TiVo Case Analysis Marketing HBS

Indian Institute of Management Kozhikode

Marketing Management Case Analysis: TiVo Submitted to: Prof. Rahul Kumar Sett

Submitted By: PGP/14/258 Alok Kumar PGP/14/280 Mahtaab Kajla PGP/14/303 Shruti Kabdal

PGP/14/279 Lokesh Singh PGP/14/283 Naveen Vyas PGP/14/304 Sneha Ramteke

Situation Analysis 5C Analysis Company Background: Tivo is a small company founded by Jim Barton and Michael Ramsay and the product was launched after about 14 months of its launch. Tivo had signed up for 42,000 subscribers, they were acquiring 14,000 new subscribers per quarter. They had a market penetration of 0.04%. Despite this low penetration, almost everyone who owned Tivo was satisfied with it. 90% of the Tivo subscribers even said they would recommend it to family and friends. It was a company which had a mission to change the consumption habits of the viewers. Competitor Analysis: Tivo was alone in its category at the time of its launch but over the period of time competition developed and some of the big players came into picture. Replay Network

Microsoft’s Ultimate TV

TiVo

Price

$ 200 more than Tivo

Not yet announced

$499 for a model upto 14 hrs of recording capacity and $999 upto 30hrs.

Brand Leverage

Low

High

Low

Distribution channel

Initial limited distributor channel; national distribution started in Apr 00 after signing a contract

Service fee

Nil

Subscription based, priced around $10 a month

Additional charge of $9.95 / month and 99/year and $199 for lifetime.

Collaborators

Replay network was in manufacturing its own hardware. No thumb buttons but „quick skip‟ which skips a 30 sec commercial

Thomson and Sony Direct TV Surfing & sending email through their TV screen when bundled with Dirct TV it would be offering the satellite TV

Sony and Philips

Features

A set of TV commercials focused on the pause feature

Marketing Management | 7/11/2010

Pause live TV, search tools and the ability to record programs through an electronic program guides

1

Initial shipment through regional delaers and then became nationally avaianle through Best buy, anelectronic chain. A month later a national distribution was In place through circuit city and sears

More advanced featuresinteractive TV & personal video recording Watching/recording 2 shows simultaneously, recording pay per view movies, 30 sec skip and fast forwarding upto 300 times the normal speed

Electronic program guide (EPG) gave access to previews for shows that could be scheduled for recording with one push of a button, a TiVoproduced video magazine, a set of network showcases, where network promted the best shows and an on screen TV guide. Season pass- It allowed users to specify their favourite shows so that Tivo would automatically record all the episodes. “Thumbs up” and “Thumbs low” button.

Other Competitors:  

Jovio: It had announced its intentions of launching a free service that would be similar to TiVo‟s. Seagate Technology and Thomson Multimedia: They had announced a joint venture to put their own hardware inside the television set.



Miscellaneous: Conventional VHS video recorders and DVD Players were already present in the market at lower prices.

Customer Analysis: In 1999, the average American household spent 7.4 hours per day watching TV, with the average adult spending about 4.3 hours per day in front of the screen. When buying consumer electronic equipment, 71% of consumers were influenced by friends or relatives, 56% by publications and advertising , 40% by store staff and 30% by television advertising. According to an independent study, 62% of Tivo owners watched more TV with the service than without and 31% of the owners said that TV was their primary source of entertainment(as compared with 16% before ownership). 59% said that they watched programs that were once unavailable to them because of inconvenient scheduling and there was a 31% decrease in channel surfing. Children‟s programming and dramas were the most recorded programs with the situation comedies following closely. TiVo‟s data showed that subscribers were fast forwarding through 90% of commercials. This proved that they didn‟t particularly like 30 second commercial that were not specially available to them. Collaborator Analysis: Tivo established partnerships with SONY and PHILIPS, they subsidized these two companies to manufacture the black box distributed and promoted to the retailers. They made their initial shipments through regional dealers and eventually became nationally available through Best Buy in Sept 1999. By Oct 1999, Circuit city and Sears started carrying black box. Context Analysis: The SWOT analysis the depicts the company‟s Strengths, weakness, Opportunities and Threats is shown below SWOT Analysis: Strengths

Weakness

Innovative Product

Lack of Brand awareness

Brand Equity

Confusion regarding Brand

Interactive Services

Lack of Marketing

Customer Loyalty

Expensive

Product Quality

Over Reliance on Partners

SWOT Analysis Diversification Advertising High Market Growth Unique Feature

Threats Low Barriers to Entry Inability to skip Ads Many Heavy Weight Competitiors Over reliance on single suppliers

Issues:    

Despite high satisfaction levels of existing subscribers, the market penetration of TiVo remains low. The company is constantly suffering from losses. Awareness about the features that TiVo offers is also low. There was no clarity among the sales persons as in how to project the product i.e. there is lack of consistent terminology in referring product. They were trying to change consumer behavior which was difficult to achieve.

Marketing Management | 7/11/2010

Opportunities

2

Numerical Analysis The company would start making profits after Oct – 02 if the market strategy under proposal is adopted. A justification for this can be seen in appendix A. Marketing Strategy It would be better if TiVo changes its marketing strategy and some of the recommendations regarding that is given as:    

Specific advertisements focusing on one feature at a time, which will ensure better awareness levels among customers, which are currently lacking Training sessions for sales persons and demos for customers, to ensure proper support for answering customer queries Quoting public reviews in advertisements to create impact Create new market segment by offering reduced features at lower prices

Segmentation: The market segment is all people who own a television set. Targeting: TiVo should be targeted to all consumers who use a TV/conventional VHS video recorder. Positioning: TiVo should be positioned as a digital video recorder having many additional features over VHS recorders. Marketing mix Product   

A less sophisticated and more user friendly product is desirable, hence the product should be made so keeping in mind that it is an easy transition for a person using a conventional VHS recorder. The privacy of customers is important and hence must be taken care of, the usage data should not be leaked out to anyone else. It should have specifications and features offered by their competitors.

Price

Marketing Management | 7/11/2010



3



In order to gain a significant market share, it should start from a low cost initially. For the people to to switch over from VHS recorders to TiVo, competitive price is the key. By collaborating with cable/DTH service provider, the monthly charges for the product service should be lowered.

Place  

All the major electronics stores where TVS/VHS recorders are sold, Tivo should be sold. It should also be available with cable/DTH service providers so people can purchase both at the same time.

Promotion  

Clear communication of the benefits of TiVo through mass media is vital. The salespersons should be well trained in order to give out the same message about TiVo to customers.

 

As a more attractive deal for customers, TiVo should be offered with a cable/DTH provider . Promotion of Tivo as an improvement over VHS recorder, offering not only better digital quality but also more convenience and features such as pausing/fast forwarding live TV and ability to offer suggestions is desirable.

Options Available for TiVo Produce Bundle with DirecTV Price at $399 with separate subscription charges Focus on training the workforce to provide sufficient support to users Integrated communication o Lifestyle commercials on TV o Feature in print media o Demos on websites

Marketing Management | 7/11/2010

   

4

APPENDIX – A Quaterly Data, in thousands No. of Months 0 3 6 Year Sep-99 Dec-99 Mar-99 Subscribers Base of TiVo 0.00 0.00 0.00 Revenues 0 0 0

15 Dec-99

18 Mar-00

21 Jun-00

24 Sep-00

27 Dec-00

30 Mar-01

33 Jun-01

1.00 8

2.50 33

18.00 182

32.00 424

48.00 719.10

82.01 1388.91

137.10 2638.89

225.04 4953.95

364.61 9227.53

0 2146 567

689 1596 2168

636 1859 1847

749 2327 5323

1993 3945 15164

4168 4678 9180

4989 5679 11384

7252 7509 13066

10254 10318 14395

14624 13804 15454

20395 18391 15580

0

0

0

382

4946

9844

4547

5349

5870

6216

6290

6026

706

1337

1125

1057

1757

3088

2691

3631

4428

5632

6976

8377

0

0

0

187

501

842

969

919

1079

1213

1291

1329

0 2719

0 4050

12 5578

201 5968

4808 15603

2213 34876

-2719

-4050

-5590

-6161

-20378

0 0.00 0.00 26233 31951.23 39203.59

-36907

-25809

-31232.1

-37814.7

0.00 0.00 0.00 48026.2 58439.37 70097.37 45387.3

800000 700000 600000 500000 400000 300000 200000 100000 0

-53485.4

Revenues

Mar-03

Jan-03

Nov-02

Sep-02

Jul-02

May-02

Mar-02

Jan-02

Nov-01

Sep-01

Jul-01

May-01

Mar-01

Jan-01

Nov-00

Sep-00

Jul-00

May-00

Mar-00

Jan-00

Nov-99

Sep-99

Jul-99

Costs

May-99

Gross Margin

12 Sep-99

0 1659 354

Mar-99

Costs and expenses Cost of Services R&D Sales & Marketing Sales & Marketing related parties General and Administrative Stock Based Compenstation Other Operating Expense Costs

9 Jun-99

-60869.8

APPENDIX – A Quaterly Data, in thousands No. of Months Year Subscribers Base of TiVo Revenues

36

39

42

45

48

51

54

Sep-01

Dec-01

Mar-02

Jun-02

Sep-02

Dec-02

Mar-03

584.13

940.34

1513.03

2427.42

3891.91

6238.40

9998.69

17102.38

31722.84

58876.53

109145.11

202292.43

374909.20

694807.13

27844

37947

52215

71238

97008

131867

179214

24416

33020

44650

60225

81231

109786

148520

15300

16670

16905

17081

17232

17406

17664

5836

6107

6090

6061

6038

6035

6053

10087

12594

15309

18665

22691

27635

33702

1356

1407

1463

1483

1499

1519

1539

0.00

0.00

0.00

0.00

0.00

0.00

0.00

84839.51

107744.9

136631.8

174753.5

225699

294248.3

386692.9

-67737.1

-76022

-77755.3

-65608.35

-23406.53

80660.93

308114.3

Costs and expenses Cost of Services R&D Sales & Marketing Sales & Marketing related parties General and Administrative Stock Based Compenstation Other Operating Expense Costs

Gross Margin