Background Fourteen months into its launch, a new technology that enables households to record and play back their favorite shows had only sold a few thousands units. This new technology was TiVo and it should have been a hit. It was founded in 1997 by Jim Barton and Michael Ramsay. Lagging TiVo Sales in Early 2000 Sales of TiVo’s digital video recorder (“DVR”) lagged in sales in early 2000 due to lack of retail execution, improper pricing, and lack of awareness.
Lack of Retail Execution
Marketing for TiVo’s DVR at the point of purchase failed in early 2000 because its product: * required extensive explanation and physical store demonstrations, * the manufacturer representatives did not give the amount of support required to market the product, * distribution partners did not have a proper appreciation for its sense of urgency, and * 50% turnover in electronic stores’ sales force made training a challenge.

For example, inadequately trained sales employees pitched TiVo as a “high-end” VCR while the press called it, in part, a personal video recorder (PVR), personal digital recorder (PDR), and intelligent video recorder (IVR) collectively resulting in consumer confusion of the product.
Improper Pricing Initial pricing for the product was around $1000 USD which TiVo reasoned was reasonable for those early adopters of the DVR technology. However, the price point was twice as much as most satellite systems and more expensive than most television sets. Without being made aware of the benefits of the product (as discussed above) coupled with a high price point, TiVo initially failed to develop a strong following and make anticipated sales.
Lack of Awareness While TiVo achieved reliability-type marketing through its partnerships with Sony and Philips it failed to promote awareness of the brand and the DVR category. Part of the problem was that TiVo initially decided to restrict its promotional activities to public relations, animating their website, and a “very limited” mass media campaign. In addition, the functions of pausing and replaying live television with a DVR were challenging to explain in their limited awareness campaign which added to the confusion of its product in the marketplace.
Beneficial Experiences and Customer Perspective

As of 2000, most TiVo customers that bought the product loved the DVR calling it the “best thing since sliced bread.” In addition, other customers claimed that TiVo was “liberating their daily life” and loved the product because of: * ability to pause, replay, and fast-forward live television, * record “season pass” feature allowing users to record all episodes of favorite show, * select “thumbs up/thumbs down” preference feature, * select “Now Playing” feature, * schedule shows at convenience, and skip advertisements.

Appealing Features of TiVO and Consumer Types

There are at least three types of consumers most suited for the TiVo product consisting of: children, teen/college age and adult (both male and female). The following chart lists the types of consumers and the TiVo product features they find most appealing.

| Replay/Fast Forward | Pause “Live TV” | Season Pass | Thumbs Up/Down | Schedule Shows | Skip Advertisements | “Now Playing” Feature | Children | X | | X | X | X | | | Teen/College Age | X | | | X |
X | X | X | Adult | X | | X | X | X | X | |

TiVo Competitors and Varying Marketing Strategies

By end of 2000, TiVo expected to have two major competitors: ReplayTV and UltimateTV. Replay TV had similar features as TiVo such as pausing live TV, searching tools and recording programs for approximately the same hours as TiVo. ReplayTV did not have the thumbs up feature, but had a “Quickskip” feature that let a user time-shift a recorded program for about 30 seconds. As such, the Quickskip feature allowed the user to skip commercials. Like TiVo, ReplayTV advertised in the newspaper and television. However, ReplayTV concentrated their marketing campaign on educating salespeople on its product features and catch phrases, unlike TiVo. For a local salesperson, selling ReplayTV over TiVo guaranteed a greater commission since the service fee of the Replay product was bundled into the price, bringing the unit price $200 higher than TiVo.
UltimateTV, a product developed by Microsoft, was another competitor to TiVo that had a lauch date in in the fall of the year 2000. UltimateTV was a more advanced technology to TiVo and ReplayTV as it had additional features like simultaneous recording of two shows, fast-forwarding capabilities to 300x the normal, and included ReplayTV’s Quickskip feature (30 second skip technology). UltimateTV also had ability to record pay-per-view movies, access electronic mail and allow for internet surfing. Unlike TiVo, UtlimateTV focused its marketing on its more advance features since their product was going to appeal to its 1 million WebTV subscribers as a technology that would enhance their existing WebTV features and provide a similar service price-point to the TiVo product.
TiVo and Networks, Advertisers and Cable Companies

Even though early on the networks viewed TiVo technology as a threat, the major TV networks like CNBC, NBC, Discovery and the Walt Disney Company eventually partnered with TiVo and became investors in the company. These companies saw TiVo as a technology that could grow the personal television industry. The TV Networks would now have the ability to track how many people were scheduling to watch the show in the future, could monitor behavioral responses, establish audience sizes and match shows to audience preferences.
As for advertisers, TiVo hoped that advertisers would see their technology as an enhancement technology. TiVo provided advertisers with viewer statistics as to which shows and advertisements were watched thereby allowing advertisers to provide “personalized and more targeted advertising.” Most cable companies did not view TiVo as a threat. In fact, DirectTV saw the “personal television” benefits in such a system and had already approached TiVo as an equity partner.

TiVo’s Marketing Strategy in 2000 and Future Outlook

TiVo’s new marketing strategy focused on all the right elements, however additional market research is required on pricing. First, TiVo focused on product development – TiVo knew that it needed to highlight its product technological capabilities and clarify the benefits it would serve everyday users. Second, the TiVo team realized that their product price-point was out of reach for most consumers, and if TiVo wanted to increase sales, they would have to decrease price. These first two strategies are sound as they focused on their core competencies and planned to adjust prices to reflect more adequate price-points.
However, TiVo can perform a market study before dropping the price by 60% (from $999 to $399). Assumption being that even with the 60% drop, there may still be healthy margins left within the product to continue incorporating technology improvements. Additionally, TiVo has the correct distribution channel. However, TiVo needs to focus on the use of more communications media and perform focused sales-personnel training to increase “awareness, interest, curiosity and to promote” the TiVo technology. The advertising suggested by TiVO is good, but does not focus on the product features itself. The ads can be improved to clearly define the product capabilities as well as potential situational uses with multiple examples. Furthermore, the advertising can be more segmented for the appropriate age segment. Since TiVo has multiple tracking technologies embedded into their product, the suggestions mentioned should be fairly easy to incorporate.
TiVo’s new marketing strategy is focused on the 4P’s and is strong in two– Product and Place; however, the marketing strategy requires tweaks to price and promotions that maybe fairly easy to incorporate. In addition, market study on a lower price point might maintain margins while increasing sales from its current lows. Furthermore, communications geared towards technology capabilities as well as ‘agent’ selling pitches will clarify the market need this technology meets.