TiVo Case Analysis Marketing HBS

Marketing Management

Case Analysis:

TiVo

Indian Institute of Management Kozhikode

Submitted By:

PGP/14/258 Alok Kumar PGP/14/279 Lokesh Singh

PGP/14/280 Mahtaab Kajla PGP/14/283 Naveen Vyas PGP/14/303 Shruti Kabdal PGP/14/304 Sneha Ramteke

Submitted to: Prof. Rahul Kum ar Sett

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Company Background: Tivo is a small company founded by Jim Barton and Michael Ramsay and the product was

launched after about 14 months of its launch. Tivo had signed up for 42,000 subscribers, they were acquiring 14,000 new subscribers per quarter. They had a market penetration of 0.04%. Despite this low penetration, almost everyone who owned Tivo was satisfied with it. 90% of the Tivo subscribers even said they would recommend it to family and friends. It was a company which had a mission to change the consumption habits of the viewers.

Competitor Analysis: Tivo was alone in its category at the time of its launch but over the period of time

competition developed and some of the big players came into picture.

Replay Network Microsoft’s Ultimate TV TiVo

Price $ 200 more than Tivo Not yet announced $499 for a model upto 14 hrs of recording capacity and $999 upto 30hrs.

Brand Leverage Low High Low

Distribution channel Initial limited distributor channel; national distribution started in Apr 00 after signing a contract

Initial shipment through regional delaers and then became nationally avaianle through Best buy, anelectronic chain. A month later a national distribution was In place through circuit city and sears

Service fee Nil Subscription based, priced around $10 a month

Additional charge of $9.95 / month and 99/year and $199 for lifetime.

Collaborators Replay network was in

manufacturing its own hardware. Thomson and Sony Direct TV Sony and Philips Features No thumb buttons but „quick skip‟

which skips a 30 sec commercial A set of TV commercials focused on the pause feature

Pause live TV, search tools and the ability to record programs through an electronic program guides

Surfing & sending email through their TV screen when bundled with Dirct TV it would be offering the satellite TV More advanced features- interactive TV & personal video recording

Watching/recording 2 shows simultaneously, recording pay per view movies, 30 sec skip and fast forwarding upto 300 times the normal speed

Electronic program guide (EPG) gave access to previews for shows that could be scheduled for recording with one push of a button, a TiVo- produced video magazine, a set of network showcases, where network promted the best shows and an on screen TV guide.

Season pass- It allowed users to specify their favourite shows so that Tivo would automatically record all the episodes. “Thumbs up” and “Thumbs low” button.

Other Competitors:

 Jovio: It had announced its intentions of launching a free service that would be similar to TiVo‟s.

 Seagate Technology and Thomson Multimedia: They had announced a joint venture to put their own

hardware inside the television set.

 Miscellaneous: Conventional VHS video recorders and DVD Players were already present in the market

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Customer Analysis: In 1999, the average American household spent 7.4 hours per day watching TV, with the

average adult spending about 4.3 hours per day in front of the screen. When buying consumer electronic equipment, 71% of consumers were influenced by friends or relatives, 56% by publications and advertising , 40% by store staff and 30% by television advertising. According to an independent study, 62% of Tivo owners watched more TV with the service than without and 31% of the owners said that TV was their primary source of entertainment(as

compared with 16% before ownership). 59% said that they watched programs that were once unavailable to them because of inconvenient scheduling and there was a 31% decrease in channel surfing. Children‟s programming and dramas were the most recorded programs with the situation comedies following closely. TiVo‟s data showed that subscribers were fast forwarding through 90% of commercials. This proved that they didn‟t particularly like 30 second commercial that were not specially available to them.

Collaborator Analysis: Tivo established partnerships with SONY and PHILIPS, they subsidized these two

companies to manufacture the black box distributed and promoted to the retailers. They made their initial shipments through regional dealers and eventually became nationally available through Best Buy in Sept 1999. By Oct 1999, Circuit city and Sears started carrying black box.

Context Analysis: The SWOT analysis the depicts the company‟s Strengths, weakness, Opportunities and Threats

is shown below

SWOT Analysis:

Issues:

 Despite high satisfaction levels of existing subscribers, the market penetration of TiVo remains low.

 The company is constantly suffering from losses. Awareness about the features that TiVo offers is also low.

 There was no clarity among the sales persons as in how to project the product i.e. there is lack of consistent terminology in referring product.

 They were trying to change consumer behavior which was difficult to achieve.

Strengths Innovative Product Brand Equity Interactive Services Customer Loyalty Product Quality Weakness

Lack of Brand awareness Confusion regarding Brand Lack of Marketing Expensive Over Reliance on Partners

Opportunities Diversification

Advertising

High Market Growth Unique Feature

Threats

Low Barriers to Entry Inability to skip Ads Many Heavy Weight Competitiors Over reliance on single suppliers

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The company would start making profits after Oct – 02 if the market strategy under proposal is adopted. A justification for this can be seen in appendix A.

Marketing Strategy

It would be better if TiVo changes its marketing strategy and some of the recommendations regarding that is given as:

 Specific advertisements focusing on one feature at a time, which will ensure better awareness levels among customers, which are currently lacking

 Training sessions for sales persons and demos for customers, to ensure proper support for answering customer queries

 _{Quoting public reviews in advertisements to create impact}

 _{Create new market segment by offering reduced features at lower prices}

Segmentation: The market segment is all people who own a television set.

Targeting: TiVo should be targeted to all consumers who use a TV/conventional VHS video recorder.

Positioning: TiVo should be positioned as a digital video recorder having many additional features over VHS

recorders.

Marketing mix Product

 A less sophisticated and more user friendly product is desirable, hence the product should be made so keeping in mind that it is an easy transition for a person using a conventional VHS recorder.

 The privacy of customers is important and hence must be taken care of, the usage data should not be leaked out to anyone else.

 _{It should have specifications and features offered by their competitors.}

Price

 In order to gain a significant market share, it should start from a low cost initially. For the people to to switch over from VHS recorders to TiVo, competitive price is the key.

 By collaborating with cable/DTH service provider, the monthly charges for the product service should be lowered.

Place

 All the major electronics stores where TVS/VHS recorders are sold, Tivo should be sold.

 It should also be available with cable/DTH service providers so people can purchase both at the same time.

Promotion

 Clear communication of the benefits of TiVo through mass media is vital.

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 As a more attractive deal for customers, TiVo should be offered with a cable/DTH provider .

 Promotion of Tivo as an improvement over VHS recorder, offering not only better digital quality but also more convenience and features such as pausing/fast forwarding live TV and ability to offer suggestions is desirable.

Options Available for TiVo

 Produce Bundle with DirecTV

 Price at $399 with separate subscription charges

 Focus on training the workforce to provide sufficient support to users

 Integrated communication

o Lifestyle commercials on TV o Feature in print media o Demos on websites

APPENDIX – A Quaterly Data, in thousands

No. of Months 0 3 6 9 12 15 18 21 24 27 30 33

Year Sep-99 Dec-99 Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01

Subscribers Base of

TiVo 0.00 0.00 0.00 1.00 2.50 18.00 32.00 48.00 82.01 137.10 225.04 364.61

Revenues 0 0 0 8 33 182 424 719.10 1388.91 2638.89 4953.95 9227.53

Costs and expenses

Cost of Services 0 0 689 636 749 1993 4168 4989 7252 10254 14624 20395

R&D 1659 2146 1596 1859 2327 3945 4678 5679 7509 10318 13804 18391

Sales & Marketing 354 567 2168 1847 5323 15164 9180 11384 13066 14395 15454 15580

Sales & Marketing

related parties 0 0 0 382 4946 9844 4547 5349 5870 6216 6290 6026 General and Administrative 706 1337 1125 1057 1757 3088 2691 3631 4428 5632 6976 8377 Stock Based Compenstation 0 0 0 187 501 842 969 919 1079 1213 1291 1329 Other Operating Expense 0 0 12 201 4808 2213 0 0.00 0.00 0.00 0.00 0.00 Costs 2719 4050 5578 5968 15603 34876 26233 31951.23 39203.59 48026.2 58439.37 70097.37 Gross Margin -2719 -4050 -5590 -6161 -20378 -36907 -25809 -31232.1 -37814.7 -45387.3 -53485.4 -60869.8 0 100000 200000 300000 400000 500000 600000 700000 800000 Ma r-99 Ma y-99 Ju l-99 Se p -99 N o v-99 Jan -00 Ma r-00 Ma y-00 Ju l-00 Se p -00 N o v-00 Jan -01 Ma r-01 Ma y-01 Ju l-01 Se p -01 N o v-01 Jan -02 Ma r-02 Ma y-02 Ju l-02 Se p -02 N o v-02 Jan -03 Ma r-03 Revenues Costs

APPENDIX – A Quaterly Data, in thousands

No. of Months 36 39 42 45 48 51 54

Year Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03

Subscribers Base of TiVo 584.13 940.34 1513.03 2427.42 3891.91 6238.40 9998.69

Revenues 17102.38 31722.84 58876.53 109145.11 202292.43 374909.20 694807.13

Costs and expenses

Cost of Services 27844 37947 52215 71238 97008 131867 179214

R&D 24416 33020 44650 60225 81231 109786 148520

Sales & Marketing 15300 16670 16905 17081 17232 17406 17664

Sales & Marketing related

parties 5836 6107 6090 6061 6038 6035 6053

General and Administrative 10087 12594 15309 18665 22691 27635 33702

Stock Based Compenstation 1356 1407 1463 1483 1499 1519 1539

Other Operating Expense 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Costs 84839.51 107744.9 136631.8 174753.5 225699 294248.3 386692.9