bear the consequences of carrying liquid cash while going for any shopping. Similarly, shop owners also had to bear the consequences of cash based transactions, including non-purchase for want of adequate amount of liquid cash. Cards from Visa and Master (and others) eliminated all associated dissatisfaction.

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Delivery Process: Arrival of courier service itself eliminated a lot of the dissatisfaction that existed with the quality of delivery of parcels and mails. FedEx introduced a number of features such as bar code label on package for route tracking thus enabling customers to check the location and progress in the journey of the parcels. Other facilities such as home delivery and Saturday 10 am delivery further eliminated customer dissatisfaction. DHL Courier service identified yet another critical need that left a lot to be improved when it offered DHL Jumbo service. According to this, customers with a number of small parcels could put all in a big box and courier it safely and more economically, as is done in cargo containers.

CDE Chain and Business Strategy We shall see the role and significance of the CDE chain in the context of the strategy of a firm and its efforts to achieve Zero Customer Dissatisfaction (ZCD) in the context of Domino’s. In order to achieve the strategy described above, Domino’s designed and developed an appropriate CDE chain. Each link formed a source of dissatisfaction, reflecting the different processes that a customer is involved in the purchase and consumption stages. One of the important links is product feature. The Company perfected and strengthened all links in the CDE chain. In the case of Domino’s, the company perfected and strengthened all links on the CDE Chain over the years and built competitive advantage. Some of the important links on Domino’s chain, and how it strengthened them are worth examining. Ordering Process: Domino’s developed a computer system and database that enabled it to speed up order taking and delivery processes. For instance, it could generate immediate information on the customer such as the previous pizza order details. As a result, time and effort required for both the company and the customers in giving details of address and preferences

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could be avoided, thus eliminating possible dissatisfaction on this count. Delivery Process: The database also provided addresses and directions to customers’ place and even the location of the doorbell. The system would print all such information, which would then be stuck on the pizza box for delivery. Domino’s also perfected a system for scheduling drivers for their bikes. Domino’s was able to replicate this model all over the US and abroad within a short period of time. In order to ensure that customer concerns about supply of hot pizza were met, Domino’s offered delivery within 30 minutes. Later, in 1993, it discontinued this practice and replaced it with ‘Total Satisfaction Guarantee’. It was forced to lift the 30 minute limit faced with traffic related problems. By this time, the corporation had already built up its reputation as the supplier of high quality pizzas at home within a short period of time. Each Domino’s shop is permitted to accept orders only from within a two-mile radius to ensure high quality timely service. The introduction in 1998 of Heat Wave, a hot bag using patented technology that keeps pizza oven-hot to the customer’s door further ensured that Domino’s did not allow any kind of customer discontentment from cropping up.

Cost and product features (quality, taste): Domino’s followed regionally centralized purchasing, processing and handling of raw materials and other ingredients through their distribution centers called ‘commissaries’. However, negotiations for specifications, price and delivery terms for most pizza ingredients and other supplies such as boxes and napkins are handled by Domino’s central purchasing department on a worldwide scale. For instance, Mozzarella cheese is sourced from New Zealand for all Domino’s outlets across the world through a number of commissaries. Through its network of 18 such distribution centers, Domino’s pizza distribution division regularly supplies more than 4,500

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pizza stores with more than 150 products, ranging from dough to pizza boxes. This takes care of the need to have consistency in quality also across stores. The central commissary system also ensured that these sales outlets are relieved from spending long hours making dough, grating cheese and preparing toppings.

Exhibit 3: Price Elasticity and Needs

The above strategy has enabled Domino’s not only to keep the price low for its pizzas, but also maintain high quality product, both eliminating customer discontentment to a great extent. Similar levels of perfection exist in the case of a number of other products such as Dell Computers. Dell has perfected the art of assembling and delivering PCs without having to carry any inventory of its own. Our research showed that price elasticity of demand is one of the most critical factors influencing the success of a product. For instance, customers often buy a product, even when it is expected to meet a need, low both on criticality and discontentment, provided the price is very low. Conceptually, customers buy such products to meet momentary critical needs for fun, when price is close to zero. To capture the power of price in this process, we suggest a three dimensional relationship involving criticality, discontentment and price as shown in Exhibit 3. As noted earlier, Dominos offered a solution combining high quality, tasty pizzas at low prices to meet a critical need of customers.

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Existing firms offering unique value to customers and then eliminating their dissatisfaction will have to constantly review changes in the needs of their customers, and offer entrepreneurial solutions. This builds deep corporate entrepreneurial culture in organizations. For instance, Disney theme park and Intel chips have been constantly innovating their offer to customers, and creating entry barriers for others in the process. There are signs that indicate that their capabilities to meet customers’ changing needs are not infallible. Categorizing customer groups broadly into four segments and further plotting them within them as per Exhibit 1 enables us to spot the market segments with greater opportunities and position the products there. For instance, what is non-critical for one segment may be critical for another. Similarly, levels of discontentment are also highly dynamic.

Conclusion Customer dissatisfaction is a source of opportunity. Focusing on existing / emerging customer needs in terms of their level of criticality and extent of prevailing / emerging discontentment is a very useful way to identify entrepreneurial opportunities. Let us realise most human beings are basically selfish, lazy, prefer to avoid work, like to eat tasty things and have all possible comforts. They would welcome any means to achieve the same. Characteristics of the opportunities (size, stability….) of course, vary accordingly, and can be for either internal or external customers. Exploitation of such opportunities and thus elimination of dissatisfaction on every link of the Customer Dissatisfaction Elimination Chain will enable organizations to be entrepreneurial always. They will achieve Zero Customer Dissatisfaction for them, and be immortal.

Combining the features of the CDE chain and the Criticality-Discontentment Matrix provides for a powerful tool for managers to evaluate the appropriateness of their existing strategies.

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In short, this framework is highly useful in determining the attractiveness of an investment opportunity, and subsequent formulation of business strategies.

8. Hench, T.J. and Sandberg W.R., 2000. As the fog cleared, something changed. Opportunity recognition as a dynamic, selforganisation process, in Frontiers of Entrepreneurship Research, Reynolds, P.D. et al, Eds: Wellesley MA: Babson College

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9. Holmes, M., 2000. Managing Customer Expectations, Information Systems Management, Spring: 92-95 10. Hills, G.E., and Shrader, R.C., 1998. Successful Entrepreneurs’ Insights into Opportunity Recognition, in Frontiers of Entrepreneurship Research, Reynolds, P.D. et al, Eds: Wellesley MA: Babson College 11. Kasper, Helsdingen and Vries jr; 1999. Services Marketing Management, Wiley – Place 12. Kickul, J. and Gundry L.K., 2000. Pursuing Technological Innovation: the role of entrepreneurial posture and opportunity recognition among Internet firms, in Frontiers of Entrepreneurship Research, Reynolds, P.D. et al, Eds: Wellesley MA: Babson College

20. Singh, J., Wilkes, R., 1996. When consumers complain: A path analysis of the key antecedents of consumer complaint response, Journal of the Academy of Marketing Science, Vol. 24: 350 72, 19-21 21. Teare, R., 1994. An overview of consumer and producer perspectives on hospitality services, in Teare, R., Mazanee, J., CrawfordWelch, S. and Calver, S. (Eds), Marketing in Hospitality and Tourism: A Consumer Focus, Cassell: London:5-13 22. Teare, R., 1998. Interpreting and responding to customer needs, Journal of Workplace Learning, Vol.10:2, 19, 76-94 23. Zaithaml, V.A., L.L. Berry and A. Parasuraman, 1993, The Nature and Determinants of Customer Expectations of Service, Journal of the Academy of Marketing Science, Vol.21, No.1

13. Kirzner, I.M., 1997. Entrepreneurial Discovery and the competitive market Process: an Austrian approach, Journal of Economic Literature, Vol XXXV (March): 6085. 14. Kleinschmidt, E.J., 1987. New Products: what separates winners from losers?, The journal of Product Innovation Management, 4(3), 169-185 15. Mittal, V., and Kamakura, W.A., 2001. Satisfaction, Repurchase Intent, and Repurchase Behavior: Investigating the Moderating Effect of Customer Characteristics, Journal of Marketing Research, XXXVIII (February): 131-142 16. Olshavsky, R.W., John, A.M., 1972. Consumer Expectations, Product Performance and Perceived Product Quality, Journal of Marketing Research, 9: 19; Porter, M., 1985, Competitive Advantage New York: Free Press 17. Parasuraman, A., Zeithaml, Valarie A., and Berry, Leonard L., 1985. A Conceptual Model of Service Quality and its Implications for Future Research, Journal of Marketing, Vol.49 18. Porter,M., 1985. Competitive Advantage, New York: Free Press 19. Simon, H.A., 1959. Theories of Decisionmaking in Economics and Behavioural Science, The American Economic Review, 49, pp.253-283

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