TiVO STUDY QUESTIONS | TOBIAS KLEINMANN

October 2nd, 2011

Question 1:

Analyze the situation from the consumers standpoint? What is TIVO? What factors facilitate adoption? Who is TIVO best suited for (target audience)? TiVO is the best thing since sliced bread!

From the customers point of view, TiVO was a solution to watch what you want whenever you want on TV. Since it involves a bunch of new functions like pausing, fast forwarding and replaying, as well as flexible recording services, the consumer saw it as a way to watch TV in a more convenient and effective way. As mass customization becomes more important, that is also important for the Television industry with TiVO opening a new branch, namely the Personal Television Industry. When consumer become to user they mostly recognize the advantages of TiVO. 72% of owners explained that TiVO made their TV viewing a lot more enjoyable, also 90% would recommend TiVO to their family and friends. The factor that facilitates adoption most, besides the already mentioned factors, is to watch anything you want when you want it. This aspect can even not be reached by cinemas. On the whole, TiVO is made for anyone who watches TV in the United States. But still the technical innovations being connected with it slightly pushes the older generations, which can be considered as 60+ out of TiVos focus. Usually men are more likely to adopt technical innovations than woman. That makes men in the age of 24 to 45 the target audience for TiVO. Looking at the statistics makes obvious that childrens programming and dramas, as well as situation comedies were the most recorded programs with TiVO. Question 2: Analyze the case from the Networks/Advertisers and satellite/cable point of view. What do they want TIVO to be? Think about competitionwhat are Microsoft's potential strengths and weaknesses as a brand in this category? How was P&G going to sell soap in a TiVO-ed world? From the Advertisers point of view, TiVO offers a variety of opportunities as well as threats for the future. On the one hand, the most significant threat for the advertisers is the option to just skip commercial breaks completely. Still on the other hand, TiVO offers the possibility for advertisers to create more personalized and highly receiver targeted advertising by not only tracking the TV habits and manners but only predicting them. This would help the advertising industry to personalize the ads and improving the quality regarding the receivers. Another way for advertisers to reach receivers was to launch pre-loaded advertisements which are shown during the set-up of the unit. The attention on a device costing $ 500 or even $ 1,000 has to be extremely high during the set-up time which results in a high quality for the specific

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TiVO STUDY QUESTIONS | TOBIAS KLEINMANN

October 2nd, 2011

advertisements. The danger of missing some important information while installing could be high so users would pay special attention during the set-up. Analyzing TiVO from the Networks point of view, it is obvious that they have to change their way of working and put down their habits regarding the characteristics of TV production to a certain extend. Since recording is now a lot easier than it was before using VCRs which includes the effort and costs of buying cassettes, it is now costless1 and more-or-less trouble free, the scheduling of a specific show2 is now probably less important as it was before, because one can record the show anyway and watch it to a certain time when she/he feels comfortable. Tracking how many people are scheduling a certain show creates the opportunity for networks to verify the effectiveness of promotions or showcases before the actual premiere. Also the scheduling feature created the possibility for networks to increase the effectiveness of market advertising slots. A threat for the networks is that they could not put a new show behind a popular show and count on enough potential viewers for the new show without any concerns. The networks want TiVO to be an information and data provider regarding quality feedback (like or dislike), viewing numbers and fast-forwarding statistics. Through features like the season pass for example they also want TIVE to increase loyalty to exactly their network. Microsofts strengths are that they already have a product on the market called WebTV. Although it is not the same technique, Microsoft proved to its one-million subscribers that they are capable of producing high quality TV subsidiary. Also users were not totally new to the technique, since Microsofts UltimateTV would still support the former functions of WebTV like send email and surf the internet on a TV screen. Asides of their technologically features like recording pay-per-view movies, 30 seconds skip and fast-forwarding at up to 300 times normal speed, which were all features that TiVO couldnt claim to offer, Microsoft has a high financial background to finance marketing campaigns and promotion operations. With Thomson and Sony, being strong brands in the multimedia field, they have powerful forces as their business partners as well. Microsofts weaknesses in this category are that their brand mainly stands for PC operating systems and software solutions. People are not aware with Microsoft being in the television and multimedia market. Another point is that in general the inflexibility of a firm rises with company

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The costs for TiVO have to be paid anyway, so recording itself does not create any costs in specific. For example sending them at prime time or on a specific day during the week like new sitcoms on Monday evening or a must-see TV on Tuesday nights. e-Mail: tobias.kleinmann@web.de Page 2

TiVO STUDY QUESTIONS | TOBIAS KLEINMANN

October 2nd, 2011

size. The size of Microsoft, as one of the biggest companies in the world, makes it difficult to react in a fast moving market like the multimedia market. Question 3: Evaluate TIVOs marketing strategy to-date. What has worked, what hasnt and why havent they met their volume goals? Would people get it? The marketing strategy of TiVO always had one big border, which is how to change peoples consumption habits which they had learned throughout several years of television experience. There were three strategies in doing that. First, straightforward explaining the features and advantages of TiVO, second burning the brand into the brain by using controversial and provocative campaigns or third, combining both methods. In contrast to its competitors like Replay Networks for example, TiVO did not focus on the product features and specifications by choosing the second of the described methods. The presented campaign called Network Executive is a good example on how the discrepancy between the well-known advantages of TiVO and its low sales numbers affect the lack of awareness of TiVO. So it is obvious that this campaign respectively this strategy did not work out well for TiVO. Also it was not clear in which product category that new device should be introduced in, especially there was confusion in the press. The identification and awareness for TiVO suffered from this fact. Since TiVO appeared to require extensive explanations to potential customers. Looking at the marketing expenses, one can see that the marketing efforts by TiVO were relatively low. Despite of not generating any revenues in the beginning, it would have been really important for TiVO to spend more money on sales and marketing. Exhibit 1 illustrates the marketing efforts by TiVO during the time from Sept-98 to Jun-00. One can clearly see that the marketing expenses increased in September 1999 to about one half of the total expenses after being about one third in the first half of the year 1999. Before that, marketing expenses were even lower with about one eighth of the total expenses.3
Sept-98 13.02 % Dec-98 14.00 % Mar-99 38.78 % Jun-99 36.13 % Sep-99 50.31 % Dec-99 67.43 % Mar-00 52.33 % Jun-00 52.37 %

Exhibit 1: Sales and Marketing expenses ratio for TiVO

The Sales and marketing expense ratio is calculated as

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TiVO STUDY QUESTIONS | TOBIAS KLEINMANN

October 2nd, 2011

Question 4:

Do you think TIVO is a strong brand? Why or Why not? TV you way!

TiVO is a strong brand. It created the right brand image as a friendly a fun company. Also it is obvious in which category the brand is situated when seeing its logo with a TV. As TiVO is the leading company in its category and got a tremendous attention when it entered the market, it is also immediately recognizable. An important attribute for a strong brand is the use of a strap line, which is missing for TiVO. Although with TiVO. TV your way they use a great line in the Network Executive commercial, they did not manage or did not want to implant it as their strap line or trademark.4 That was a real mistake, to not use that slogan and graft t into peoples head. In the context of TiVO it is important to mention that brand recognition or brand strength does not always come together with financial achievement. Actually TiVO made losses to-date. In Mar-00 their loss was about $24 million, with a projected loss of $29 million for June-00. Also the awareness of a brand cannot always be connected with financial success. The brand of TIVO is in the mind of the customers, since it created a new market. Considering the loyalty of customers to the brand, it can be stated that customers were satisfied with the product and all its features, as described in the first part of the assignment. Therefore it is obvious that the degree of loyalty was really high for TIVO. The loyalty did not come from the fact that there was no substitute product in the category, although there was none in the beginning, but because the just liked the way in which they could integrate TIVE in their everyday life.5 Question 5: How would you describe TIVO's action plan at the end of the case? How do you evaluate the planned communications campaign? What is the strength of the TIVO brand? Does your analysis suggest an alternative plan? We came to the conclusion that the price was too high! The advantage of TIVOS marketing department was that the product and its features have never been seriously attacked or questioned, except from very view articles in the press, which did not really scratch their brand.

For example it is not in the early print ad (Exhibit 4) or it is also not used in the Sports Education and Cop target television commercials. 5 TiVO made TV viewing a lot more enjoyable. e-Mail: tobias.kleinmann@web.de Page 4

TiVO STUDY QUESTIONS | TOBIAS KLEINMANN

October 2nd, 2011

One major issue of the new marketing plan was to ensure that all the individual elements were strategically consistent. The possibility of collaborating with strong partners, namely DirecTV and AOL would have a strong recognition and improvement of awareness. The decrease in price to approximately 40 % of the original price would increase the target audience a lot. Furthermore would this product fall in a whole new category regarding to pricing strategies. The new price of $ 399 would hit the customers value perceptions more than the premium pricing before. The new form of communication with the customer including the three different steps of information depth was the right way to catch the customer: 1. Introducing the feeling that you could have your personal and individualized TV network through TV ads. 2. Describing specific features and benefits of the product through print ads. 3. Giving the consumer an educational background for the product, regarding service, price and functionality. In overall the new marketing plan for the TiVO would probably catch more customers, with the decrease in price being the main reason for that.

e-Mail: tobias.kleinmann@web.de

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