TiVo

Case Analysis
Ahir Mahmood
1009429129
Professor Tarun Dewan

Executive Summary

TiVo is a company founded by Michael Ramsay and Jim Barton with the sole purpose of
providing customers with the power to program their own network on television. So,
TiVo’s newest product is the digital video recorder which can allow customers to control
what they watch and when they watch it if customers own a TiVo black box and
subscribe to the TiVo service as well. The TiVo digital video recorder helped TiVo sign
up 42,000 subscribers with a current rate of 14,000 subscribers per quarter within 14
months of launching the product. However, there are 102 million TV-watching
households in the U.S. and there was only 0.04% penetration of this market even though
the product is available in most major consumer electronics stores across the nation.
Also, customers who owned TiVo seemed satisfied with their purchase which drove
TiVo’s marketing team to deduce that the lack of awareness about the product among
consumers is the main reason for the discrepancy between the love for TiVo and its awful
sales. This is because the digital video recorder’s main problem is that its advanced
features were not as easy to explain as it was to experience. So, TiVo created the
“Network Executive” ad which contained the replacement of any explanation of the
product with the phrase “Program your own network.” Furthermore, before approving the
release of the “Network Executive” ad and three other similar ones, Brodie Keast decided
to take a step back and review the company’s position one more time. This statement
proves that TiVo is an evaluation case because the problem has been presented to us with
different decisions for a solution. So, we must evaluate each decision for the solution to
determine which decision is the most successful option for TiVo.

SWOT Analysis

Strengths
 TiVo has developed an innovative
and revolutionary product of
technology that gives users the
ability to control what they want to
watch and when they want to watch
it.
 72% of people who owned TiVo’s
digital video recorder claimed that
TiVo made TV viewing “a lot more
enjoyable.”
 90% of customers said that they
Weaknesses
 TiVo’s low penetration of 0.04%
within the U.S. market of 102
million TV-watching households is
making the company have a low
market share.
 TiVo’s digital video recorder
category contains many advanced
technological features that are
complicated to teach consumers
about and the onscreen program
guide was confusing.
 would recommend the digital
recording device to family and
friends which showcases a high
amount of word-of-mouth.
 Partnership with brands Sony and
Philips increase product reliability
and effective distribution because
Sony and Philips will manufacture,
distribute, and promote the black
box to retailers.
 The company has a friendly-
sounding name and a cute brand
identity which can potentially
increase brand recognition.
 Early adopters of the digital video
recorder were celebrating
intensively in the online forums of
TiVo’s website.
Opportunities
 A market of 102 million TV-
watching households in the U.S.
allows TiVo to have a huge target
market.
 The number of families owning a
25-inch or larger TV set and a
surround sound audio system
increased by 300% from 1995 to
1999 which is 20 million currently.
This means that more families are
willing to spend more money to
attain a greater experience of
watching TV.
 In 1999, the average American
household owned 2.4 television
sets and spent 7.4 hours per day
watching TV. This proves that the
 TiVo’s Personal Television
displayed some major glitches, the
process of navigating around the
unit’s menus is confusing, and
changing channels caused the TiVo
picture to break up or freeze
briefly.
 TiVo’s devices required extensive
explanations and in-store
demonstrations which created
problems for the salespeople. Also,
a 50% salesperson turnover rate in
consumer electronics stores made
training efforts unsuccessful.
 The price is high because a $1000
ticket meant that TiVo was more
expensive than twice the price of a
good satellite system and most TV
sets.
Threats
 Certain products such as ReplayTV
and UltimateTV are from TiVo’s
main competitors, Replay
Networks and Microsoft. These
products are like TiVo’s products
because the devices contain
features such as pausing live TV,
search tools, etc.
 Network and advertising
companies view TiVo as a threat
because it allows customers to skip
advertisements which can reduce
the amount of viewership during
prime time.
 demand for television content is
rising among American
households.

Recommendations - Marketing Mix: The Four Ps of Marketing

Product

To increase brand credibility and loyalty TiVo should maintain the two principles that
will restrict the amount of freedom for advertisers. The first principle is that consumers
need to always remain in control and so they will only be exposed to commercials based
on their choice of preference or involvement. This principle is going to boost brand
credibility because consumers will realize that TiVo has the ability and willingness to
consistently provide what has been agreed upon. Furthermore, the second principle is that
data about individual viewing patterns will only be disclosed in aggregate format. So, this
principle increases brand loyalty by having TiVo prioritize the privacy and safety of their
customer's personal information. Therefore, brand loyalty will increase because
consumers will deduce that TiVo does not prioritize the relationship it has with
advertising companies over the relationship it has with its customers.

Place

TiVo should continue distributing its products within reputable retail stores and consumer
electronics stores such as Best Buy, Circuit City, and Sears. This is because TiVo will be
able to target numerous segments within the market since a higher number of consumers
and workers will be exposed to TiVo’s products frequently. Also, TiVo should not have
DirecTV as an equity partner because if TiVo bundled with the DirecTV receiver it
would force consumers to choose between a DirecTV-Microsoft and a DirecTV-TiVo
bundle. This would create problems for TiVo because the company would have to focus
on differentiating its product line from Microsoft’s product line. So, to avoid this problem
TiVo should seek a partnership with AOL when the product implications of the
partnership have been finalized.
Promotion
To raise awareness during the introduction stage, promotion and educational advertising
are crucial therefore large advertising costs should be anticipated. So, the entire approach
to advertising for TiVo is catchy one-liners in commercials such as the “Network
Executive.” However, consumers do not become aware of the full extent of the product’s
capabilities so TiVo should focus on educating consumers about the product’s different
abilities. TiVo can educate these consumers by showcasing how the product differentiates
itself from the VCR system such as skipping advertisements, pausing live TV, etc.
Furthermore, TiVo should create incentives for consumers to purchase the product by
successfully executing sales promotions. However, to execute the sales promotion,
salespeople and workers need detailed instructions on how to present the product to
consumers so there is no misunderstanding. So, through free trials, retail merchandising,
and presentations TiVo can properly execute this sales promotion which will increase the
understanding consumers have about TiVo products and improve word-of-mouth.

Price

TiVo needs to lower the price of the digital video recorder because TiVo needs to match
the market-penetration scheme prices, so consumers are more willing to purchase the
product. This is because TiVo is not a well-known company and introducing a new piece
of technology is very challenging since consumers are not aware of the company or the
product. So, consumers will need to purchase the digital video recorder from TiVo and
experience it themselves to evaluate the usefulness of the product. However, a high price
of $999 will not encourage consumers to attain a product that they do not understand and
since the product is in the introduction stage it should be priced competitively. This is
because competitive pricing will encourage consumers to test the product and switch
from the VHS to the digital video recorder. However, the price shall not drop to $399
because that is lower than competitive pricing and so the price should be around $550-
$650 because this will ensure competitive pricing. Also, TiVo can distribute discounts at
specific retail locations based on the sales performance at a location or to loyal customers
based on how long they have been subscribed to TiVo.