Case Study - Tivo in 2002: Consumer Behavior

FUNDAMENTALS OF MARKETING

Case Study - TiVo in 2002: Consumer Behavior

Group 13 - M1

1. Background of the case

The case deals with the problems faced by TiVo (a creator of the personal video recorder) in 2002. This is with respect to the amount of sales it is able to acquire along with the fact that they have been operating with losses for the last few quarters. It also highlights the different measures TiVo has undertaken in the form of surveys and consumer research projects to understand the customer's perspective of their product. This research was aimed at seeking options as to how TiVo could increase their customer base. The below report showcases the problems faced by TiVo and the possible solutions TiVo can adapt to overcome the same.

2. Problems

* Slower start in number of subscribers than originally forecasted

Compared to the forecasted sales, TiVo saw a surprisingly slow start. The main reason for this initially was assumed to be due to the lack of awareness.

* Company facing financial problems

TiVo was also continuously losing money. This was evident from the fact that the amount of money spent on Sales and Marketing greatly exceeded the total revenues that they were getting in return. The increased expenditure also did not contribute to increasing the sales. TiVo had not made a dime in the last few years.

* Profile of subscribers remain narrow

Majority of TiVo subscribers were married couples, high income families and middle aged consumers. Very small percentage of the subscribers comprised of singles, lower and middle income households, the young and elderly. This raised a question about TiVo's universal appeal.

* Disparity between customer satisfaction and growth

Post purchase attitude reflected high level of customer satisfaction but on the other hand the volume of sales was still lagging. This was contradictory to TiVo's expectation, of increasing sales volume through their existing customers.

* Perceived Risk of Purchasing

A small percentage of the purchasers were from the middle and low income groups. This was because, even though the awareness and intention to buy was rising, it did not translate into action. The main reason for this was that customers seek referrals from their friends and acquaintances prior to making any purchases.

* Company's focus on sales, not evangelism

Sales are good for a company but evangelism is good for customers. TiVo's big-picture marketing focused on promotional sales tactics rather than embracing enthusiastically outspoken customers who could influence sales on customer's behalf.

* Pricing Issues

In addition to the prices of the recorder which the customer had to pay, TiVo also increased the subscription fee to $12.95. This would make already-expensive monthly cable bills even more daunting.

3. Objectives of the Company

The main objectives of the company at present include:

* Increase their dominance in the PVR industry

o Close the gap between intention to buy and action

o It was known that the product awareness, understanding and intention to buy was increasing and hence the company has to focus on influencing customers to purchase the high quality and high satisfaction product.

o Penetrate a broader consumer market

* The company needs to increase their sales to singles, low and middle income households and the young and elderly. Also at the same time, they need to maintain strong relationships with current subscribers.

* Decrease the perceived risk

* The company needs to focus on producing a quality product and thereby on increasing customer satisfaction.

4. Alternate Solutions

The options that TiVo could consider would broadly fall into one of the 2 categories i.e. either pricing options or promotional options.

Pricing Options

* Reduction of prices

Because