Case Analysis: Zenith

MR for HDTV
Industry Analysis
• Mature and highly competitive
• Key Players: Thomson (22%), Zenith (12%), Philips (11%), Sony (6%)
• New products see high initial adoption then gradually slows down as
it matures (exhibit 2 – analogy with Color TV, VCR & Cable)
• High Volume & Low Margin

Sales ($)
9000000
8000000
7000000
6000000
5000000 Sales ($)
4000000
3000000
2000000
1000000
0
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990
Zenith’s position in the industry
Category Rank 1 Zenith’s Rank
Repurchased RCA 2
Reputation Zenith 1
Latest Features Sony 2
Familiarity Zenith 1
Less Expensive Zenith 1
Recognition Zenith 1
Overall Brand Rating Zenith 1

• Zenith purchase decision influenced by past experience more

• Sony leads in performance and features
• RCA leads in price
Market Potential by 20 th Century for
HDTV
No of No of Households No of Households
Households (1999) (2000) Price

Total TV Industry 101 mn

HDTV Industry
Penetration 10.12 mn 25 mn
$1108
Unit Price of HDTV

Total Cost $ 1.02 bn $ 27.7 bn

 Calculations

  1992 1993 1994 1995 1996 1997 1998 1999 2000

Households with
TV 92100000 93393750 94687500 95981250 97275000 98568750 99862500 101156250 102450000

Forecast %  

TV Households 4 10 21.4 32.8 44.2 55.6 67 72.4 77.8

Color TV 2 4 7 13.8 20.6 27.4 34.2 41 47.6

Cable 2 4 7 8 9 10 11 12 13.6

Household
 
Forecast

TV Households 3223500 6115875 14147250 17334600 25660950 29143275 37764600 35472525 44233575

Color TV 1842000 1893750 4734375 8511037.5 11527612.5 15480225 18672750 22801312.5 25964887.5

Cable 1842000 1893750 4734375 2944125 5810625 4046250 6938625 5200125 8733075
What Should Bruce Huber Do?
• Propose to adopt Aspect Ratio study, Secondary Research & Focus
Group research in 1990
• Innovators & Qualitative Research, WP7 research and Dealer Research
could be pursued in 1991
• Preference test in 1992
• Post launch Consumer Awareness survey in 1994
• Launch a pilot project and develop HDTV prototypes to learn consumer
responses through actual trial before launching actual model
• Collaborate with the Japanese to develop the HDTV prototypes and
working models
• saving R&D Cost – estimated around $50 million with $ 10 million
already invested in 1991
• Savings spent on improving marketing expenditure and even helping
the WP7 implement HDTV testing standard with sole sponsorship
 Scenario’s defined
• Pessimistic Scenario
• HDTV broadcast issues are resolved
• HDTV sets are readily available
• Quality HDTV programming is not available
• Consumers do not see the benefit in paying higher price
• Sales will suffer and HDTV would only be able to penetrate 3-4 % of US
households. It would be a mix of the early penetration pattern of colour TVs
and projection TV.
• Most likely Scenario
• Sales are slow initially
• Sales pick-up after as good HDTV quality programmers are available
• Consumers slowly become willing to invest in a HDTV
• Sales would follow the pattern of the colour TV with slow initial sales but high
penetration (98%) of US households as the time progresses
Scenario’s continued…
• Optimistic Scenario
• Broadcast Standards are readily adopted.
• TV stations invest in new equipment and HDTV shows are
available.
• HDTV sets are readily available.
• Consumers think the superior sound and picture quality is
worth the higher price.
Alternatives for Zenith’s MR
Marketing Research Estimated Research Cost Launch Time

Focus Group $30,000 Few Months

HDTV Consumer Research $10,00,000 Few Months (subject to

(WP7) availability of funds)

Aspect Ratio Study $125,000 Few Months

Dealer Research $70,000 Immediately

Secondary Research $100,000 Immediately

HDTV Innovators & $50,000-$70000 Next Year i.e. 1991

Qualitative Research on
Early Adoption

HDTV/NTSC TV $75,000 Around 1992

Preference Test

Consumer Awareness $100,000 1994/95

(“Halo Effect”) Survey
Zenith’s Marketing Budget for 1990
Head % of total budget Amount
(Total = $500,000)

Syndicated Data 32 $160,000

Color TV Research 18 $90,000

HDTV Aspect Ratio 25 $125,000

Study

VCR Research 8 $40,000

Advertising Research 7 $35,000

Miscellaneous 10 $50,000
Tentative Research Plan for 1990
Assumption: $500,000 allocated for
MR consecutively for 1991 & 1992

Research Head Tentative Launch Estimated Budget Allocation

time Research Cost

Aspect Ratio Study 1990 $125,000 As per marketing

budget of 1990

Secondary Research 1990 $100,000 As per marketing

budget allocated to
Syndicated Data in
1990

Focus Group 1990 $30,000 Misc. Budget 1990

($50,000)
Proposed Marketing Budget for 1991
Head % of total budget Amount
(Total = $500,000)

WP7 Research( Instead of 40 $200,000

Syndicated Research)

Innovators & Qualitative 12 $60,000

Research

Color TV Research 18 $90,000

VCR Research 8 $40,000

Advertising Research 8 $40,000

Dealer Research 14 $70,000

Assumption: WP7 Cost of $ 1mn divided equally among the top 5 players.
 Other Initiatives
• Preference test can be conducted in 1992 @ 15% of the total marketing
budget allocated last year
• Consumer Awareness survey can be launched in 1994 @ 20% of the total
marketing budget (reference: 1991/92 budget)
• Internet flourishing in US by 1990 s and usage of internet to create HDTV
awareness could give Zenith the first mover advantage in internet
marketing
• Launch a pilot project and develop HDTV prototypes to learn consumer
responses through actual trial before launching actual model
• Collaborate with the Japanese to develop the HDTV prototypes and
working models
• saving R&D Cost – estimated around $50 million with $ 10 million already
invested in 1991
• Savings spent on improving marketing expenditure and even helping the
WP7 implement HDTV testing standard with sole sponsorship
Should Zenith undertake the Aspect Ratio Study?
• No, Zenith should not undertake the Aspect Ratio study as a tool
for marketing research
• Pros: The Aspect Ratio study could indicate
• customer aspect ratio preferences,
• determine preferences at different prices,
• changing preferences with program content &
• changing preferences with diagonal size variances

• Cons:
• Customers won’t have the experience of HDTV resolution which might
undermine the product benefit
• Large screen color TV’s are already proliferating – HDTV as wider TV only
might be seen as a variant of the same and not new innovation
Alternative Research Design
• Develop a pilot project and manufacture HDTV
prototypes to test customer preferences
• Collaboration with the Japanese can speed up the
process and lower R&D costs
• Customers can get real feel of the HDTV which would
help in its rapid adoption
• To be adopted by end of 1991
• saving R&D Cost – estimated around $50 million with $ 10
million already invested in 1991
• Savings spent on improving marketing expenditure and even
helping the WP7 implement HDTV testing standard with sole
sponsorship
Analogy to previous innovations – Assessing HDTV
Market Potential

Innovation CAGR Penetration Growth Period

Color TV 11% 74% 10 years

VCR 36% 66% 5 Years

• New products adding value to viewer experiences are adopted rapidly

• Sales of Large Screen Color TV between 24-28 % till 1989, considerable share
for large screen
• Past Experience, Price & Product features crucial elements in understanding
consumer behavior
Role of MR for CD innovations
• Identify the product fitment to the consumer’s preferences
• Identify the perception of the market segment targeted towards new
innovative and value adding products
• Identify the consumer needs that the new product would serve
• Determine market readiness for the innovation at that particular time
• Determine the add-on features that might be added to stimulate buyers
• Determine the price differential preferences of the consumers
• Determine the features and attributes customers are willing to pay extra for
• Determine the overall acceptance of the consumers
• Educate the customers about a new product that is about to enter the market
MR feedback useful in strategy formulation
for HDTV introduction
Research Usefulness

HDTV Consumer Research Clarifies mis-c0nceptions on HDTV acceptance

Aspect Ratio Study Determine Consumer Aspect Ratio preferences &

corresponding changes with price, program &
diagonal sizes – to design the product accordingly

Dealer Research Determine the extend to which a dealer can influence

buyer behavior and push the product

Secondary Research Estimate market size and growth

Qualitative Research Explore benefits that customers seek in HDTV

Preference test Determine Optimal pricing and volume parameters

Halo Effect Survey Determine Customer Awareness of HDTV

Analogy with existing products Growth potential

Thank You !!!