TiVo in 2002

TiVo in 2002: A Case Study on Consumer Behavior Marketing 650 –Dr. Hansen Mohammed Al-Alassi, Christopher Boykins, Jwana Carson, Timothy Grant, Aaron Hussain & Timothy Price March 5, 2012

Part I TiVo launched in 1999 as creator of the PVR (personal video recorder) or now generally referred to as DVR (digital video recorder). In June 1999 TiVo had 1,000 subscribers and by January 2002 there were now 380,000 subscribers. The increase in subscribers could be attributed to the TiVo service now available bundled with DirecTV. Now with TiVo and DirecTV sharing the same platform there was one DirecTV receiver and a special model AT&T receiver. Other key introductions included the a two tuner system and the launch of TiVo “‘Series 2’ which allowed consumers to control and organize not only television content but also digital materials downloaded from the internet, their video cameras, and other audio equipment.” The monthly subscription service for owners of standalone TiVo units was increased to $12.95 while $9.99 was charged to DirecTV customers. TiVo had surprisingly slow start compared to expected sales. The main reason was initially assumed to be due the lack of awareness. This problem becomes more pressing as companies announced the launch of competing products. TiVo was also facing financial problems by continuously losing money. This was clear from comparing the amount of money spent on sales and marketing with the total revenue. The amount spent greatly exceeds the total revenue. The expenditure also didn’t help to increase the sales. The majority of TiVo subscribers were married couples, high-income families, and middle-aged consumers. A very small percentage of the subscribers were singles, lower and middle income households, the young and elderly. This raised a question about TiVo’s universal appeal. The attitude survey reflected a high level of customer satisfaction but the volume of sales was still lagging. This was contradictory to TiVo’s

expectation, of increasing sales volume through their existing customers. A small percentage of the purchasers were from the middle and low income groups. This was because, even though the awareness and intention to buy was rising, it did not translate into action. The main reason for this is that customers sought referrals from their friends and acquaintances prior to making any purchases. Sales are good for a company but evangelism is good for customers. TiVo’s big-picture marketing focused on promotional sales tactics rather than embracing their loyal customers. Part II TiVo’s challenge is to break through the inertia of consumers who haven’t subscribed to TiVo to show how the service could significantly enhance their television experience. The issues TiVo must tackle are: 1) the problem of defining and communicating a meaning for TiVo; 2) generating positive cash flow; 3) reaching a broader consumer market; and 4) dealing with competitors. The main issues are defining and communicating a meaning for TiVo as well as reaching a broader consumer market. If these two major issues are addressed, the other two minor issues will be easier to deal with. Part III Considering these four challenges, defining and communicating the meaning for TiVo is the key element that will give non-subscribers a concrete idea of the product. In other words, the company must position TiVo so that there is a defined correlation between the segment and the product’s core benefit. Kotler and Keller describe positioning as “the act of designing a company’s offering and image to occupy a distinctive place in the minds of the target market” (Al Ries and Jack Trout, Positioning:

The Battle for Your Mind). The article states that Brodie Keast was under pressure to “further understand the nature of TiVo’s appeal for potential and existing customers.” TiVo, at this point, proves to have a steady growing subscription base as well as a strong loyal subscriber base. By positioning the product and efficiently communicating that position through TiVo’s capabilities non-subscribers might become subscribers. This in return will generate positive cash flow and aid in reaching a broader consumer market. Part IV TiVo has two alternative courses of action to choose from. The first is to conduct thorough market research in order to find out what potential customers lack from the normal television viewing experience. Once this is done, the company can try to establish the needs of potential customers. One reason why the forecasted sales were not met may be due to insufficient market research. Most of the marketing research done by TiVo is on current customers, their likes and dislikes, and their individual experiences. It is becoming too difficult to establish a position of TiVo by reiterating what the loyal customer fan base is saying. They can use the data gathered from current customer’s as testimonial evidence that the product works, but they cannot target a new market based on the research done by the small number of subscribers who are already loyal customers. In terms of where TiVo is in the product life cycle, it falls somewhere between the growth stage and the maturity stage. Also, most of the current customers are either early adopters or part of the early majority. If proper market research is done, TiVo can pick a strategy to improve the product (quality, features, and design), price to penetrate the market, build awareness, or diversify the brand and items. Surveys should be given out to DirecTV customers who have not switched to TiVo, and ask them what they would like

in their television viewing experience. Once this information is gathered, TiVo can attribute the needs of these people to one of the benefits of the product, whether it be pausing live television, creating a custom television network, or organizing digital content. The next alternative for TiVo is take steps in building a stronger brand. TiVo needs to adjust its brand image so that its device is not seen as an experimental new invention in the world of television technology. TiVo has a very loyal following. The customers are in love with the product. Why not let these customers describe the product in their own words through a testimonial advertising campaign? Parents may be more comfortable buying a new TiVo if they see a family supporting the device as a product that brings families together. TiVo could create a brand community by offering consumers and employees ways to share what they are watching with others and express how much TiVo has changed their lives. TiVo can try building a cult brand. The device is already only available at BestBuy and it has made alliances with DirecTV. This could generate buzz inexpensively if a small community of users were supported and treated as a cult following. Part V If the company chooses to conduct market research, it must be done in an effective way. It will add even more expenses to the company. However, it should give the marketing information system team critical information on people’s views of themselves and their television viewing habits as well as how different cultures and income distribution shape television viewing. By learning more about the current television viewing conditions in the United States, TiVo can figure out opportunities for

innovation and what needs to address for the untapped mass market of television viewers. Thorough research in understanding the issues surrounding television viewing will give TiVo adequate knowledge on how to shape its marketing plan to convince the common person to purchase a TiVo device. In evaluation of building a stronger brand, it seems that TiVo may have to wait to do this until the future. Currently, there is not much competition in the DVR industry, so consumers do not have anything to compare the brand to. Potential customers will probably want to understand the technology first, before deciding on whether or not to purchase a device from TiVo. Since the product is still quite new and not well established in the market, brand strengthening would not be a feasible task to complete with so many other issues plaguing the company at the moment. Part VI It is recommended that TiVo does its best to conduct sufficient market research. It must define the problem, which is addressing the needs of the mass market of untapped television viewers and research objectives, which includes identifying a way to position TiVo’s benefits to the segment of casual television viewers; develop a thorough research plan; collect and gather information through surveys; analyze the information; present the findings; and make a decision on TiVo’s final position. By doing so, it can retain a definition of its meaning to potential consumers and communicate it through an effective method.