Hbs Tivo Case Analyais

TiVo's problem rests in its inability to convince consumers to change their television consumption habits. Improper targeting and positioning have led to an ineffective product, price-point and promotion strategy that has stranded TiVo in the chasm between the early market and the early majority.

TiVo is a truly discontinuous innovation, a product that requires consumers to dramatically change their past behavior with the promise of gaining equally dramatic new benefits. TiVo's main challenge is convincing the consumer to buy an expensive product in a new product category. While the Early Market, categorized by visionaries and technology enthusiasts, is adopting the product, TiVo has had little success convincing the Early Majority segment, also referred to as pragmatists, that the risk of change is worth the reward of their groundbreaking technology. This is evidenced by TiVo's current overall market penetration level of .04% and lackluster future projections. Visionaries are not a good reference for pragmatists because of their belief in evolution rather than revolution: . There are two things that TiVo can do to convince the Early Majority to buy. First, they need to secure a market leadership position. When pragmatists do decide to adopt a new discontinuous innovation, they purchase from the market leader. As the market leader, everyone else in the market adapts their products to work with the leader's product. In addition, the market leader attracts third party companies who make aftermarket products, even if the leader is not responsive. Second, TiVo can position their product to a target market that values the product as a 100% solution to their problem - what is typically called the whole product.

Determining the right target segment requires an analysis of the customer, company and competition (fig. 2). TiVo's customer is defined by unmet needs in the market. While TV is one of the most ensconced and ritualistic elements of contemporary American life, there are still aspects of television viewing that do not fulfill customer needs. An estimated 68% of Americans complained that they felt "widowed" by their loved one during the Fall television season because their spouses were chained to their televisions during primetime from 8pm to 11pm. Additionally, parents expressed a difficult time getting their children to do homework during key television programming times. In general, this is evidence that consumers want greater control over their television consumption habits. Analysis of the TiVo Corporation reveals their core competencies, which include proprietary software, national distribution through established retail outlets such as Best Buy, Circuit City and Sears and product co-branding with trusted electronics giants Philips and Sony. Finally, we need to examine the weaknesses of the competitive set. While it would be possible to establish several competitive frames (i.e. VCR, DVD) we feel that TiVo is a discontinuous technological innovation that does not have a frame of reference in any established products and therefore competes primarily with Replay TV and Ultimate TV. Replay TV is positioned as a digital VCR and has similar features as TiVo without a monthly service contract. They are primarily focused on their "Pause" and "Quickskip" features and their primary weakness is a comparative lack of features. TiVo data has shown that the pause feature is valued less over time because TiVo viewers began watching significantly less live TV and more recorded TV (70% of owners were watching recorded materials every day). Ultimate TV, on the other hand, is technically superior to TiVo because it gives the user the ability to record two shows at once, and has email, internet and interactive TV bundled with the PVR. The main weakness of Ultimate TV is one of timing: they cannot go to market with their superior product for one more year and possibly higher priced software.

Our segmentation targeting strategy is built on this analysis of the customer, company and competition. There are several key variables that allow us to segment the larger Early Majority market of pragmatists. We believe that the demographic parameters of income and family as well as the psychographic elements of social behavior, lifestyle and media consumption will enable us to reach customers that have the unmet needs described in our customer analysis (fig. 1). Within these parameters, we propose two target markets. First, we intend to target socially active, busy, double-income families with children that consume television with an index of at least 110. These families should respond positively to TiVo's ability to satisfy their unmet TV consumption need to gain control over when they watch programming. Because they are busy, TiVo will enable them to watch programming at their leisure and structure precious time at home around their needs instead of the primetime schedule. This will be particularly useful in managing children's programming time. For instance, with TiVo, children can be rewarded for doing their homework rather than procrastinating by watching television that is only available during primetime hours. TiVo has also identified children's programming as the top recorded category of current owners, a fact that demonstrates the target's interest in the product. Second, we intend to target professionals under 45 who earn over $100K per year, have an active social life, travel regularly and index over 115 for lifestyle products like Blackberries and Palm Pilots. The income level and purchase behavior of this target supports trying new products that will make their lives easier. With busy social lives and successful careers, they can rest assured that their favorite programs are being recorded whether they are at the office, in the gym or taking a vacation. In addition to these targets, we considered targeting average income, in-market VCR shoppers, but assessed that their customer need would include playing VCR tapes, something that our product cannot do.

We believe that TiVo should be positioned as a lifestyle product that can augment a consumer's quality of life. Effectively communicating this to the target will require adjustments to TiVo's current product, price, promotion and placement strategy. First, TiVo will have to quality check its software and manufacturing to make sure that the onscreen program guide, navigation and image freezing "glitches" identified by the WSJ writer are fixed. It is essential that they have a 100% product for the target markets. Not every feature has to be perfect, in fact we recommend limiting the amount of advanced features such as the recording quality level and support the company's idea to produce only the larger sized hard-drive to limit buyer confusion. However, the onscreen program guide, smooth video playback