TIVO TiVo COMPANY BACKGROUND TiVo is a small black box which contains a digital video recorder that allows

viewers to watch what they want, when they want to watch it, it allows Pause and instant replay of live TV by storing information on a hard drive. The TiVo Service represents what has been called the Personal Television Industry Total control over the way you watch television. The company established manufacturing partnerships with well established firms like Philips and Sony, and also made some agreements concerning distribution through retail chains such as Best Buy, Circuit City and Sears. In sum, the product was designed and developed by Tivo, and then licensed for manufacture and sold in retail channels as a consumer electronic device. Price range is between $499 and $999, plus and additional $9.95 monthly for the TiVo servive (with the option to pay $99 yearly or $199 for the lifetime of the service). Sales, expressed in terms of the number of subscribers, have been growing consistently over the 14 months of the conpanys lifetime, yet, they have grown at a much slower rate than the one that was anticipated in face of the dimension of the market and of consumer satisfaction. It is no wonder that the company has been carrying losses through its short existence, yet, it is disturbing to find that there is no evidence of the sales take-off that has been expected to happen, especially on the Christmas shopping season. SITUATION ANALYSIS 1. Product What is TiVo after all ? A digital video recorder, a personal video recorder PVR? DVR? PDR? IVR? No one seems to know. That is the first problem. The product that the company is trying to sell is located at the convergence of these four well established industries: - Broadcasting & TV - which provides Content; - Communications Equipment - which provides the Pipeline equipment; - Software, which provides the software itself, for encoding, decoding, storage, database etc; - Electronic Instruments Devices - the consumer products manufacturers; Its no wonder that the consumers are confused about Tivo. And they should, for it is genuinely a new product that may lead to a whole new industry. But for the moment, Tivo is still in the introductory phase of a product lifetime cycle, as pictured below: 2. Market The market potential is enormous, as there are 102 million potential consuming householders in the USA alone. But the company as failed to attract as much interest and sales as it should, with only 42.000 costumers so far, a mere 0,04% of the market. 3. Competition Since it is a new industry, there is no significative competition for the moment. But two major movers have started to emerge - Replay Networks, which sells a more expensive product, is threat due to similar characteristics of its product and also to the large commissions it pays to

the salespeople; Ultimate Tv, from Microsoft is about to enter the market a may become a significative threat mainly because it combines several products like Internet and Email, into the same product. Many other competitors are expected to be on the market soon, since every key company in the four sectors discussed before (point 1) is paying extreme attention to this emerging market. For the moment, TiVo still holds a competitive advantage, it was the first on the market, and it possesses a technological lead, but that lead is eroding and will soon disappear. 4. The Advertisement Industry Issue The unique features of TiVo, that grants the consumer the opportunity to skip advertisements is viewed as a significant threat to the advertisement industry, and thus to the whole Tv industry because the networks are expecting that if TiVo achieves a large market penetration, the advertisers will drastically reduce their traditional media spend. 5. Pricing (Vs Costumer Satisfaction) Pricing is a real issue in this case, since, in our opinion, is a real obstacle to product adoption, and may explain up to a certain level why the sales are so low compared to the customers satisfaction that has been measured. This maybe somewhat controversial but the reasoning behind this statement is the following TiVo is not the main product, it is an accessory for the real product which is television, and television in turn is just a vehicle for entertainment. But we are asking the costumer to pay for an accessory that is still somehow confusing, a amount larger than that he would pay for an established product such as a DVD Player or a VCR, or for a TV Set. We need to review this pricing policy. SWOT ANALYSIS Strengths - Partnered with many large established players, both manufacturers and retailers; - Multiple potential revenue streams (direct ads, cross selling, special agreements); - Technological Lead; Weaknesses - Partnerships with retailers create a barrier between tivo and costumers (no direct contact); - Partnerships with producers are eroding the product margins; - Financial Results and perspectives are poor; - Product awareness is still low; - Product is an hybrid, not yet regarded as a must-have; Opportunities - Large Market Potential; - Can gather data on consumers preferences and tv program real audiences; Threats - Collecting data from customers preferences may be regarded as privacy violation; - Increasing Competition is expected soon, with the entrance of giant competitors like Microsoft; PROBLEM TiVo Sales have been very disappointing. The companys Vice President of marketing and sales, wants to launch a strong communications campaign, combined with a new product

bundling with satellite television receivers, lower prices and better sales support in order to encourage product adoption. RECOMMENDED STRATEGY There is a need to combine all the enumerated factors pricing, advertisement, product package, sales support into an integrated marketing plan. This new strategy must position TiVo as a market leader before the entrance of Microsoft and other key movers, otherwise the company will go out of the market. But in order to do so, Tivo must be able to fully understand what it is selling and to whom It is selling. It is selling a new and complex electronics product that is meant to change consumer habits radically. And it is selling an entertainment product, not a laundry machine, so it is necessary to understand the motives why the consumer would feel the need to buy this entertainment product. What kind of consumers are we talking about? TiVo has been targeting early adopters, with enough buying power to buy an expensive accessory to their Tv sets. But we are also speaking about a 112 million consumers market, not just of a small niche of techno freaks. So, the real question should be: Why should the average American Tv Consumer buy a TiVo Box? Lets look at it from the consumer point of view We are reading an ad that says you should buy this wonderful new gadget because it improves your Tv entertainment experience. And the average costumer thinks: - Sure, Sure its wonderful but dont the advertisers say so about mostly anything? - What exactly is this TiVo thing? How does this work, it seems complicated, doesnt it? - I already have a TV, a VCR and a DVD. Are you sure that I need this Thing? - And it is expensive too, insnt it? Once you look at it from the consumers point of view you are no longer surprised with the low product sales that TiVo has achieved. TiVo has been emphasing the wonderful products capabilities, when it should focus on its operating simplicity, on the way it works. This should be kept in mind when passing the directions to the creatives of the new campaign. The products price is clearly exaggerated, why not cut prices, after all, in the long term the products price will be completely irrelevant because the companys larger revenues will come from the subscription services. Ultimately we might say that TiVo needs two things: 1. To simplify the product. To explain both its capabilities and the way it works. The message should be understandable by a 10 year old; 2. To lower the prices and to redesign its sales support efforts (maybe even by increasing salesman commissions); This recommendation is based on the assumption that if you have a good product, at an affordable price you can capitalize on the word of mouth (weve discussed the high ratings attributed by current costumers), that you should expect once you achieve a critical sales volume.