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TiVo's CEO, Tom Rogers, had high hopes that the fact that many companies rely on TV as a medium of advertising would work to the company's advantage. In 2007, this strategy was tested when TV-advertising and ads-related crises plagued many companies whose business models are reliant on TV advertising. This "TiVo 2007: DVRs and Beyond" is an evaluation case.
David B. Yoffie and Michael Slind
Harvard Business Review (708401-PDF-ENG)
October 15, 2007
Case questions answered:
- Analyze the situation from the consumer’s standpoint. What is TiVo? What factors facilitate its adoption? What factors make adoption difficult? Who is TiVo best suited for?
- Now adopt the standpoint of the networks, the advertisers, and the cable/satellite companies: what do they want TiVo to be? Thinking about the competition: What are Microsoft’s potential strengths and weaknesses in this market?
- How would you describe and characterize TiVo’s action plan in 2007 as given at the end of the case? How do you evaluate the planned communication campaign? Does your situation analysis suggest an alternative plan?
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Case answers for TiVo 2007: DVRs and Beyond
EXTENDED 5 C’S for TiVo
The 5 C’s are used to analyze the five key areas in marketing before making any decision. They are Company, Customers, Competitors, Collaborators, and Climate. These areas are used to create a well-defined marketing strategy. In effect, TiVo can make an informed decision regarding the introduction of their new product into the US market.
TiVo set out to revolutionize the smart home market when it started in 1997. Founded by Jim Barton and Michael Ramsay, their objective was to create a product that keeps the customer in control. Soon they realized that they need to initially focus on one aspect of the house. They decided that the television market was the best one to go after.
The product was intended to allow customers to record and pause live TV. They had tested out the potential of the market. Even though at the time, there wasn’t necessarily a market for such a product, the use of televisions and screen time were on the rise. They used this to their advantage and introduced the first TiVo box in 1999.
Regardless of the great potential and huge market size, TiVo was finding it challenging to create that viral awareness needed when introducing a new product. Due to this, TiVo has reported an operating loss from the time they started in September 1999 till June 2000. With the loss of the $29,436 from March to June 2000. Due to this, top management at TiVo is reconsidering many aspects of their marketing plan, including the price and types of promotion.
Through this report, with the help of the case and marketing tools such as SWOT, Extended 5 C’s, STP, 4 P’s, and Hofstede’s dimensions, I will effectively evaluate every option and suggest the best overall strategy for TiVo. Due to this, TiVo 2007: DVRs and Beyond is an evaluation case and will be treated accordingly.
It’s quite evident from the case that TiVo’s customers are the entire Television watching market. Since this is a product that creates an opportunity to provide an additional service to the regular cable network watching individuals. Currently, there aren’t any outright customers or markets for such a product, simply because people are not aware that such a product exists and therefore is a new market created by TiVo.
Statically speaking, in 1999, the average American household has 2.4 television sets. With an increasing importance on more luxurious products with customers having a 25 inch or larger TV set and a surround-sound audio system was 20 million, which had increased by 300% in the last four years.
All these customers could potentially be customers for TiVo, and therefore it could see huge growth potentials. Tivo is also best suited for families, students, and working professionals who miss many TV shows and movies. Due to their busy schedules, who now can record their favorite programs and watch it at their convenience.
Since TiVo introduced the category, initially, they had no competition. This gave them a comparative advantage over other entrants. However, over time companies like ReplayTV and Microsoft’s UltimateTV entered this market. UltimateTV hasn’t been launched yet, but ReplayTV became a big competitor.
However, initially, ReplayTV has a limited capacity due to which it wasn’t a significant threat. In 2000, they signed a contract with Panasonic and used its name and production capacity to increase its presence in this market. The only major difference was that TiVo had the new system or getting feedback on the tv shows and movies, which helped it create an algorithm to suggest and prerecord other shows the customer may like.
On the other hand, ReplayTV had an option explicitly to skip advertisements. This could lead to potential troubles for ReplayTV in the form of lawsuits from ads or problems with the big network channels. The price was quite similar to TiVo’s rates. ReplayTV substituted the subscription charges by making the entire box $200 more expansive, which is essentially the cost for a lifetime subscription from TiVo.
Microsoft could potentially become a big competitor for TiVo because they were going to use their already established customer base of 1 million subscribers to introduce the UltimateTV.
Moreover, they will also include an option for web surfing on the Television, which would give it an advantage over TiVo. They also had better features overall, like recording two shows at the same time, fast-forwarding up to 300 times compared to 60 times by TiVo. This could lead to problems for TiVo in the future.
Moreover, smaller companies are emerging in this market such as Jovio, and the joint venture with Seagate Technology and Thomason Multimedia.
Lastly, TiVo also faces indirect competition from regular cable TV providers and VHS video recorders. This can be seen in the form of low acceptance of this new product and the majority of the customer base or 99.96% customers not adopting this new product. At the moment, regular TV sets and VHS video recorders amount to the biggest competitor for TiVo.
TiVo realized soon enough that this product needs to get viral, and for that to happen, they need to focus greatly on advertising and marketing. Due to this, TiVo outsourced the production and sales of the products. It allowed Tivo to focus on the marketing of the product solely. Furthermore, it was suggested that TiVo further team up with Sony and Philips and provide the product through them.
Through this partnership, TiVo would use the companies to manufacture, distribute, and promote it. Due to this, TiVo increased its presence and got shelf space in big names such as Best Buy, Circuit City, and Sears. This would help the company get well-established brand names of Sony and Philips to back the product. This will intern make it easier for TiVo to successfully increase awareness of the product.
Moreover, TiVo is also exploring options to work with Microsoft by combining it with DirectTV, which could also potentially increase awareness and acceptance of the product. This could help TiVo access the 1 million subscriber customer network that Microsoft already has working for them.
The climate and context are also important factors when making any decision. Analyzing the environment around the area is an excellent measure to understand how customers make decisions. There isn’t enough information regarding the locality of the business, but it can be assumed that since it’s a new product, it will only be available in the home market, which is the US.
Through the help of Hofstede’s dimensions later in the report, we will be able to understand how and why people in this environment behave a particular way. For example, a high uncertainty avoidance could mean lower acceptance of a new product.
Note: This is discussed in more detail in the Hofstede’s Dimensions section.
A SWOT analysis looks into the internal (Strengths and Weaknesses) and external (Opportunities and Threats) factors of TiVo in 2007. In simple words, it helps managers analyze every possible element when making a big change in the structure. With the help of this tool, we will be able to figure out the reasons for TiVo’s success so far and also the failures. This will further help us solve the question of how to be more competitive and successfully penetrate this product in the market and increase awareness and, therefore, sales.
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