Customer Dissatisfaction as A Source of Entrepreneurial Opportunity1

CustomerDissatisfaction asA Source ofEntrepreneurialOpportunityK.RamachandranIndian School of Business

Nanyang Business ReviewVol. 2 No. 2 July – December 2003

K.Ramachandran 22

K.Ramachandran

K Ramachandran joined the Indian Institute of Management, Ahmedabad, in 1986soon after obtaining a Ph.D. from the Cranfield School of Management, UK. He was anacademic advisor to the Satyam Computer Group on e-business during 2000-2001. SinceJuly 2001, he is a Professor of Entrepreneurship and Strategy and Head of the WadhwaniCentre for Entrepreneurial Development at the Indian School of Business, Hyderabad.

He has been teaching on short and long duration programmes, including MBA andPhD since joining IIMA. He ahs done research on entrepenreurship and strategy and haspublished extensively in reputed Indian and overseas journals including the Journal ofBusiness Venturing, Small Enterprises Development Journal, Entrepreneurship & RegionalDevelopment, Venture Capital, Keio Business Review and Vikalpa. He has presentedpapers on entrepenreurship and strategic management at national and internationalconferences. He has also published three books and has contributed chapters to bookson entrepenreurship, global strategy and research methodology.

His strong areas of knowledge include all aspects of entrepenreurship and strategicmanagement with special focus on growth strategies, customer satisfaction, resourcesmanagement, innovation, corporate venturing


K.Ramachandran 23

Abstract

Millions of dollars are wasted every year in failed and less successful newproducts and ventures. This is universally true. Not much success has beenmade so far in solving this problem, though identifying an attractive investmentopportunity has been one of the determining factors of firm success.Methodologies to spot an opportunity have been scarce and weak. This paperdiscusses a simple but highly effective framework to fill this gap. This is basedon the logic that customers buy new products and services if they are dissatisfiedwith the existing and if the new offering is better. Here customer need may beexplicit or latent. Two implementable frameworks are discussed. One, Criticality-Discontentment Matrix for opportunity identification and, two, CustomerDissatisfaction Elimination Chain to refine business strategies and thus to achievezero customer dissatisfaction for any business. A number of case studies fromglobally known firms have been referred to illustrate the frameworks.

Customer Dissatisfaction as a Source ofEntrepreneurial Opportunity

Most often entrepreneurs rely ontheir intuition; they do not useany clear reliable framework to

check the power of an idea. They do tryto check the attractiveness of the idea interms of the overall demand andentrepreneurial capabilities to exploit itcommercially. After tracking the historyof ninety new ventures from the US,Europe, Japan and Asia, representing anumber of industries at different stagesof growth and operating under differenteconomic conditions, we seem to havecreated a simple, basic framework that canpredict the possibilities of success of anew product in the market. This has beenrefined and validated further and

discussed here. Building on this matrix,we have developed another frameworkthat enables firms to refine their productmarket strategy and constantly meetchanging customer needs.

Customer Dissatisfaction:the source of opportunity

Fundamentally, firms do not sellproducts or services. They offer solutionsto customers’ problems. Customers payfor them based on their perceivedconfidence in the ability of the product orservice to solve their problems. In thatsense, customers always look for abetter alternative to eliminate their

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.

How to Identify Entrepreneurial Opportunities

Tarun Sethi

Highlight

Tarun Sethi

Highlight


K.Ramachandran 24

dissatisfaction; if one product is foundbetter than another, they buy that.

The search for an alternative ariseseither when customers are dissatisfied withthe existing products (including services)or when customer needs change under theinfluence of a number of stimuli such asage, income, habits, interests andknowledge about things availableelsewhere. In that sense, customer needsare dynamic and firms have to understandthe changes in needs constantly toeliminate customer dissatisfaction entirely.

Conventional wisdom suggests thatdissatisfaction is uni dimensional.However, a closer, analysis would show thatthis is not true. The extent ofdissatisfaction is not the same for allproducts and services even if they areequally poor on all features. Similarly, theextent of dissatisfaction is not the samefor the same product under differentconditions and at different points in time.For instance, the extent of dissatisfactionwith the quality of a TV channel is not thesame when we watch an importantprogramme and at other times. Similar arethe feelings with Internet connectivity orthe quality of drinking water supply,depending on their importance to us.

We did a content analysis of customercomments on their level of dissatisfactionwith a number of different products whichshowed that dissatisfaction has twodimensions. One, the extent to whichcustomers are discontended with thefeatures of a product and processesinvolved in its purchase and consumption.Two, the level of criticality of specificfeatures and processes to customers.These are independent dimensions ofcustomer dissatisfaction.

However, such bifurcation ofdissatisfaction has not caught the attentionof researchers on customer satisfaction sofar, though there have been a number ofexcellent papers in this area, (Singh andWilkes 1996; Bearden and Teel 1983;Olshavsky and Miller 1972).

Parasuraman, Berry and Zeithaml (1985)had identified customer need as one of thethree factors determining customerexpectations and resultant satisfaction inservice organizations. They confirmed the

importance of customer desires as adeterminant of satisfaction. Homes (2000)has also discussed the relationship betweencustomer expectations and dissatisfaction.It is useful to remember that the purchasedecision of a customer is influenced by anumber of factors (Teare 1994; 1998).They include: consumer’s preferencestructure, information search behaviour,prior product experience, extent of productinvolvement, feeling of perceived risk,extent of role specialization and the roleof decision rules in choice. Mittal andKamakura (2001) concluded that customerswith different characteristics havesystematically different thresholds andresponse biases. This helps to explain whya customer’s level of satisfaction with thesame product changes over time.

In all these references, there has beenno serious effort made to study whatconstitutes customer dissatisfaction. It iscommon knowledge supported by researchevidence that the level of dissatisfactionrises when importance of the need goesup. For instance, Goodman and Fichman(1995) studied the relationship betweencustomers’ evaluation of core andperipheral factors in their transactions andcustomers’ overall satisfaction. Theyconcluded that customer dissatisfactionwith peripheral factors (such as help onproduct use) may make them moredissatisfied with the overall performanceof the product. They too have notcategorized the peripheral factors as moreand less critical needs, though they seemto admit that not all factors, core orperipheral impact the customer equally. Inessence, when needs are expressed asdesires, which are either not met in part orin full, entrepreneurial opportunity arises.

Interestingly, the relevant entrepreneurshipliterature focuses heavily on the strengths ofthe entrepreneur and not so much oncustomer need. This includes explorationof opportunities based on technologicalinnovations (Colarelli and Rice 2001; Choiand Shephard 2000) and the entrepreneurs’previous work experience and area ofexpertise (Hench and Sandberg 2000; Kickuland Gundry 2000; Melyrath and MacMillan2000; Hills and Shrader 1998; Kirzner 1997).Christenson and Peterson (1990) concluded

Tarun Sethi

Highlight

Tarun Sethi

Highlight

Tarun Sethi

Highlight

Tarun Sethi

Highlight

Tarun Sethi

Highlight

Tarun Sethi

Highlight

Tarun Sethi

Highlight

Tarun Sethi

Highlight


K.Ramachandran 25

that specific problems and social encountersexperienced / observed by entrepreneurs aresources of venture ideas. This probably isone of the few studies capturing the essenceof opportunity in customer problems. A fewstudies (Henard and Szymanski 2001;Kleinschmidt 1987; Cooper 1979) onindustrial products have concluded thatthe key to success in industrial productsremained unknown. However, introductionof unique and superior products, uniquecustomers benefits and solving customers’problems were identified as factorscontributing to new product success. Froman entrepreneurial angle, this meansreduction or elimination of existing customerproblems and dissatisfaction revolvingaround them. However, this stream ofenquiry has not captured much attention inrecent years.

It is in this context that this paperbecomes relevant. Since discontentmentand criticality are two independentvariables, we need to examine theirinfluence on the level of customerd i s s a t i s f a c t i o n a n d r e s u l t a n tentrepreneurial opportunities.

As shown in Exhibit 1, thisDiscontentment – Criticality Matrix is theheart of entrepreneurship opportunityidentification process. Customers are mostdissatisfied when they are mostdiscontended with the features andprocesses of buying and consumption fora product which is very critical to them(Quadrant 1). Customers are leastdissatisfied if the discontentmentlevel is very insignificant or nil for aproduct which is not at all critical to thecustomer (Quadrant 3).

Quadrant (1) offers the most attractivemarket opportunity to anyone who offerssolutions to customers who are mostdissatisfied. Since customers in thisquadrant eagerly look for new products,firms will have to make minimummarketing efforts as there will be a naturalpull coming from customers. The reasonfor the rapid success of a number ofproducts including Barbie doll, Dominio’sPizza, Dell Computers and the Harry Potterseries of books can be attributed to the highlevel of customer dissatisfaction thatexisted at the time of their entry, with theavailable alternatives. These experiencesare elaborated below.

1. Barbie

Barbie doll’s wonderful success storyreinforces the criticality – discontentmentargument of opportunity made here. Barbiedoll made Mattel Toy’s sales to go up to$96m in 1964, compared to the pre-Barbiesale of $9m in 1959.

Ruth Handler got into toy business inthe early 1940s, and introduced the Uke-A-Doodle musical instrument in 1947, anda toy piano with black and white keys andreal scales a few years later. During the1950s, Mattel became the third-largest toycompany in the world.

Handler noticed a basic play need in achild when her 9-year-old Barbara imaginedadult features for her paper creations;stewardesses, secretaries, or college coeds.She noticed in her daughter the existenceof a critical need to have dolls that enabledher to fantasize an adult life (beyond beinga mother). She also noticed that theexisting products did not have the featuresto eliminate the discontentment thatexisted. She built on some adult dollscollected from a Swiss holiday, andredesigned to make them look like thecurrent day Barbie. She hired a hairdresserto experiment with hairstyles,and a dress designer to design a completewardrobe of clothes.

The trader perception that childrenalways wanted to be mommies and hencelittle girls wanted cuddly bobby dolls gotshattered when Barbie galloped the storeshelves. It took Mattel three years toeventually catch up with the burgeoning

Exhibit 1: Criticality-Discontentment Matrix

Tarun Sethi

Highlight


K.Ramachandran 26

customer demand. Barbie met two kindsof customer needs. One, an already highcritical need to fantasize an adult life, andtwo, a need to be like others. Since therewere no real alternatives for these dolls,the existing level of dissatisfaction wasvery high [quadrant (1)].

2. Domino’s

The success of Domino’s Pizza from aborrowed $500 and one shop to a $3.4billion international company with 120,000employees in 2,000 outlets across theworld demonstrates the discontentment-criticality link very clearly.

Domino’s Pizza’s phenomenal successcan be attributed to its initial ability to spota segment of the market, which was highlydissatisfied with the then existingpossibilities for cheap but high qualityfood. In 1960, when Tom Monaghan andhis brother bought Domino’s Pizza inVpsilanti, Michigan, his largest customersegment consisted of students of theUniversity of Michigan and the Eastern

Michigan University. Pizza was a highlycritical product for the students ofMichigan because of its high quality,delicious taste and low price combination.At the same time, they were dissatisfiednot with the product features but with theprocesses involved in their purchase.Monaghan realized that students werereluctant to go out for pizza, particularlyduring their examinations, though it wasone of the best and cheapest sources offood for them. Besides, students, mostwithout cars, could stay in the dorms andorder pies to share with their friends.Pizzas also provided them with somerespite from the drab and predictablecollege food. This observation aboutexam days also implied that studentswould not go out whenever they arebusy, which is most often the case. Yetanother implication was that the totalpotential market was much larger than thenumbers who came to the shop to eat. Themoment Domino’s removed all the hurdlesto their having pizza in their rooms, thedemand zoomed.

Disney

When Disneyland was started, and customers were highly dissatisfied with the existingalternatives Walt Disney met a critical need for amusement. In Disney’s own words, “existingamusement parks are neither clean nor amusing, and offered nothing for Daddy”. Disneylandbecame a roaring success because it shifted the speed and size of the thrill to the showelement. Their attractions were seen by visitors as extensions of the already famous Disneymovie experience with visitors taken out of their seats and placed in the middle of theaction. Disneyland has always been an attraction for the entire family, and has been keptclean always.

VISA/Master Cards

The concept of a credit card, with guaranteed payment by a banking organization beganin the 1940s. The phenomenal success of Master and Visa Cards in the subsequent decadescan be attributed to their meeting a critical need for which the existing alternatives werenot at all satisfactory.

In the absence of cards, people had the option of carrying money (often in large quantitiesto meet specific requirements) with the associated risks and discomforts. Those withoutadequate cash had to either abandon shopping plans or postpone them. Cards eliminatedmost of the high levels of discontentment associated with possession of liquid cash as themeans to buy. Since the need to have cash or its equivalent is critical for all, credit cardsmet a critical need. In some cases, it enabled maturing of latent need for a number ofproducts, as it facilitated easy payments in multiple instalments at a later date.

Later card companies introduced variations including debit cards, ATM cards and co-branded cards to eliminate customer discontentment in some other areas of financialtransactions.

Good /Bad Opportunity Illustrations

Box 1:


K.Ramachandran 27

Gilbert Toys

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

Electric Cycle

Sir Clive Sinclair, pioneer of pocket calculator and pocket TV, took advantage of a 1983law in the UK that permitted small electric vehicles on the highway without road tax, alicense or compulsory insurance. Sinclair imagined that availability of an electrically assistedcycle would create new dissatisfaction with the existing geared cycle. In 1985 he introducedC5, an open-top, single seater, lightweight three-wheel buggy, powered by a lead acid batteryand foot pedals. Unfortunately for him, instead of eliminating any dissatisfaction on theCDE chain, it created more when many customers found the vehicle too low, too slow andtoo limited in range. Customers were extremely disappointed with the poor technologyand lack of sophistication. Stores selected for selling vehicles often did not have enoughspace 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 transportsolution for young executives and families on the way up. Ford was able to create greatexpectations in the minds of the target group, and dissatisfaction about the existingcompeting 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 amajor motoring innovation. Customers did not like its styling and the fancy failed to worksatisfactorily. Also, most of the cars in the initial lot had something wrong with nearly eachone of them, with overpowering as a basic problem.

The market for pizza could thus bedivided into customers for whombelonging to different combinations oflevels of criticality and discontentmentexisted as shown in Exhibit 1. The mostattractive segment has very highcriticality of need and high level ofdiscontentment with the existing optionsfor eating pizza type of food. Those whowent to the shop to eat reflected only atip of the potential market size. WhenDomino’s offered home delivery of pizza,it was able to mop up all the customerswho were at the high criticality-highdiscontentment point in the matrix. Theiroffering of high quality, fresh, tasty pizzaat reasonable price eliminatedall kinds of pent up discontentmentcustomers had about food.

Domino’s continued to offer traditionalpizzas with different toppings for almost

30 years. They covered moregeographical ground but with the sametarget group of high criticality-highdiscontentment customers whowanted fresh, tasty and cheap food[quadrant (1)].

Domino’s had two options to grow.One was to focus on the lessdissatisfied and less critical marketsegments in Michigan itself byexpanding capacity of their first storefurther. Since the level of criticalitywould be lower for the other customers,Domino’s would have had to contendwith lower level of market pull. This isa situation when both criticality anddiscontentment are low. An alternativewould have been lowering prices. Thiswould have resulted in lower level ofprofits particularly when the level ofdiscontentment also is lower.


K.Ramachandran 28

The other option was to target the samesegment elsewhere. They went for thesecond option. Focusing on the section ofthe society whether students or not, whichwanted tasty, hygienic and low pricedpizzas delivered at home they set up storesin different parts of the US. Everywhere,Domino’s became the home-delivery pizzapeople. Domino’s continued with the timetested traditional pizzas for almost threedecades before introducing productinnovations in the nineties.

It is when firms continue to offerproducts, which are highly critical to thecustomers, but also the absence of whichwill create high level of discontentment thatthey tend to become immortal. This isamply illustrated by the experiences of alarge number of successful and failedproducts across the globe.

Michael Dell met the so far unmet needsof a category of computer customers whowanted a say in the configuration of theirsystems, which was critical for them. Healso eliminated a lot of discontentment thatexisted in terms of price and delivery. Dellis now one of the largest PC manufacturersin the world.

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 importantneeds are the basic needs as identified by Maslow and would include food, clothing andshelter of a basic nature. For higher income people the ingredients and the quality of muchbasic 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 butnon-essentials will be less critical. Because of the dynamism in need, today’s non-criticalproducts may become very critical tomorrow. High prices as perceived by customers, canalso be a source of dissatisfaction. Some of these sources of dissatisfaction do influenceeach other. For instance, new knowledge about better products can lead to dissatisfactionwith 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 havetheir traditional food. This is true with Indians, Chinese and the Spanish in Europe or theU.S. The extent of criticality can also be influenced by fashion trends in the society foritems such as for clothing or furnishing. This is particularly so for youngsters. Individuallikes also determine the extent of criticality. This could be for music or even food. Theneed for fun may be momentary, as is the case with some kind of food. In short, a closeanalysis of the factors influencing the dynamism in customer needs would enable managersto know where on the criticality continuum their products lie.

Structure of needs and dissatisfaction

Box 2:

The Harry Potter series of four booksmade J.K. Rowling a household name allover the world with her books gettingtranslated and distributed in most parts ofthe world. These books met a highly criticalneed of the children to fantasise withexcitement in a world full of magic, with alot of positive suspense built in. Yetanother of children’s critical needs is to belike other children. There has been nowriter since Enyd Bliton who has capturedthe imagination of children so well.

Quadrant (2) represents customers whoare highly discontended with the existingproducts which are not critical to themin terms of importance: for instance, poorpublic transport in a town whereeveryone travels by own vehicle.Customers there are indeed discontendedwith the quality of local public transportservice, but do not bother so much becauseit is not critical to their movement. On theother hand, poor quality of service of localtrains would become a major public issuein any large city because of the criticalityof the service to the public. Poor qualityof peripheral features of many productsalso belong to this quadrant. E.g.


K.Ramachandran 29

customers do not bother much about thepoor quality of wrapper of a mineral waterbottle if the quality of water inside thebottle is very high. However, level ofcriticality of such needs may also undergochanges over a period of time, and qualityof wrapper may also become a determinantfactor of brand preference.

Introduction of products into this marketwill not be easy and new venturists haveto carefully identify niches for which suchitems may be critical (and hence falling intoquadrant (1)) and the commercial viabilityof such a decision. For customers whobelong to quadrant (2), substantialmarketing efforts will be required to makeimpact, if any. This could include effortsto change customer needs.

Quadrant (3) represents customers whohave currently no discontentment withproducts which are any way not critical tothem. This is the least attractive part ofthe market as considerable marketingefforts are required to create demand, if any.It may, however, be possible to move the

customer into quadrant (1) through thediscontentment-criticality tunnel as shownin Exhibit 1.

Discontentment– CriticalityTunnel

In dynamic external and internalenvironments, customer needs keepchanging, some faster and moresubstantially than others. In that sense,the level of criticality for a product alsochanges over a period of time. (There islikely to be new customers entering anygiven market segment at any given pointin time). As the criticality rises, latent needalso matures, and market pull goes up(please see Box 2 for how latent needmatures). For innovative products, growinglevel of criticality also means growingdiscontentment with the existing since theexisting alternatives fail to meet the newneeds. Over a period of time, customerswith such critical needs anddiscontentment will travel through the

Elements of Discontentment

When products fail to meet customer expectations, they feel discontented. The fourkey sources of discontentment are: product features, process involved in buying andconsumption, and intangible external variables. Most often deficiencies in product featuresare major sources of discontentment. This could be design related or manufacturingrelated. In a world where most products are getting standardized at least in terms of theircore features, the challenge to understand the customer needs for peripheral features isenormous. The key processes involved in buying start with collection of informationabout the product. This could include level of discontentment with reference to adequacyof data. During the process of buying, customers may get discontented for a number ofreasons 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 whichconfidence in the product is built during product demonstration. With respect todelivery, there can be discontentment due to delays, damage in transit and arroganceof deliverers or service people. This can be particularly so for services such as courierand products such as furniture or decorative items.

Consumers may get discontented for want of adequate training and instruction on theuse of the product as can happen in the case of a washing machine or a product to be selfassembled. Internet connectivity for want of band width and physical breakdown ofgadgets can also be sources of discontentment. Yet another source of discontentmentcould be limited number of choices for customers, often for want of competition. In thatsense, availability of choices can eliminate discontentment. Toys are a category wherechildren 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 betterproducts offered elsewhere but denied to them. Discontentment may also be due toknowledge about improved processes existing elsewhere for buying and consumption.Thanks to the Internet and other communication facilities, knowledge dissemination isfaster now, creating opportunities for some and threat to some others.


K.Ramachandran 30

Discontentment-Criticality Tunnel to reachthe farthest point in quadrant (1) as wasexperienced by Kellogg’s in many countries;for instance, it took about 25 years forKellogg’s to break-even their operation inJapan and Mexico. Kellogg’s has beenfollowing this strategy of deep investmentand long wait for customer needs to slowlychange through promotions, and makingtheir products critical in almost alldeveloping countries. Here Kellogg’s istrying to change the levels ofdiscontentment and criticality of not anybreakfast item but specifically of cereals.The speed of change and influence of suchattempts on specific factors determiningcriticality obviously vary from society tosociety. In essence, they are trying to shiftpeople from quadrant (3) to quadrant (1)and offer cereals to bring them to (4), andreduce competition. Entrepreneurs whoenter the market with solutions forcustomers who are at lower points in thetunnel may have to make a significantlyhigher level of effort (and substantialinvestment) to possibly make some impactin the market. For instance, Iriddium failedin the market because despite some of thebest promotional efforts, Motorola couldnot make its targeted customers feelcritical about it, nor have high level ofdiscontentment with the existing situation.Ford Edsel failed when the companybrought out a car with features which wereneither critical to customers nor eliminatedany discontentment.

Unlike Kellogg’s which proactively worktowards creating a change, there areinstances of some firms spotting changesin the level of criticality of some customerneeds under the influence of either externalor internal factors. These changes on thecriticality front could also lead to a rise indiscontentment level. This movement ofcustomer from quadrant (3) to (1) throughthe Discontentment-Criticality Tunnelcreates new opportunities, as is beingexperienced by toy maker Jakks Pacific.

Jakks Pacific is one of the Fortune 100Fastest Growing Companies since 1999when the ranking was introduced and isone of the Forbes 200 Best SmallCompanies in the US since 1999. Itsstrategy has been to grow through new

product introductions in tune with thedynamism on the level of criticality tocustomers. The company went public forthe first time in 1996. Its net sales grewfrom $12m that year to $42m in 1997 and$85m the next year. Total revenue for 2000was $210m, and $310m for 2002. Netincome also registered attractive growth($1.2m in 1996, $2.8m in 1997, $6.4m in1998, $26.6m in 2000 and $36.5m for2003). The overall toy industry in the USis estimated at $15 billion in sales perannum. Jakks Pacific manufactures a newarray of toys, the most popular amongthem being action figures of the WorldWrestling Federation (WWF). In 1998, itintroduced 100 new products under theWWF category. Many of these productswere made interactive in 1999. The othersare ‘American Muscle’ category cars,animated animal toys for babies and dollsof adolescent age ‘Charlie’s Angles’ comingwith fashion accessories and additionalclothing. Jakks Pacific brought out about700 products in 1999, all categories puttogether.

Jakks Pacific’s toys are different fromothers in two ways. One, they haveintroduced a new range of toys bringing ina novelty element which is important fortoy business. This is based on the fact thatchildren always want change and look fornew toys. Once the novelty disappears,the consumer looks for a change. Here theneed will be maturing in tune with thechanging socio-cultural profile of thesociety. It is in this context that the seconddimension becomes relevant.

It is useful to understand the socio-cultural factors contributing to the rise indemand for these characters. Pro-wrestling is becoming big business in theUS with the two privately ownedorganizations (World Wrestling Foundationand World Championship Wrestling)accounting for annual sales revenues ofUS$1 billion generated from sales of actionfigures, T-shirts and matches broadcast.Obviously, there are direct and indirectcommercial dimensions to the promotionof this violent ‘game’. Each of thesebusinesses supports the promotion ofthe concept and thus the other businessesindirectly. There are also training


K.Ramachandran 31

schools across the US to train people tobe ‘professionals’.

The rapid growth in viewership forprograms organized by the ‘pro-wrestling’organizations could be interpreted as areflection of the changing social values.In any case, that has led to a change in thepreferences of children for toys. Theywould like to possess models of their iconsfrom this field and create their own boxing‘rings’ at home.

Jakks Pacific exploited a maturinglatent need for such products withoutchanging any of the processes involvedin toy purchase, except for theintroduction of an online store. Theyoffered solutions to customers who hadmoved up from a low discontentment -medium criticality position ]in quadrant(3)] to a high discontentment – highcriticality position [in quadrant (1)]. It isinteresting to note that when they noticedsigns of a fading interest in the wrestlingcharacters, the company quickly jumpedon to selling Harry Potter craft sets in2001. Building on the ‘Harry Potter’ brand,they have got into licensing agreementfor introducing Harry Potter characters.In this case, they are exploiting anopportunity in the high discontentment– high criticality zone of the matrix. Thecompany is launching a line of girlsfashion accessories based on the hit TVshow ‘American Idol’ and a toy line forNickelodeon’s’ The Fairly Old Parents,both in 2003.

Quadrant (4) reflects customers who arehighly contended with the existing optionsavailable to meet their critical needs. It isvery difficult to penetrate into such marketswith new offerings. The challenge getscompounded because customers do notwork out the best solution always; theytolerate variations in performance withina range, which is called the ‘tolerancezone’(Kasper, Helsdingen and Vries jr,1999). For most critical items, thetolerance zone is narrower compared toless critical items. This argument appliesto other quadrants as well.

We should remember that a dissatisfiedcustomer may not always offer anentrepreneurial opportunity easily.Customers would not like to switch brands

because of the perceived risks involved ifsuch a change is insignificant. Customersdo not switch brands not because they areloyal to any brand, but because of theuncertainties associated with untestedexperience of using an alternative.Customers do not want too many hasslesand there is a zone of ‘satisficing’ (Simon,1959) or ‘tolerance’ (Zaithaml, Berry andParasuraman, 1993) within which theywould prefer to stay. Therefore, minordeficiencies in the mix of offering are notlikely to result in a shift in brandfor a customer. This should not bemisunderstood as pure loyalty to anybrand. Also, the level of discontentmentfor a given brand will be lower, ifsubstitutes exist.

The strategic implications to existingfirms are: one, they have to constantlyidentify changes in needs and modify thefeatures accordingly, as is done by manyairlines. The other option is to create newneeds by terminating an existing productbefore it completes its life cycle. Forinstance, Intel’s Pentium chips are upgradedbefore their demand matures. Gilletteupgraded its Sensor XL the same way withthe offer of Mach 3 razor.

Introduction of colour TV to substituteblack and white TV and email replacing faxand surface mail are examples of creationof discontentment (moving the customersto quadrant 1) and reaping benefits.

For new entrants into the market, thechallenge is to develop something that cancreate discontentment with the existing.That requires identification of maturinglatent needs. Apple Computers became arun away success with its PCs because ofits ability to identify a maturing latent needto have more comfortable and convenientcomputing. Disruptive technologies arefound to achieve this by challengingexisting market leaders.

Where to enter:

This framework can be used topredict potential attractiveness of anopportunity, whether for start up orexisting firms. An understanding ofthe dynamism in cr it ical i ty anddiscontentment will enable managers to


K.Ramachandran 32

identify entrepreneurial opportunities.As shown in Exhibi t 1, maximummarket attractiveness lies where bothdiscontentment and criticality are highand currently existing, which we callToday’s Star. At the other end, whenboth are emerging, the opportunity isindeed promising, but not immediately(Dis tant S tar ) . When only oneof the d imens ions (e i ther h ighdiscontentment or high criticality) isexisting now and the other is onlys lowly emerging, i t can be anOpportunity for Tomorrow. Making asuccess out of products falling intoquadrant (4) is not very easy. It callsfor challenges in innovation. Managersand entrepreneurs have to constantlywatch the movement of a product ideaon these dimensions to exploit theopportunity at the appropriate time.This analysis can enable managers todetermine when changes are requiredin product features.

Firms will find easy entry and quickestsuccess for products which providesolutions to highly critical customerproblems but for which exist ingsolutions are highly inadequate(quadrant (1)). Maximum returns can bemade with minimum effort in this case.As soon as the product concept is sold,customers would lap up such products.Buyers will have limited bargainingpower, and several firms can manageoperations with negative workingcapital. Sales would peak once thepossible process hurdles related todiscontentment such as informationavailability and distribution are removed.This situation is similar to a waterfallfrom a very high point withoutobstructions on the way down, creatingmaximum impact. Such a strategy willalso ensure quicker cash flows andmarket feedback. An analysis of thevariables affect ing crit ical i ty anddiscontentment and where differentsegments of customers are locatedon Exhibit 1 would be very useful toformulate product market strategyin detail.

Where are the opportunities?

Entrepreneurial opportunities existwherever the level of criticality and extentof discontentment peak. These cover notonly products but also services requiredto consume products, traditionally calledvalue chain. According to Michael Porter(1985), value is created in a productthrough a series of activities in theorganization involving all the resources indifferent degrees. Extending the logic, thesources of dissatisfaction are also someor all of these value links. In other words,the role of this chain is to eliminatecustomer dissatisfaction, and is, therefore,called Customer DissatisfactionElimination (CDE) Chain. An analysis of thischain enables us to identify a number ofentrepreneurial opportunities in bothmanufacturing and service sectors. Thesecan be any link on the CDE Chain. A closelook at any link would show that itrepresents a Criticality-DiscontentmentMatrix. For instance, outsourcing of housekeeping services. In terms of criticality,it is not very high, but it can be a majorsource of discontentment for internalcustomers and hence the decision toentrust it with specialists in that area. Itbecomes a commercially viableopportunity for a new firm when manyfirms realize this logic in outsourcing suchservices. Courier services and IT enabledservices are examples of suchopportunities. With the rise inintensification of attitude, skill andknowledge for success in eliminatingdiscontentment in each link, their role,significance and structure have undergonechanges rapidly. Modifications in thestructure of the CDE Chain is a reflectionof the methods used to eliminatedissatisfaction on the Chain. New linksmay be added, which can eliminatediscontentment easily and profitably.

The key steps involved in the use ofthe matrix to determine attractivenessof an opportunity are listed in boxes3, 4 and 5.


K.Ramachandran 33

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 anopportunity, the criticality discontentment framework can be used to formulate and evaluateentry strategies.

Applications of the Tools

Box 3:

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 technologyas of now.

1. Observe customers to identify things, processes or prices with which they are dissatisfied. Thismay 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 challengein 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 theproducts 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 determinethe 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 anattractive 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.

Box 4:

Applications of the Tools


K.Ramachandran 34

Criticality

Observing and/or interacting with customers who are dissatisfied with the present candetermine the level of criticality of a need. Accordingly, rate the criticality on a 5-point scale. Torevalidate this rating, ask the customer the level of criticality in the immediate need set. Forinstance, criticality of need for bottled mineral water my be rated as 5 on the scale. Ask thecustomer, “in your overall need for a journey, how critical is this water compared to the level ofcriticality for class of journey in the train, snacks on the way and so on?” This additional questionis to make the customer think more logically, rather than intuitively, and enable the entrepreneurto determine the level of criticality more objectively.

It is important to determine the level of criticality of each of the links on the CDE chainseparately, where the entrepreneur is either creating a CDE chain afresh, or the quality of otherlinks 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 andconsumption, and price. Customers can rate the extent of dissatisfaction on a 5-point scale throughobservation and or interaction as discussed under criticality.

Recent performance of conjoint method in identifying customer preferences in a number of situationsis very promising. It is possible to validate the findings quantitatively.

Measuring Criticality and Discontentment

Box 5:

An entrepreneur / manager has toconstantly identify existing and emergingsources of discontentment and level ofits criticality, and then keep offeringsolutions, all to retain customers andcreate new ones. Each link in the CDEchain plays a unique role, high orlow on criticality.

Exhibit 2: Customer Dissatisfaction Elimination Chain

A close look at the sources ofdiscontentment would show that a numberof factors contribute to it, besides thoseidentified by conventional wisdom. Whenproducts are becoming increasinglystandardized with given core andperipheral features, many process involvedin linking the firm and the customer


K.Ramachandran 35

becomes sources of discontentment. Thiswould include information collection,buying, paying, delivery, consumption,return of unused products if necessary,after sales service and disposal of wasteafter use. Each one of these or their sub-activities is a possible new entrepreneurialopportunity; the level of attractiveness ofcourse depends on a number of techno-commercial dimensions.

Information Collection Process: One ofthe most critical steps in the buying processis collecting information not only about aspecific product but also about alternatives.This remained a major challenge until thearrival of the Internet. Firms such as ebay,Amazon and Google eliminated mostcustomer dissatisfaction on this countwhen they made it possible to collectinformation on a variety of things quicklyand reliably.

Buying Process: Amazon.com becamea run away winner because it eliminatedcustomer dissatisfaction that existed inthe process of going to a bookshop at atime when it is open and buying a bookfrom among titles available there, asagainst scanning all possible titles in thearea of interest and deciding in a fewminutes from anywhere in the world, allusing the Internet. For most book buyers,while the buying process is very critical,they are not particular about seeing theproduct as it is standardized in terms ofshape and looks. This is not the case withmany other products where touch and feelare important. Boo.com failed as anInternet garment firm for this reason. Forsuch items, firms have to ensure widedistribution through a number ofchannels/outlets to eliminate customerdissatisfaction.

Payment Process: This is yet anothercritical process, but has created muchcustomer discontentment until credit/debitcards came on the scene. Customers hadto bear the consequences of carrying liquidcash while going for any shopping.Similarly, shop owners also had to bear theconsequences of cash based transactions,including non-purchase for want ofadequate amount of liquid cash. Cardsfrom Visa and Master (and others)eliminated all associated dissatisfaction.

Delivery Process: Arrival of courierservice itself eliminated a lot of thedissatisfaction that existed with the qualityof delivery of parcels and mails. FedExintroduced a number of features such asbar code label on package for routetracking thus enabling customers to checkthe location and progress in the journey ofthe parcels. Other facilities such as homedelivery and Saturday 10 am deliveryfurther eliminated customer dissatisfaction.DHL Courier service identified yet anothercritical need that left a lot to be improvedwhen it offered DHL Jumbo service.According to this, customers with a numberof small parcels could put all in a big boxand courier it safely and more economically,as is done in cargo containers.

CDE Chain and BusinessStrategy

We shall see the role and significance ofthe CDE chain in the context of the strategyof a firm and its efforts to achieve ZeroCustomer Dissatisfaction (ZCD) in thecontext of Domino’s. In order to achievethe strategy described above, Domino’sdesigned and developed an appropriateCDE chain. Each link formed a source ofdissatisfaction, reflecting the differentprocesses that a customer is involved inthe purchase and consumption stages. Oneof the important links is product feature.The Company perfected and strengthenedall links in the CDE chain.

In the case of Domino’s, the companyperfected and strengthened all links on theCDE Chain over the years and builtcompetitive advantage. Some of theimportant links on Domino’s chain, and howit strengthened them are worth examining.

Ordering Process:

Domino’s developed a computersystem and database that enabled it tospeed up order taking and deliveryprocesses. For instance, it could generateimmediate information on the customersuch as the previous pizza order details.As a result, time and effort required forboth the company and the customers ingiving details of address and preferences


K.Ramachandran 36

could be avoided, thus eliminatingpossible dissatisfaction on this count.

Delivery Process:

The database also provided addressesand directions to customers’ place and eventhe location of the doorbell. The systemwould print all such information, whichwould then be stuck on the pizza box fordelivery. Domino’s also perfected a systemfor scheduling drivers for their bikes.Domino’s was able to replicate this modelall over the US and abroad within a shortperiod of time. In order to ensure thatcustomer concerns about supply of hotpizza were met, Domino’s offered deliverywithin 30 minutes. Later, in 1993, itdiscontinued this practice and replaced itwith ‘Total Satisfaction Guarantee’. It wasforced to lift the 30 minute limit faced withtraffic related problems. By this time, thecorporation had already built up itsreputation as the supplier of high qualitypizzas at home within a short period oftime. Each Domino’s shop is permitted toaccept orders only from within a two-mileradius to ensure high quality timely service.The introduction in 1998 of Heat Wave, ahot bag using patented technology thatkeeps pizza oven-hot to the customer’sdoor further ensured that Domino’s didnot allow any kind of customerdiscontentment from cropping up.

Cost and product features(quality, taste):

Domino’s followed regionally centralizedpurchasing, processing and handling of rawmaterials and other ingredients throughtheir distribution centers called‘commissaries’. However, negotiations forspecifications, price and delivery terms formost pizza ingredients and other suppliessuch as boxes and napkins are handled byDomino’s central purchasing department ona worldwide scale. For instance, Mozzarellacheese is sourced from New Zealandfor all Domino’s outlets across the worldthrough a number of commissaries.Through its network of 18 such distributioncenters, Domino’s pizza distributiondivision regularly supplies more than 4,500

pizza stores with more than 150 products,ranging from dough to pizza boxes. Thistakes care of the need to have consistencyin quality also across stores. The centralcommissary system also ensured that thesesales outlets are relieved from spendinglong hours making dough, grating cheeseand preparing toppings.

Exhibit 3:Price Elasticity and Needs

The above strategy has enabledDomino’s not only to keep the price lowfor its pizzas, but also maintain high qualityproduct, both eliminating customerdiscontentment to a great extent.

Similar levels of perfection exist in thecase of a number of other products suchas Dell Computers. Dell has perfected theart of assembling and delivering PCswithout having to carry any inventory ofits own.

Our research showed that price elasticityof demand is one of the most critical factorsinfluencing the success of a product. Forinstance, 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 productsto meet momentary critical needs for fun,when price is close to zero. To capture thepower of price in this process, we suggesta three dimensional relationship involvingcriticality, discontentment and price asshown in Exhibit 3. As noted earlier,Dominos offered a solution combining highquality, tasty pizzas at low prices to meeta critical need of customers.


K.Ramachandran 37

Existing firms offering unique value tocustomers and then eliminating theirdissatisfaction will have to constantlyreview changes in the needs of theircustomers, and offer entrepreneurialsolutions. This builds deep corporateentrepreneurial culture in organizations.For instance, Disney theme park and Intelchips have been constantly innovating theiroffer to customers, and creating entrybarriers for others in the process. Thereare signs that indicate that their capabilitiesto meet customers’ changing needs are notinfallible.

Categorizing customer groups broadly intofour segments and further plotting themwithin them as per Exhibit 1 enables us tospot the market segments with greateropportunities and position the productsthere. For instance, what is non-critical forone segment may be critical for another.Similarly, levels of discontentment are alsohighly dynamic.

Conclusion

Customer dissatisfaction is a source ofopportunity. Focusing on existing /emerging customer needs in terms oftheir level of criticality and extent ofprevailing / emerging discontentment is avery useful way to identify entrepreneurialopportunities. Let us realise most humanbeings are basically selfish, lazy, prefer toavoid work, like to eat tasty things and haveall possible comforts. They would welcomeany means to achieve the same.Characteristics of the opportunities (size,stability….) of course, vary accordingly, andcan be for either internal or externalcustomers. Exploitation of suchopportunities and thus elimination ofdissatisfaction on every link of theCustomer Dissatisfaction Elimination Chainwill enable organizations to beentrepreneurial always. They will achieveZero Customer Dissatisfaction for them,and be immortal.

In short, this framework is highly useful indetermining the attractiveness of aninvestment opportunity, and subsequentformulation of business strategies.

Combining the features of the CDE chainand the Criticality-Discontentment Matrixprovides for a powerful tool formanagers to evaluate the appropriatenessof their existing strategies.

References

1. Bearden, William O., and Teel Jesse E., –1983. An Investigation of PersonalInfluences on Consumer Complaining.Journal of Marketing Research 20(February):21-28

2. Christenson, P.S., and Peterson, R., 1990.Opportunity Identification: Mapping theSources of New Venture Ideas. Paperpresented at the 10th annual BabsonEntrepreneurship Research Conference,April 1990. Denmark: Aarhus UniversityInstitute of Management

3. Choi, Y.R., and Shepherd D.A., 2000.Investigating Exploitation and Exploitationin Entrepreneurial process: as systemdynamic approach, in Frontiers ofEntrepreneurship Research, Reynolds, P.D.et al, Eds: Wellesley MA: Babson College.

4. Colarelli G O., and Rice Mark P., 2001.Opportunity Recognition and BreakthroughInnovation in Large Established Firms,California Management Review, Vol 43: 2,95:22

5. Cooper, Robert G., 1979. The Dimensionsof Industrial New Product Success andFailure, Journal of Marketing, 43(Summer):93-103

6. Goodman. P.S., and Fichman, M., 1995.Customer-firm relationships, involvementand customer satisfaction, Academy ofManagement Journal, Vol. 38 (Oct): 15

7. Henard, David H., and Szymanski David M.,2001. Why Some New Products Are MoreSuccessful Than Others, Journal ofMarketing Research, Vol 38: 3, 62 : 14

8. Hench, T.J. and Sandberg W.R., 2000. As thefog cleared, something changed.Opportunity recognition as a dynamic, self-organisation process, in Frontiers ofEntrepreneurship Research, Reynolds, P.D.et al, Eds: Wellesley MA: Babson College


K.Ramachandran 38

9. Holmes, M., 2000. Managing CustomerExpectations, Information SystemsManagement, Spring: 92-95

10. Hills, G.E., and Shrader, R.C., 1998.Successful Entrepreneurs’ Insights intoOpportunity Recognition, in Frontiers ofEntrepreneurship 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. PursuingTechnological Innovation: the role ofentrepreneurial posture and opportunityrecognition among Internet firms, inFrontiers of Entrepreneurship Research,Reynolds, P.D. et al, Eds: Wellesley MA:Babson College

13. Kirzner, I.M., 1997. EntrepreneurialDiscovery and the competitive marketProcess: an Austrian approach, Journal ofEconomic Literature, Vol XXXV (March): 60-85.

14. Kleinschmidt, E.J., 1987. New Products:what separates winners from losers?, Thejournal of Product Innovation Management,4(3), 169-185

15. Mittal, V., and Kamakura, W.A., 2001.Satisfaction, Repurchase Intent, andRepurchase Behavior: Investigating theModerating Effect of CustomerCharacteristics, Journal of MarketingResearch, XXXVIII (February): 131-142

16. Olshavsky, R.W., John, A.M., 1972.Consumer Expectations, ProductPerformance 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., andBerry, Leonard L., 1985. A Conceptual Modelof Service Quality and its Implications forFuture Research, Journal of Marketing,Vol.49

18. Porter,M., 1985. Competitive Advantage,New York: Free Press

19. Simon, H.A., 1959. Theories of Decision-making in Economics and BehaviouralScience, The American Economic Review, 49,pp.253-283

20. Singh, J., Wilkes, R., 1996. When consumerscomplain: A path analysis of the keyantecedents of consumer complaintresponse, Journal of the Academy ofMarketing Science, Vol. 24: 350 72, 19-21

21. Teare, R., 1994. An overview of consumerand producer perspectives on hospitalityservices, in Teare, R., Mazanee, J., Crawford-Welch, S. and Calver, S. (Eds), Marketing inHospitality and Tourism: A Consumer Focus,Cassell: London:5-13

22. Teare, R., 1998. Interpreting and respondingto customer needs, Journal of WorkplaceLearning, Vol.10:2, 19, 76-94

23. Zaithaml, V.A., L.L. Berry and A.Parasuraman, 1993, The Nature andDeterminants of Customer Expectations ofService, Journal of the Academy ofMarketing Science, Vol.21, No.1

Documents

Customer Dissatisfaction as A Source of Entrepreneurial Opportunity1