TiVo - Case Assignment

Background
Jim Barton and Michael Ramsay left their jobs at Silicion Graphics in August 1997 in order to work on their own business idea. At the beginning this was meant to be a userfriendly home networking system, but as soon as they were facing many difficulties they focused on a progressive digital video recorder. That product includes revolutionary features such as recording, fast-forwarding and rating live TV-programs. It was produced by Sony and Philips and sold nationwide in shops like Best Buy, Circuit City and Sears. The different models of their black-boxes were sold for 999$ or 499$ and an additional charge for the service. The key elements of TiVo s business strategy were partnerships with some networks (NBC, CBS), collaborations with Phillips and Sony promising to deliver a better TV-watching experience to consumers. Furthermore TiVo offered advertisers a way to target certain demographics more effectively using TiVo s ability to track the watching preferences of its users. TiVo s strategy was a revolutionary concept for couch commerce, a growing niche of consumers that TiVo felt was underserved. However, sales in 1999 did not meet predictions since many factors in product pricing and marketing were not thought out well. In order overcome the problems these issues were revised.

Analysis of the Marketing-Mix

Product
In 1999 TiVo was a pioneer product with advanced features such as pausing and replaying live TV, Electronic Program Guide (EPG), recording without DVD, VCD or video cassettes, a season pass feature, "Thumbs up" and "Thumbs down" buttons for rating user's favorite shows, suggesting users, the shows they would want to watch and many others. In fact, the user could really control what he watched and when he watched it. Furthermore, everyone who owned TiVo seemed satisfied with it, with 72% of owners even claiming that TiVo had made TV viewing a lot more enjoyable .

Varity in product and packaging is given since TiVo offered two different model (499$ for 14 hours of recording capacity, 999$ for 30 hours of recording capacity) and there were three service packages ($9,95per month, $99 per year and $199 for the lifetime of the unit) available in order to attract different costumer segments. Moreover, the brand name has a friendly sound including the main aspect of the product since TiVo means TV your way . And the logo consisting of a TV with the brand name on it seems very pleasant and nice as well. After all the, the pioneering functions were difficult to explain to customers and that is why the early print advertisements (Exhibit 4) were printed with a lot of text and therefore really overloaded. Unfortunately, there was some confusion in the press because it was not clear how the new product category should be introduced (personal video recorder, digital video recorder, personal digital recorder, intelligent video recorder or on-demand TV). Oftentimes the press discussed the features of the device, but it was not always to the advantages of the company, as the first generation product was no free of problems.

Price
TiVo was a very expensive since the models cost up to $999 plus another charge for the service up to $199 for the lifetime of the unit. Therefore owing and using such a product was more expensive than most TV sets or satellite systems. According to the fact that it was a complete new product there was no real comparable reference point for the pricing. Moreover, the new competitive product launching in 1999 by Replay Networks was priced $200 higher than TiVo s unit, but the service was included .

Promotion
By outsourcing manufacturing and distribution TiVo s promotional power was restricted. While the hardware manufacturers took control of retail distribution and in-store communications, TiVo s promotional activities were restricted promotional activities to public relations, animating its website, and a very limited mass media campaign. Furthermore the role of early adopters as TiVo s advertisers TiVo was ineffective even though 72% of them were satisfied with the product.

Place
In order to ensure quick market entry and development Jim Barton and Michael Ramsay built a partnership with the strong and well-known brands Sony and Phillips in the electronic industry. These parental companies manufactured the black box distributed it, and promoted it to retailers. One the one hand the strong parental is a great advantage for the unknown brand, on the other hand TiVo as company does not have a direct contact to its customers. This aspect is proven by the fact that the interviewed salesmen at the end of the case have each their own sales strategies and product descriptions which may confuse the customers. The product was distributed nationwide by Best Buy in September 1999 as well as Circuit City and Sears in October 1999. By doing so TiVo had a huge customer base, however, the market penetration was incredibly slow. This is shown by the numbers of subscribers in the third quarter of 1999 by 2,500 and in the holiday shopping season by only 18.000 (Exhibit 3).

Branding Issues
Since the increase in subscriptions is slow it is an obvious sign that a part of potential customers did not know about the brand which is quite right because the company s efforts in marketing were not as they were ought to. A further aspect could be that even though another part of the potential customers knew about TiVo, they were confused about the product since it was not easy to explain and hard to assign to a specific group of products in the industry. The costumers are up to 72% satisfied with the product and the services TiVo offers. For this reason the brand loyalty should be rated high, but in general this will not lead to repeated purchases in a short period of time because the product will have a long lifetime. TiVo s slogan is You watch anything you want, when you want it . It is definitely conformal to the product and its features. The parental companies are Sony and Phillips which obviously strengthens the brand equity of up to that date unknown product called TiVo.

Changes
The whole range of the above mentioned inconsistencies of TiVo s marketing plan and branding were in fact the reason why the company was not able to gain more subscribers during the holiday shopping season in 1999. The failures were realized which is why the elements of a marketing plan were developed for TiVo. One of the main problems was the high price of the black-box that was dropped from $999 to $399 dollars. Furthermore, the promotion aspect was strengthened by showing four commercials on TV and printing advertisements. Finally, they were considering going in business with an equity partner such as Direct-TV. In fact the right steps were taken to correct the failures that were made thereby they could gain more market share in order to become a well-known and profitable company. We can see that by the growing number of subscribers in the first half of 2000 in Exhibit 3.

Sources
TiVo Case Study Paper: Notes on Evaluating Case Studies Marian Burk Wood, The Marketing Plan Handbook Prentice Hall, 4th, 2 http://www.scribd.com/doc/31683893/Tivo-Case-Analysis-Bullets http://www.123helpme.com/tivo-branding-and-advertising-case-study-view.asp?id=167882