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TiVo Case Analysis

1. Analyze the situation from a consumer’s standpoint. What is TiVo? What factors facilitate its
adoption? What factors make the adoption difficult? Who is TiVo best suited for?
TiVo entered the market in the late 1990’s as a pioneer in the Digital Video Recorder (DVR)

industry. The concept behind TiVo’s DVR was to give consumers a device to help them

determine what they watch and when they watch it. The features of the TiVo include:

- Recording programs – schedule recording of shows able to play, stop, rewind and pause

to meet the needs of the consumer

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- Option to watch live TV or to view a previously recorded program

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- Previews of upcoming shows and ability to record them with the push of one button
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- Owners could give a ‘thumbs up’ and ‘thumbs down’ buttons which TiVo would then

track and make program suggestions based on their habits

- Season pass was an option which allowed users to specify their favorite show and

automatically record them even accounting for and tracking programming changes
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- Ability to skip commercials which allowed consumers to take control of what they
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watch
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TiVo was a pioneer in the industry and 72% of owners claimed it made watching TV
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more enjoyable and 90% went so far as to say they would recommend it to family. Even with the
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early adopters raving about TiVo, the market penetration was only .04%.

There are three main factors that made the adoption of TiVo difficult. The first was

difficulty was in trying to explain all the functionality of the TiVo in way that consumers could

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easily understand its functionality as well as the benefits of owning one. Commercials did not

communicate the message straightforward so the concept was not easy to grasp. Second, the

product was priced higher than consumers were willing to pay at $499 for a unit that would

record up to 14 hours and $999 for a model that would go up to 30 hours. This pricing strategy

made the cost to the consumer more expensive than many satellite systems and most TVs. Lastly,

the product required training to help sell the benefits to consumers and turnover in salesmen at

distributors made it difficult to train them in order to explain the benefits to customers clearly.

TiVo was best suited for young professionals between 23 and 45 years old with an

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average middle class income. This demographic was one that would likely adopt technology

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because they were likely college educated, heavy internet users and they could also afford the

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technology.
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2. 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
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strengths and weaknesses in this market?

Networks want TiVo to assist them in tracking behaviors of consumers. How many are

watching live versus recording to watch in the future. The season pass could guarantee that the
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consumer would not miss their favorite programs which would result in increasing the network
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loyalty and viewership numbers. According to an independent study, of people who owned a
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TiVo 62% watched more TV after purchasing TiVo than before.

Advertisers can use the data that is tracked and collected by TiVo to create personized

advertisements that would be relevant to the viewer. Advertisers can also track the viewer
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response to the commercials. With TiVo advertisers are less concerned about the popular prime

time spots as the commercial space is based more on the viewer’s behaviors which could mean

2:45am is their ‘prime time’.

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TiVo was a pioneer in the industry with no competition when it first launched in early

1999. Competition soon developed and Microsoft announced that it would enter the market with

its own version of DVR. Microsoft had many strengths (and ultimately threats to TiVo) starting

with its ability to promote the product within its current one million subscribers of WebTV.

WebTV would complement Microsoft’s DVR making it more attractive to customers. Another

benefit for Microsoft was that providing interactive television in combination with access to the

internet, e-mail as well as recording and playback features. Lastly, Microsoft claimed to have

more technologically advanced features over what TiVos base features were by offering the

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ability watch or record two shows simultaneously, advance skip and improved speed in the fast-

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forwarding feature. Although Microsoft had several strengths, there were also potential

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weaknesses. TiVo had established partnerships with large industries such as Amazon and
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Comcast in order to improve its features. Second, being the second to market is a tough position

as TiVo had an established presence.

3. How would you describe and characterize TiVo’s action plan as given at the end of the
case? How do you evaluate the planned communication campaign? Does your situation analysis
suggest an alternative plan?
TiVo’s new plan focused on three elements: Product, Price & Communications. The plan
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was built off of lessons learned from the initial launch. Each element need to not only stand-

alone but also work strategically with the other elements.

Product:

Partnering with DirecTV (who also partnered with Microsoft) so the product could be
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bundled and force a direct choice of consumers between the Microsoft and TiVo bundles.

Differentiation from Microsoft will be key to the success of this strategy.

Price:

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TiVo had determined that their originally pricing was too high for the market. TiVo

established new pricing for the 30-hour DVR at $399 (down from the original $999). AT $399

the price would be $100 less than the 14-hour TiVo DVR so existing units in inventory could be

used as a give-away to further entice new buyers. The company would have to manage

potentially unhappy customers who purchased TiVo prior to the price cut.

Communications:

Awareness was a big issue with the initial launch and the strategy now is to utilize

various types of media for different reasons. TV ads would focus on the basic lifestyle benefit

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messaging which could be conveyed quickly to the consumer in a short amount of time. The

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consumer could focus on the major message of the product without getting lost in the details.

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Print and internet ads would focus more on the details of the features that support the benefits.
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Consumers could spend more time understanding the specific details at their own pace. Lastly,
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TiVo would use its own website TiVo.com to offer more detailed information and education on
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the features, functions, how to purchase, and costs. Television ads would be used to promote the

TiVo brand and establish its identity and brand awareness among consumers.
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TiVo’s communication strategy makes the most sense however their pricing and product

plan is a little weak. Partnering with DirectTV and going head to head with the Microsoft bundle
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does not give real product differentiation to TiVo and they will end up competing primarily on
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price. I would recommend that TiVo focus on developing product differentiation and offer a

better value to consumers. The pricing strategy may be a little extreme. The original pricing was
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established with little insight into what the market would pay. I would recommend a strategy that

look at competitive pricing and features to determine TiVo’s positioning relative to the

competition in terms of total value to the consumer.

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