TiVo's target market strategy and mass consumer adoption approach

Marketing

TiVo Case Analysis

Who should TiVo's target market(s) be?

TiVo's target market should be the mass consumer market. The article notes that TiVo is faced with a choice between speeding consumer adoption or striving for increased levels of innovation to differentiate themselves from competitors. The best option for TiVo is to aim for the mass consumer market to speed consumer adoption. There are several reasons for this decision.

The first reason is that the consumer is the end-user and the one with something to gain from TiVo. This makes the consumer the most likely to adopt the new technology. This also means that TiVo will be able to market the product to consumers more effectively than to other parties who have less to gain. The article also shows that TiVo has already put significant resources into developing the technology and that the technology is better than what the competition offers. If this can be communicated to consumers, then TiVo can become a clear choice over the competition. It is recommended that TiVo market its product aggressively to gain market share while it has strong advantages over the competition.

Another reason that TiVo should pursue the mass market is that it has a unique opportunity to introduce consumers to its product and to build customer loyalty. It is noted that the cable companies may introduce a similar product at a later time. If this is done, the cable companies have a strong advantage because of the convenience that the integration of cable and DVR technology offers. However, if TiVo takes advantage of the market now, they can build customer loyalty and develop their product, reducing the ability of the cable companies in eroding their market share.

The next reason that TiVo should focus on the mass consumer market is that achieving a strong market shares from the basis for improving their service and their profitability. For example, if they have a strong market share they can attract companies to produce Showcases as a form of advertising. If these continue to effectively combine advertising and entertainment, TiVo can offer these to consumers as a form of exclusive content. The most important point is that the larger the market of end-users TiVo has, the more effectively it can gain both content and advertising. If TiVo has a large mass consumer market, it will also be better able to expand its services by forming partnerships with other organizations. It must also be noted that advertising is an important part of TiVo's revenue base. Even more significantly, the greater the number of subscribers, the more appeal TiVo will have to advertisers. TiVo will actually have a resource that it can profit from, namely the viewers which TiVo can offer advertisers. In addition, TiVo offers advertisers the opportunity to determine viewer interest and so it serves as a market research tool as well, making it even more valuable to advertisers. It is suggested that this could create significant revenue for TiVo. If this potential is utilized effectively, the advertising revenue could generate enough profit that TiVo can provide end-users the service without a subscription fee. This will be important when TiVo faces competition from other areas, especially those that offer greater convenience. This would be an effective long-term strategy for TiVo. Most importantly, the strategy requires that TiVo develop a large customer base, with this providing significant benefits that will allow TiVo to remain competitive, even as competition increases.

The final reason that TiVo should focus on the mass market as the target market is that these marketing efforts will be likely to pay off in the long-term. For example, consider an alternative where TiVo selects CE retailers as the market, allowing the retailers to sell the product as their own brand. The major problem is that this is unlikely to generate significant long-term profits for TiVo, since any companies that do well initially will be likely to pursue developing their own competing product to achieve greater profit. Rather than increases its profits, the end result would be negative for TiVo. The same applies if TiVo considers advertisers as its market and focuses on gaining advertising revenue. The problem is that as competing products are developed, there will be no advantage to TiVo and advertisers will be just as likely to advertise with competing companies. This will put TiVo in a position where it will have to price cut to attract advertisers, with this eroding its advertising profits. The alternative where TiVo focuses on the mass market as the target market avoids this problem because the mass market that TiVo has attracted becomes its competitive advantage that enables it to attract advertising dollars and achieve maximum profits.

2. Which specific items in each of the 4P categories (Product, Place, Price, Promo) should TiVo address. What, specifically, should they do with the ones you selected?

Place

The first place where TiVo needs to be sold is via retailers of televisions and home entertainment equipment. This is especially important because when an individual purchases a new television, it is the perfect time to introduce them to the product. This would be an effective place for several reasons. The first is based on the case noting that consumers are not aware of what TiVo does, what it doesn't do, and how it can benefit them. Using retailers as a sales point will be an effective way of educating consumers about the product. This includes that the product can be demonstrated to show the benefits. Another reason is that when the cost of a TiVo unit is compared to the cost of a most televisions and home entertainment systems, the cost seems minimal in comparison. This makes it a good opportunity to sell a unit. The final reason is that the commission paid to retailers presents an opportunity to motivate sales people into promoting TiVo. This includes that retailers will be able to add TiVo as part of a home entertainment system package. Not only does this provide retailers with a commission, but it can also be a sales tool.

The second place where TiVo needs to be placed is in department stores, including discount department stores such as Wal-Mart. This is based on the need to reach the mass consumer market. Having the product in these locations will make TiVo accessible to all individuals, which is necessary to the consumer adoption strategy.

Price

To speed consumer adoption, price needs to be reduced. This is noted in the case study, where it describes how there are a number of potential buyers who choose not to buy because price is a barrier. It is recommended that the price of the TiVo unit be reduced to $50 per unit, which includes 2 free months of TiVo service. Following the initial service, the subscription fee will be $15 per month or $100 per year. The low initial price is required to help ensure that the price does not become a barrier for many buyers. The two free months is based on TiVo needing to encourage people to try the service and its figures showing that less than 1% discontinue the subscription service. This suggests that up to 99% will continue the trial after the initial two months. The significant saving for a yearly subscription is based on two factors. The first is that it lessens the ability of competing firms to attract consumers. The second is that it will allow TiVo to have a set number of future viewers and to provide information on the demographics of these viewers. This will allow TiVo to better attract advertisers and advertising revenue.

It is also recommended that only one all-inclusive package be available, rather than having a range of subscription services at different prices. This is based on the conclusion that having different options requires using unnecessary resources to manage the different subscriptions and to motivate consumers to upgrade. With the consumer adoption strategy being pursued, it is suggested that resources will be better utilized attracting customers rather than getting current customers to upgrade. It is also suggested that the upgrade options add an unnecessary element of confusion and frustration for consumers.

Promotion

It is recommended that an advertising strategy be adopted that uses the current interests in the consumer market to motivate people to buy. This is based on the idea that the majority of consumers will consider TiVo, but will not actually buy the product until they find a specific motivation to do so. Considering that TiVo is positioning itself as an entertainment services product, it is suggested that linking to current entertainment will be effective in generating consumer interest, showing the benefits of the product, and motivating people to buy. This strategy will involve developing on-demand content that expands on popular films and television programs. Advertising can then show how TiVo allows you to keep up with current programs and go behind the scenes. This can be considered as similar to how a film trailer motivates people into seeing a film, where the advertisements will show what people can watch by purchasing TiVo. Consumer interest in the on-demand content will provide the motivation for people to buy. It is suggested that this strategy will be especially effectively because it encourages an immediate sale by focusing on what people are interested in now. The same advertising methods can be used based on major sporting events, with advertisements for TiVo showing how the product allows individuals to replay events. This advertising strategy will effectively show the benefits of TiVo, while also motivating people to buy immediately.