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Zenih-Write Up Case Study
Zenih-Write Up Case Study
TABLE OF CONTENTS
Introduction ........................................................................................................................................... 3
INTRODUCTION
Zenith Electronics Corporation is a brand of the South Korean conglomerate LG Group by way of LG Electronics. The company was previously an American manufacturer of televisions and other consumer electronics, and headquartered in Lincolnshire, Illinois. Before LG Electronics acquired a controlling share of Zenith in 1995 and eventually the rest in 1999, Zenith was the inventor of subscription television and the modern remote control, color picture tubes , color computer displays , cable products and high tech electronics components such as monochrome displays, power supplies , and automotive electronics. Zenith has employed more than 32000 people world wide . all though brand and distribution were among its strength , results from continuing operations were disappointing in 1999.Despite sales volume increases, zenith saw net loss of $17 million compared to a net loss of $11 million in 1988. Zenith Electronics Corporation was keen on entering into the High Definition Television (HDTV) segment by launching a new technology that produced higher resolution (sharper pictures) and super digital stereo sound. Currently, there exists a relatively square NTSC (National Television Systems Committee) standard with an aspect ration of 4:3, found in almost all the households in the United States. However, Zenith would like to study whether consumers preferred the 16:9 wide screen aspect ratio proposed to HDTV as compared to the existing NTSC. If preferred, Zenith would have to shell large amounts on investments in new plants and equipments to produce wide shape picture tubes larger than 28 in diagonal. To understand the consumer behavior in terms of HDTV introduction, managers at Zenith must decide what marketing research, if any, needs to be done now in order to assess market potential and consumer preference for a technological innovation, high definition television (HDTV) that is yet to be introduced. The case describes various marketing research options available to Zenith in August 1990. In particular managers have to decide whether to conduct a study to examine consumer preferences for the wider screen format
of HDTV. They also need to forecast HDTV demand from 1992-2000 under pessimistic, most likely and optimistic scenarios that have to be defined. In 1989, despite sales volume increases and a strong branding and distribution base, Zenith saw a net loss of $17 million compared to $11 million in 1988. The areas of an increase in sales were due to shipment of color TV sets, picture tubes sold to other manufacturers, and high resolution color monitors.
Case Analysis
Zenith was primarily a CRT manufacturing firm. They had a perception in people mind which was like a fathers TV set (Old TV Sets). They major matter if concern was their market capture. Thompson and RCA were the leading companies. Zenith saw a net loss of $11 million in the year 1988 in the corresponding year their sales volume increased by 9% even then they faced a net loss which increased to $17 million in 1989. As a result Mr. Jerry Pearlman CEO was very concerned and asked Mr. Bruce Huber, VP Marketing of Zenith to conduct a thorough Market research upon the introduction of HDTV technology which functioned at an aspect ratio of 16:9, as compared to the present ratio of 4:3. There were many problems with this innovation as Zenith had no idea of the consumer preferences and their choices. Their marketing activities were majorly focused on the gut feel of their CEO. Which needed to change, Zenith was the pioneer of HDTV technology. As HDTV was taken into consideration a lot of problems arrived the first and foremost was whether to go ahead with this technology as the not only the cost of production but also the cost of market research was way too high. At the point of time when they were in process to take a decision on HDTV technology the major competitor was Thompson and RCA. During this period HDTV was given the name of the next generation technology but the acceptance was uncertain amongst the people. When the buying pattern of the consumers were analyzed it was known that consumers often were hesitant to buy a TV set of more then $1000. When
Zenith made an effort to understand the Consumer Behavior Findings their key Point of Targets was: 1. Consumers 2. Product 3. Price 4. Distribution 5. Promotion Pearlman the CEO of Zenith at first was hesitant in conducting the Market Research he felt that Market Research slows down the new product introduction. But at the later stage he realized that its very important to conduct Market Research as it allows the company to do Market Segmentation. It helps in setting up communication strategy also helps in selecting the appropriate media for targeting the consumers. Zenith also conducted survey amongst the non-zenith buyers such that they can understand their buying pattern and can also target them. Their main concern was to understand the aspect ratio required for the success of HDTV system to be a success. How this aspect ratio was to be implemented. How would the consumer perceive it and respond to it. Also how the problems of side curtains and top and bottom curtains can be solved and managed.
High competition.
High Cost.
Marketing Strategies
Advertising strategy pull strategy. Hired Focus Group. Heavy Cost incurred on advertising and promotion. Traditional Marketing with Gut Feeling. Feedback from not just consumers but employees and dealers as well. Conducted One to One interviews with television buyers to know their buying behavior. Applying push strategy, making goods available at large retail stores. Purchased syndicated consumer data.
Conducted among 200 panels of 1000 households each in 9 geographic regions across U.S.
1. The Prospected HDTV demand from the year 1992 to the year 2000 under a pessimistic
Most likely and optimistic scenario. 2. The main factors that are to be taken into consideration in order to analyze market Research strategies. 3. Solutions to the factor issues.
Issue 1
Pessimistic Scenario
HDTV broadcast issues are resolved. HDTV sets are readily available. Quality HDTV programming is not available. Consumers do not see the benefit in paying higher price. Sales will suffer and HDTV would only be able to penetrate 3-4 % of US households. It would
be a mix of the early penetration pattern of color TVs and projection TV.
Most likely Scenario Sales are slow initially. Sales pick-up after as good HDTV quality programs are available. Consumers slowly become willing to invest in a HDTV. Sales would follow the pattern of the color TV with slow initial sales but high penetration of US households as the time progresses.
Optimistic Scenario
Broadcast Standards are readily adopted. TV stations invest in new equipment and HDTV shows are available. HDTV sets are readily available. Consumers think the superior sound and picture quality is worth the higher price. Sales would follow the pattern of the VCR with high penetration rate
Issue 2
Price: Consumers have a fixed budget which was not extremely low as it signified a cheap product. The objective was to get the best TV within the budgeted amount. a. Product: Picture quality was the main concern of the consumers .They also concentrated on other features such as remote controls and stereo systems. b. Place: Consumers would generally tend to buy their products from retail outlets .They got more product information at stores rather than through advertisements. c. Promotion: Informative advertising generally went unnoticed. Customers were more interested in sale offers.
ISSUE 3
It is advisable to opt for primary research when it comes to Aspect Ratio Analysis as the results must be customized in order to meet the research requirements of Zenith. Moreover the RCA in its earlier research had certain discrepancies wherein it did not take into consideration how displays would be viewed in the real world. As pertaining to 16:9 ratio display, aspects such as side curtains and letterbox images view were overlooked.
SWOT Analysis
Strengths
Oldest brand in US market. Good Brand Image Promised customer satisfaction Good Cash Flow
Opportunities
New product launch will help capture greater market share.
Despite of increased sales, Zenith was facing losses. Lack of acceptance by the youth. Weaknesses
Threats
Conclusion
Even though there were many competitors present in the market, the demand forecasting of HDTV by Zenith was successful. However, they should have focused more on building adoption models so that more and more people accept and use the product and spread a good word of mouth, so that further sales can be achieved and a permanent customer base is acquired. The data they collected was relevant and was efficiently used, also wed like to suggest to use the secondary research along after a successful Aspect Ratio study.
US population has a colour TV 7. They can also get valid and relevant information from the dealers and retail outlets as they are the people who are indirectly and directly respectively connected with the customers Based on all the above information which was available it would be very useful for the HDTV to be launched in the market.
Pessimistic Scenario
HDTV broadcast issues are not resolved. HDTV sets are not readily available. Quality HDTV programming is not available. Consumers do not see the benefit in paying higher price. Sales will suffer and HDTV would only be able to penetrate 3-4 % of US households. It would be a mix of the early penetration pattern of color TVs and projection TV.
Most likely Scenario Sales are slow initially. Sales pick-up after as good HDTV quality programs are available. Consumers slowly become willing to invest in a HDTV. Sales would follow the pattern of the color TV with slow initial sales but high penetration of US Households as the time progresses.
Optimistic Scenario
Broadcast Standards are readily adopted. TV stations invest in new equipment and HDTV shows are available. HDTV sets are readily available. Consumers think the superior sound and picture quality is worth the higher price.
Sales would follow the pattern of the VCR with high penetration rate
Q4.What additional market research should be done to assess market potential / consumer preference for HDTV?
Answer 4) The alternative proposals for HDTV marketing research are: 1. Dealer research: Zenith has not yet done any formal HDTV research with the dealers, as it had just asked them informally about market preferences. They also did not have access to the syndicated dealer data. This is important as a group is familiar with the consumer preferences and realistic buying situation. 2. Secondary source research: This is the data from the commercial marketing research firm. The marketing Department could analyze all existing data about consumer adoption of recent consumer electronic products. They would also estimate the size and growth of HDTV industry in various scenarios.
3. HDTV innovators and qualitative research on early adoption : This research would consist of series of focus groups with innovators and early adopters of consumer electronic products. These identifications could be based on demographical or psychographical characteristics. Also by exploring expectations on product, pricing, promotion, and placement.
4. HDTV /NTSC TV preferences test: This was the joint analysis with thousand respondents who viewed actual working models of HDTV and NTSC monitors under various pricing scenarios.
5. HDTV consumer awareness/ HALLO EFFECT survey: A quantitative survey could investigate the consumer awareness after the introduction of HDTV. Also it would access HDTVs overall brand image, brand awareness, and purchase consideration rates of non-HDTV products. 6. Competitors Research: A quantitative survey of the competitors such that what sort of Market Segmentation they are targeting, quality of product attributes they include, Pricing strategy they offer, etc