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Marketing Management

Zenith
Marketing Research for HDTV
Case Study Analysis

Group 6:

Priyanka Agarwal Sherin Kalam Saad Subooh Anuj Inani Amit Kumar Devika Atree

Case Study Report Zenith: HDTV


Case Overview Zenith Electronics Corporation is an American based manufacturer of color televisions, color picture tubes, color computer monitors, cable products and hi-tech electronic components such as monochrome displays, power supplies and automotive electronics. Zenith was investigating on entering into its new High Definition television (HDTV) technology. With the HDTV technology, they can provide to their market a higher resolution and super digital stereo sound TV experience. The vice president of marketing at Zenith, Bruce Huber, is considering conducting an appropriate marketing research to understand market and its preferences before launching the HDTV technology. Traditionally the CEO of Zenith, Jerry Pearlman, launched new products on gut feelings. For him, the role of marketing research was to give a direction and theme for advertisers, to attract the appropriate crowd. Huber is currently in dilemma to choose the appropriate research strategy to consider for the launch of HDTV technology.

SWOT Analysis for Zenith Strength Good market share Record sales volume Popular player in color TV industry Weakness Increase in net loss compared to previous year despite the increase in sales No good advertisement strategy Not popular among the younger generation Opportunities HDTV technology that can provide better picture resolution and super digital stereo sound Visibly different in shape and design so easy to market Consumers valued picture quality Threats Despite the advent of HDTV, broadcasters would continue to broadcast in 4:3 format Hence in real world conditions, display would appear with side curtains or letter boxes

for choosing TVs

Only 3-4% of TVs were sold above $1000, with HDTV price would increase by $300

Case Analysis Q1. How much existing information on TV buyers can be used to assess the HDTV market? The company can make use of various researches that have been conducted during the previous years. One research in 1988 highlighted key buying decisions of consumers: value, product, price, distribution and promotion. They can also make use of the research conducted on Exhibit 9 identifying 3 main customer segments performance buyers, experience buyers, & price buyers. Overall, Zenith should first think about information relating to Color TVs such as its penetration rate to know if HDTV adoption would be similar to any other products adoption or not. Since HDTV is a new technology the company has to rely on historical data to get a similar view of the market. If the company is seeing the product as a replaceable product then it should also consider Exhibit 5 to see how many TV owners exist. The company should look at how marketing plays a role in forecasting demand for HDTV. Zenith should form team to do better research on consumers acceptance and demand for HDTV. The company should also keep in mind how the brand is viewed by its customer & then evaluate how the new product will affect the brand.

Q2. What are the forecasts of demand from 1992-2000? Requirement is the forecast of HDTV from 1992 to 2000 Zenith Forecast of the HDTV U.S. Market done in 1988 1992 1993 1994 1995 1996 1997 1998 1999 2000 Industry Total (millions 100 102 105 107 110 113 115 118 121 of units) 25" & larger (millions of 100 102 103 107 113 120 125 133 142 units) 11% of 25" and larger over $1000 (thousands 100 102 103 106 114 120 124 133 141 of units) HDTV units industry 100 205 409 682 970 1197 1242 1333 1409 forecast ('000s) Zenith's forecast of 100 205 409 682 970 1364 1970 2727 3788 industry sales ('000s)

160 140 120 100 80 60 40 20 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 Industry Total (million of units) 25" & larger (million of units) 11% of 25" and larger over $1000 (thousands of units)

in % after taking 1992 as base year

Graph 1: Zenith forecast of U.S. market

4000 3500 3000 2500 2000 1500 1000 500 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 HDTV units industry forecast ('000s) Zenith's forecast of industry sales ('000s)

Graph 2: HDTV units versus Zeniths forecast of industry sales The above forecast clearly shows that the industry demand for 25 or higher HDTV would continuously increase during the span of 1992 2000. The increase in demand by 42% in the forecasting shows that the budget of the customers would also increase accordingly. This can also be seen by the simultaneous increase in the 11% of 25" and larger over $1000 (thousands of units) category. This shows an increase of 41% in comparison with the base year 1992. (See Graph 1) Moreover, the forecast demand for Zenith in comparison to the industry for the same period is showing a drastic increase in competition with the industry average. The demand of HDTV units forecasted shows that the demand will increased 14 times in the year 2000 in comparison with that of year 1992, whereas the same for Zenith would increase to almost 38 times. (See Graph 2)

Q3. Should Zenith conduct the aspect ratio study? Since they are launching a new product that is visibly differentiable, it would be useful to know the acceptance of the new aspect ratio 16:9 with equal height and or equal diagonal displays. The aspect ratio study would help Zenith understand the preferences of their consumers towards the new HDTV wider screen aspect ratio or the current standard 4:3. The study also aims to understand the changes in consumer preferences for 16:9 wide screens at various price differentials, with different program content and different diagonal displays. The previous research conducted by RCA on aspect ratio did not consider the response on customers on adverse circumstances in real world, such as that of viewing with letter boxes and side curtains. In the proposed study, the research team recruited 2,250 respondents who had purchased TV in the past year from a shopping mall in a single city. The respondents would be exposed to various real world situations, to choose their better preferred options. They were also given option to choose their overall preference as well. Even though the study would cost Zenith $125,000, it is needed as they are launching a new technology for which they have to make huge investments on plant. Thus it is important to make sure that the customers are satisfied and would still prefer the HDTV despite of various changes. The results would be more accurate and reasonable in this study since the researchers are working on real world scenarios. Hence, the company would be able to understand how the consumers made tradeoffs among the various features of the HDTV that are under study.

Q4. What additional market research should be done to assess market potential/consumer preference for HDTV? Analysis of each alternative proposal for HDTV marketing research: Dealer research Pros Get first hand consumer information Get first hand consumer preference (price, Cons Dealers interest in showcasing the new product
5

quality, size) No additional investment Direct interaction with the consumer Brand name with the dealership

Little cost involvement to convince the dealers Might require to sample get pieces for

showcasing feedback

better

consumer

Secondary source research Pros Cons concentrating on a replacement

Would get consumer trend towards recent Not new technologies Can also understand the product quality, sizing and distribution strategy More chances of being accurate & detailed

products but on new technologies, hence the consumer trend might vary While this seems like a good idea, it might not give the consumers liking for HDTV High cost is involved ($100,000)

HDTV innovators and qualitative research on early adoption Pros Cons

Insight of what a consumer actually Members in a focus group might be excepts, whether he likes the new product or not Will allow the consumers to get a feel of the product which will allow influenced by others and moderators Information may not be considered of value if they have predetermined result for Early adopters do not represent the population

formulation of strategies

HDTV/NTSC-TV preference test research Pros Cons their Cost of study


6

Consumer would be able to compare both Production of HDTV, huge investment standards side-by-side and

expectations of size, screen, picture quality Cost of developing programs to be viewed and pricing The innovators could add positive word of mouth Research would be done only after the HDTV is produced leading to delay

HDTV consumer awareness/halo effect survey Pros Cons

By doing this survey, they would not only Takes long to get survey results find out about the HDTV market but would Cost involvement of $100,000 also become aware of zeniths brand image Will be conducted after introduction so and purchase considerations there is a risk of product failing before the research

The most ideal strategy in this case would be to use HDTV innovators & qualitative research on how the product will be adopted. As this would be an explorative research the company can easily introduce variables or scenarios it believes it needs to study for its HDTV technology. This will also allow the company to see the customer reactions directly & this can help them adopt the right strategy when introducing the product. E.g. If most of the focus group feel that this will replace or redefine the color TV then the company can make strategies accordingly. Through this the company will also be able to identify the consumer behavior with regard to the product like their willingness to pay, their need for information, where will they buy from, and other related factors. This study would not consume time as it can be conducted at the earliest & the cost of conducting it is not very high. As of now the company is making losses & huge investment in research may not seem like the best of ideas. Keeping costs low even for the new product is crucial for the company to succeed with the new technology. Lastly, as the company is directly dealing with its customers & if the customers give a positive response, then this will help the company generate positive word of mouth publicity for its upcoming product. This can help the company create a buzz in the market & make its product highly anticipated.