Tivo 2002

 

CONTENTS 1. Point of View 2. Marketing Objectives and Relevant Case Facts 3. Problem/Opportunity Statement 4. Alternative Courses of Action 5. Evaluation of Alternatives 6. Decision 7. Implementation Plan 8. Contingency Plan / Risk Analysis 1. POINT OF VIEW Taking the marketing manager perspective the main issue is centered on the department’s inability to classify the recently collected customer experience data to clearly explain consumer behavior; more specifically, purchasing behavior.

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The department is unable to connect customer experience to consumer behavior, and customer behavior into sales. In addition, the current product message is not reaching customers adequately. 2. MARKETING OBJECTIVES AND RELEVANT CASE FACTS (RENIER) The current situation can be analyzed using the relavant finance and marketing facts. The finance facts are: • Steady, but less than expected sales; • Steady market growth at approx. 20% per quarter; • Heavy marketing investments lead to significant net losses; • Gross margins turned positive for first time in last half year.

The marketing facts are: • Market research yielding customer experience; customer satisfaction and equipment usability; • Two customer segments identified; • Marketing department has decided more emphasis should be put into the message of convenience; • Marketing research has focused on current client base, without investigating consumer behavior of other consumers. Marketing objectives Focusing on these facts the marketing objectives should be to increase understanding of consumer behavior.

Key areas of focus for the marketing department will be to identify the reasons for the purchase, the purchase drivers and their sources. At this point, the cultural, social and individual forces, specifically motivation and perception, and the psychological processes need to be determined. Finally, the buying process needs to be examined. The increased understanding of the consumer behavior should lead to opportunities to improve the product message and thus influence consumer behavior more effectively. In summary, the plan is to understand our current customer’s behavior to understand buying patterns.

Then, adjust our processes and message as needed. And, develop a plan to stimulate identified drivers through the product message. 3. PROBLEM/OPPORTUNITY STATEMENT The main problem TiVo faced was not achieving the desired sales level, leading to significant financial losses. In order to better address this issue the company’s approach was to prepare a series of surveys with its current clients in order to better understand their level of satisfaction with the product, reason to buy, most important product features, and demographics.

These surveys revealed a very high general customer satisfaction, but gave limited insight in the consumer behavior in the buying process. The problem statement for this situation is therefore: In order to answer the problem statement presented above and to set up an effective action plan to increase sales, TiVo has to overcome three critical obstacles: 1. The company needs to shift focus from understanding current clients to understanding consumers in general (that is: potential clients). This implies a shift in marketing research focus. 2.

The company needs to find a way to stimulate recognition of a problem in watching television. This implies focus on the first step of the buying process. 3. The company needs to leverage the satisfaction of current clients. This implies using the social factor of family influence in consumer behavior. 1. Shift marketing research focus TiVo’s market research efforts were put on understanding current clients while it was not clear the total number of still available clients in the market as well as other important factors regarding buying behavior were not being considered.

We cannot assume that everyone with a TV enjoys it as much as current clients do and feel the necessity to record their TV shows. The focus in current clients’ behavior and the lack of information about the rest of the market considering client’s cultural, social and personal factors does not allow us to clearly see the potential for this product and more effort must be put on that rather than simple sales effort.

Furthermore, it should be noticed that the results of the marketing research carried out by TiVo could be influenced by a set of other biases: non-response bias; web users bias; reward bias; questionnaire length bias and formulation-bias (the bi-annual survey asks directly about “satisfaction”, which makes respondents typically score high). 2. Influence problem recognition From these learnings we can see that there was an important element in promoting the product which is referral and trial. This demonstrates that many clients would only recognize a need once they were shown the benefits of using TiVo. . Leverage satisfaction as a social factor Basically, new clients relied a lot on current clients before making a decision (70. 1% knew someone who had the product) and more than half of the clients who bought it either read an article, tried the product in a store or had a reference (data from exhibit 3). We also realize from surveys that people who had Tivo were heavy TV users since from case exhibit 7 more than seventy percent of the clients affirm that their lives were better with Tivo and before acquisition TV schedules would affect their personal schedules not to miss their favorite shows.

As so many people were socially influenced by friends and family to buy TiVo, the company should find a way to further leverage the very high customer satisfaction to increase sales. 4. ALTERNATIVE COURSES OF ACTION TiVO can take action in each of the 4 P’s of marketing trying to stimulate sales. In this chapter these courses of action are set out, the following chapter will evaluate all of the actions proposed in order to arrive at a recommended approach. Action 0

Prior to exploring the opportunities for changes to Product, Price, Placement and Promotion, we need to point out the opportunity TiVo has to change nothing. Although the financial situation of the company is not promising, gross margin has recently turned positive and the number of new subscriptions is increasing each quarter. Product Customizing TV consumption has proven to be a market opportunity. TiVo’s reputation among their customers leads to conclude that this is an appreciated product, with high rates on consumers’ satisfaction in relation to the service provided.

However, since 1999, the year when TiVo was created, the trend on TV consumption, with the invasion of the Internet as an entertainment provider has drastically changed the picture. As competitors withdraw providing the service to the market, this leads to the assumption that DVR innovation is not being properly transmitted to consumers. This situation leads to the following potential actions in the area of product changes: • Explore completely different platforms, combining Internet and TV; • Add features to the device in order to further improve the customer experience.

Price Pricing is well defined taking into account TiVo out sources via Direct TV the customer’s acquisition costs being the latter financially responsible. Difference in prices, whether the service is provided through TiVo alone, or through Direct TV customers brings options to customers and we consider it a positive fact. The case does not provide much detail on the pricing strategy of the company and does not offer clues that lead to the idea that the product is priced wrongly. The company might benefit from offering discounts to increase sales.

Potential actions in the area of price are: • Investigate the price-elasticity of the service in order to see if prices could be increased; • Offer cheap or free trials to trigger new consumers to try the product; • Offer discounts to customers that are effective in referencing the product to others (buzzing). Placement TiVo is currently using Best Buy as the exclusive retailer. Coverage of Best Buy can be read as a huge success, with more than 1. 400 stores in the US, plus its subsidiaries such as “Geek Squad”.

Furthermore, the placement in cooperation with the cable providers should bring in additional revenues. Potential changes to this strategy are: • Widen the scope to other retailers not so technologically oriented. This could open a new segment for final purchasers acquiring TiVo at stores (Sears, Macys); • Build more partnerships and joint ventures with cable companies; • Build partnerships with TV hardware companies to sell the TiVo with the TV; • Sell the Company to cable or satellite TV suppliers. Promotion The detailed surveys carried out by TiVo’s marketing team do not provide a onvincing reason for the lower than expected sales. The high rate of buyers that have had recommendations from friends and that have seen demos of the product seem to indicate that TiVo needs to convey the message of how TiVo can change the customer’s life (“problem recognition”) more effectively. New marketing campaigns and promotions could be driven to either swap to other targets (other than young men or busy families) or stimulate the existing ones by further exploring the “deep emotional response” TiVo can be proud of obtaining from its final customers.

Potential promotion actions are: • Carry out consumer surveys in the mainstream market, not only targeting current customers; • Target the mainstream market without first carrying out more marketing research in this segment; • Strengthen the problem recognition-message in all marketing campaigns; • Incentivize current customers to carry out more Word of Mouth marketing to friends and family. 5. EVALUATION OF ALTERNATIVES The potential actions set out above will need to bring TiVo the required sales increase in order to become profitable in the long run.

Furthermore, all the company should urgently improve its short term financial position. Interest income has stopped and interest expenses are skyrocketing, indicating increasing debt and lack of cash. Sales & Marketing account for 60% of the overall expenses over the last year. These expenses result in a significant net loss for the company. The actions taken should therefore be beneficial for both short term and long term financial performance. Other criteria to be considered when evaluating the alternatives are the ease of implementation and the risk level associated with the action.

The criteria defined for evaluation are: 1. Cost of implementation (short term) 2. Ease of implementation 3. Market size & share impact 4. Profitability/margin impact (long term) 5. Risk level “Table 1 – Evaluation of alternatives” gives the detailed evaluation on these alternatives based on these criteria. Obviously, changes to the product will be time consuming, expensive and carry a high risk. Pricing and discount alternatives are attractive due to relatively low risk and good options to leverage the high customer satisfaction in both trials and buzz-marketing.

Placement changes will involve high levels of negotiation and might involve legal issues as Best Buy is currently the exclusive retailer and existing partnerships with cable companies might have exclusivity-clauses. For all promotion changes considered in the table the amount of funds available for marketing is considered fixed. Naturally, sales will increase further if more funds are made available. However, marketing ROI appears to be low in the short term, considering the enormous amounts of money spent on marketing in the past years.

Tuning the marketing message appears to be most promising. Table 1 – Evaluation of alternatives [pic] 6. DECISION After analyzing the survey results, consumer behavior and evaluating the potential actions, we propose the marketing team the following strategies, combining the promising actions defined in the previous chapter: 1. Redefine campaign message (Corresponds to action nr. 12 in table above) The company has to redesign the marketing campaign to increase the sales level very fast in order to solve the cash problem it has.

We believe the best way of doing this is to have a clear tailored message focused on problem recognition, thus influencing the buying process. The message should be tailored for specific audiences (e. g. single women; families with teenagers, etc. ), as the benefits of the product are specific to segments. Changing the message to make the positive impact of TiVo on the life of customers clearer is a low risk, low cost strategy that could have very high sales impact. 2. Incentivize Word of Mouth (Corresponds to action nr. & 13) By the surveys it is known that the subscribers are mostly single men and families and also that the majority of the people that buys TiVo do it after a recommendation, so it can be inferred that the product is selling as a consequence of a mouth to mouth campaign. We recommend launching a marketing campaign to our customers incentivizing them to bring new clients to the company. We recommend sending all customers online information, and printed catalogues announcing that for each new subscriber they refer they will get determined prizes; some of them will be for children in order to get all the family members involved. . Offer Trials (Corresponds to action nr. 4) Another important factor to use in the new campaign will be to show real cases of customers? satisfaction. As the surveys showed, the clients who have the product are in majority very happy with it so this feeling has to be transmitted to the possible customers in order to transform them into clients. A good way to convince potential clients about the benefits of TiVo is to offer them cheap or free product trials (price to be determined based on project costs) for a limited period (e. g. 14 days). 4. Survey whole market (corresponds to action nr. 0) The company will need to improve understanding of the needs of the whole market. All the surveys the company has done until now have been only to its clients, not to the non-clients. We believe it is essential to make surveys to the whole market to understand why people are not buying the product. Because of lack of awareness about the product? s benefits, too high price, sale points, among others. 7. IMPLEMENTATION PLAN The actions defined above should all be started as soon as possible, but will have different time paths, as shown in Figure 1. 1. Redefine campaign message

The potential customers are all TV-owners who wish to gain more control over their agendas or that want to “capture” the TV-moment or “re-watch” scenes from the main program to commercials. In order to achieve this campaigns should focus on “showing the end game”: interview or show ads of real people with real experiences; connecting with the rest of TV watchers (potential customers) who were either looking the same experience or triggered an interest to get the same experience. The message changes from “buy it because we believe is good” to “buy it because we have proof from real consumers just like you! The redesign of the marketing campaigns will take approximately 4 months, so that the new message can be launched long before the Christmas shopping season. 2. Incentivize Word of Mouth Word of Mouth (WoM) is one of the most powerful marketing tools that should give result that can alter the current situation. TiVo needs to give incentives (e. g. free month of use or presents) to customers who persuade others to try or buy the product. This program should be run for a number of months and then be evaluated. [pic] Figure 1 – Implementation plan 3. Offer trials

In order to show how confident TiVo is about the product and to give our customers a chance to “check-out” the product, the company should offer customers a “pay after 14 days” policy. The customer can try the product for free for 14 days and if they want to keep it, they pay for the product in full; otherwise they have to return the product “in the same condition” as they have purchased it. This will allow many more customers’ attention and interest about the product which we believe will lead to increase in sales. This campaign can be launched within months and evaluated while running the campaign.

Risk of the campaign will be the cost of returned devices that will have to be sold at a discount. 4. Survey whole market Although TiVo did survey consumers (which provided valuable information if we wanted to implement our current product), TiVo’s purpose is to attract potential customers and it’s important to know the current trend and what the mainstream markets are. Most of the customers have answered positively about the product once they’ve purchased it. It is a matter of letting the product be known Knowing about the mainstream market and preferences of ustomers in these markets will enable the company to better understanding of the market and how to promote it to be attractive. The survey results will help redesigning the campaign, as defined in the first action. 8. CONTINGENCY PLAN / RISK ANALYSIS Risk profile of the actions explored above is very low. In the first place costs will be low in relation to the Marketing & Sales budget. Secondly the brand image is not likely to suffer from the “customer friendly” actions. In case the change of marketing message would work counter-productive, it would be easy to shift to the current message again.

Sales forecasts will need to be adjusted in both scenarios. Key risk for the company seems to be to run out of cash required for marketing in the short term. As gross margin recently turned positive, the contingency plan in this case would be to cut marketing costs and focus on Word of Mouth, while at the same time trying to attract more capital. [pic][pic][pic] ———————– What actions should TiVo take in order to convince the public to buy its product, in that way increasing sales in order to become profitable?

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