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Indian Institute of Management

Kozhikode

Marketing Management

Case Analysis: TiVo

Submitted to: Prof. Rahul Kumar Sett

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
Situation Analysis

5C Analysis

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; Initial shipment through regional delaers and
national distribution started in Apr then became nationally avaianle through Best
00 after signing a contract buy, anelectronic chain. A month later a national
distribution was In place through circuit city and
sears

Service fee Nil Subscription based, priced around Additional charge of $9.95 / month and 99/year
$10 a month and $199 for lifetime.

Collaborators Replay network was in Thomson and Sony Sony and Philips
manufacturing its own hardware. Direct TV
Features No thumb buttons but „quick skip‟ Surfing & sending email through Electronic program guide (EPG) gave access to
which skips a 30 sec commercial their TV screen when bundled previews for shows that could be scheduled for
with Dirct TV it would be recording with one push of a button, a TiVo-
A set of TV commercials focused on offering the satellite TV produced video magazine, a set of network
the pause feature showcases, where network promted the best
More advanced features- shows and an on screen TV guide.
Pause live TV, search tools and the interactive TV & personal video
ability to record programs through recording Season pass- It allowed users to specify their
an electronic program guides favourite shows so that Tivo would
Watching/recording 2 shows automatically record all the episodes.
simultaneously, recording pay per
Marketing Management | 7/11/2010

view movies, 30 sec skip and fast “Thumbs up” and “Thumbs low” button.
forwarding upto 300 times the
normal speed

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
at lower prices.

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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:

Strengths Weakness
Innovative Product Lack of Brand awareness
Brand Equity Confusion regarding Brand
Interactive Services Lack of Marketing
Customer Loyalty Expensive
Product Quality Over Reliance on Partners

SWOT Analysis
Opportunities
Threats
Diversification
Low Barriers to Entry
Advertising
Inability to skip Ads
High Market Growth
Many Heavy Weight Competitiors
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Unique Feature
Over reliance on single suppliers

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.

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Numerical Analysis

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
Marketing Management | 7/11/2010

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.


 The salespersons should be well trained in order to give out the same message about TiVo to customers.

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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

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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

800000
700000
600000
500000
400000
300000 Revenues
200000 Costs
100000
0
May-99

May-00

May-01

May-02
Jul-99
Sep-99
Nov-99

Jul-00
Sep-00
Nov-00

Jul-01
Sep-01
Nov-01

Jul-02
Sep-02
Nov-02
Mar-99

Jan-00
Mar-00

Jan-01
Mar-01

Jan-02
Mar-02

Jan-03
Mar-03
APPENDIX – A Quaterly Data, in thousands
36 39 42 45 48 51 54
No. of Months
Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03
Year
584.13 940.34 1513.03 2427.42 3891.91 6238.40 9998.69
Subscribers Base of TiVo
17102.38 31722.84 58876.53 109145.11 202292.43 374909.20 694807.13
Revenues

Costs and expenses


27844 37947 52215 71238 97008 131867 179214
Cost of Services
24416 33020 44650 60225 81231 109786 148520
R&D
15300 16670 16905 17081 17232 17406 17664
Sales & Marketing
Sales & Marketing related 5836 6107 6090 6061 6038 6035 6053
parties
10087 12594 15309 18665 22691 27635 33702
General and Administrative
1356 1407 1463 1483 1499 1519 1539
Stock Based Compenstation
0.00 0.00 0.00 0.00 0.00 0.00 0.00
Other Operating Expense
84839.51 107744.9 136631.8 174753.5 225699 294248.3 386692.9
Costs

-67737.1 -76022 -77755.3 -65608.35 -23406.53 80660.93 308114.3


Gross Margin