Tivo in 2020: Consumer Behavior

TiVo in 2020: Consumer Behavior

Mitch Dutra

April 4, 2018

MBA 320

What are the facts?

        This case addresses the company TiVo and their flagship digital video recording device, TiVo. TiVo was launched in 1999 and expected to be instantly embraced by consumers. Aside from recording digital media, TiVo offered features allowing users to pause, play, rewind, and fast-forward live TV (Wathieu, 2002).

        Within three years of launch, TiVo had 380,000 subscribers with slightly decreasing monthly growth rates. Initially, TiVo was offered as a standalone black box which was manufactured and branded by Philips or Sony. However, TiVo later opted to license their software and bundle it with various television providers services and hardware which resulted in multiple benefits to TiVo including increased monthly subscription costs of non-bundled subscriptions and the transfer of customer acquisition costs (Wathieu, 2002).

TiVo was the industry-leading product. Microsoft had attempted and failed to introduce a successful competitor to the TiVo into the market. ReplayTV, another competitor was unable to introduce a cost competitive product.

                TiVo launched a marketing effort to better “understand the nature of TiVo’s appeal for potential and existing customers and encourage all other actors involved (advertisers, television networks, content owners, and service providers) to account for TiVo’s relevance in the life of television consumers. Additionally, TiVo launched series of focus groups and consumer surveys directed at current customers. One consumer survey, based on consumer satisfaction, verified that the vast majority of consumers were satisfied with their purchase and would recommend it. A second survey, based on consumer attitude, was used to gather data about the deeper impact TiVo had on consumers lives (Wathieu, 2002).

What problem exists, and why?

The key problem that exists, in this case, is simply that TiVo was not achieving their desired sales levels which had lead to increasing financial losses (Wathieu, 2002).

Despite TiVo’s initial growth, their total number of subscribers was considerably lower than initially forecasted. Although TiVo was supported by significant players in the entertainment industry they had been operating at a loss for multiple quarters. This could have been partially due to TiVo’s narrow overall subscriber profile which majority consisted of affluent 25 to 54-year-old individuals who were primarily located in five different states (Wathieu, 2002).

Although TiVo had an ostensibly market viable product with superior technology than its contemporary rivals and had an overwhelmingly satisfied customer base, TiVo was not hitting the subscription numbers necessary to generate a positive cash flow or meet their forecast (Wathieu, 2002).

Another factor as to why this problem exists is Microsoft’s failure to successfully introduce a product to the market. Microsoft’s promotion of their own device would have had beneficial effects for TiVo but since the product was not pursued TiVo did not receive that benefit.

What additional information is needed to analyze this case adequately?

        Information that would be useful in analyzing this case would be what steps TiVo may have taken toward expanding their overall consumer profile. Other information that would be helpful would be to know the prices at which the TiVo was sold during the first three years of its sale. After knowing the prices, it would be helpful to know what changes appeared in the consumer profile between price changes. It would also be useful to know what advertising efforts were made by TiVo.

What are possible solutions to the problem?

From the information provided in the case, there are three possible solutions for TiVo increase their sales and rescue them from the red and introduce them to the black. The first possible solution is for TiVo to shift their marketing research focus from understanding current customers to understanding their potential customer base. The second possible solution is for TiVo to find ways to stimulate recognition of the gap in the television market they were attempting to fill. The final possible solution would be for TiVo to leverage the satisfaction of their current customers.