1. TiVo Digital Video Recording Technology
“TiVo, TV your way®”
TiVo Digital Video Recording Technology
Marketing I Group C5
April 24, 2002
Corinne Allarde
Robert Dimaggio
Edward Liang James Tseng Ann-Marie Wun

2. Overview Background Market Situation Distribution Situation
SWOT Analysis
Market Research
Market Positioning Perceptual Map
Marketing Plans
Q & A

3. Background
Vision:
“to create and continually enhance a new, easy - and much better - way to watch television”
TiVo, the creator of television services for digital video recorders (DVR)
Considered best DVR by Business Week,The New York Times, and Popular Science
Revenue increased by 437% in 2001
280,000 subscribers to TiVo Service in 2001
TiVo Series2 DVR $399.99, monthly subscription fee $12.95

4. Market Situation
DVR penetration highest in digital cable and DSL homes
Market Share:
TiVo 47%
ReplayTV 35%
Philips 7%
Sony 6%
UltimateTV 4%
Satellite 1%
1 out of 10 consumers had hoped to buy a DVR by the summer of 2001

5. Distribution Situation
Two primary methods of distribution
Online retailers
Amazon.com, Spiegel.com
Walk-in store
Circuit City, Best Buy and Sears
TiVo and big-name strategic partners
AOL Time Warner
AT&T
Sony

6. SWOT Analysis Strengths Opportunities Weaknesses Threats Versatile
Customer service
Product quality
Good brand image
Opportunities
Unique features
Interactivity
Weaknesses
Advertising
Monthly pricing plan
Funding
Threats
ReplayTV
UltimateTV
DVD recorders
VCR
ReplayTV
Prices from $699 to $1999
Recording time ranging from 40 hours to 320 hours
UltimateTV
Interactive TV
Costs $199.99
Subscription fee $9.95 per month

7. Problem Failure in sales growth attributed to: Recommendation:
Ineffective advertising
Pricing issues
Recommendation:
New marketing strategy to increase market and profitability

8. Marketing Research Primary Data Source (questionnaire)
Location : Waterfront Shopping Center
Contact method : Personal
Sampling unit : Individual households
Sampling procedure : Random
Data Source Analysis
Increase awareness in the general public
Overcome the perception of “expensive VCR”
Adjust pricing plans
High customer satisfaction
Huge potential market
- Waterfront was chosen because it was a crowded middle-class shopping mall, and most shoppers are consumers with desirable income level and spending power
- Contact method : Personal
- Sampling unit : individual households
- Sample size : 214
- Sampling procedure : random
- Sample was representative of the target
- Sample was sufficiently large and reliable
- The data strongly stuggest that we need to increase awareness because
- 28% of non-DVR owner never heard of TiVo
- 28% don’t find a need
- 21% price too high
- Need to overcome perception because
- 70% own VCR
- Thus, we need to develop a new marketing scheme to make consumers believe TiVo is a new technology they need
- Need to have a new pricing scheme to exploit the perceived consumer value in TiVo
- only 8% of all surveyed are willing to spend $600 or more
- 69% look for $450 or less
- It is encouraging to se TiVo achieves high customer satisfaction with 72% of surveyed owner
- A significant portion of all surveyed, 79%, do not own any form of DVR
- A huge potentially untapped market and consumer base

9. Marketing Research Sample

10. Target Market Young professionals (23-37 year-old) Males
Middle-income households
Middle-aged adults aged years old -> from survey results, this age group is the most financially stable, with disposable income. Also, young people tend to be more tech-savvy than the older generation. But we did not target teenagers even though they are tech-savvy because they do not have the disposable income to spend.
Target males because survey results show that many more males said they would purchase a DVR within the next 6 months. This shows that males are more receptive to the new technology that TiVo provides.
Since our goal is to gain as many subscribers as possible and capture a large market share, we decided to target middle-income households. We are not targeting high-income households as only a small % of people come from high-income households. We are also not targeting low-income households because we are offering a quality product and at a reasonable price. We cannot possibly lower the price a lot to make it affordable to low-income households. Lowering the price by a lot might give people the false impression that TiVo is not a quality product.

11. Market Positioning Perceptual Map
High Price
DVD-Video Recorder
ReplayTV
TiVo
Low Functionality
High Functionality
We intend to position TiVo as a high functionality product, sold at a fair price.
Observe that closest competitor is ReplayTV. Price is about $300 higher than TiVo, but has slightly less functions. ReplayTV allows sharing of recorded shows over the home network which TiVo doesn’t. However, we still feel that TiVo has greater functionality because TiVo learns what you prefer and finds shows you’ll like, even if you didn’t know about them. We think that TiVo’s ability to personalize and cater programs greatly adds to its functionality.
Next closest competitor is UltimateTV. UltimateTV is offers multiple functions such as Web browsing and interactive TV. Price is about $300 lower than TiVo. However, UltimateTV is known to be of low quality – slow performance, hard disk spoils easily, web text is hard to read. Hence, even with its competitive price and higher functionality, we do not see UltimateTV as a big threat to our market position.
UltimateTV
VCR
Low Price

12. Marketing Plan Initiate new pricing strategy
Goal: Achieve 200,000 unit sales
Launch advertising campaign
Goal: Achieve additional 200,000 unit sales
Reassess market

13. New Pricing Strategy Promotional period will last 4 months
Consumers will be given two purchasing options
Present method
Pay $399 for hardware
Pay $12.95 monthly for service subscription
Or pay one-time $200 lifetime service subscription
New method
Sign a three-year contract and pay only $24.95 monthly for service and hardware
After three year contract is up
Pay $12.95 monthly rate
Or pay reduced price ($149) lifetime subscription

14. New Pricing Strategy (continued)
Expect to sell 200,000 units with new pricing strategy
200,000 units cost $60 million ($299 per unit)
TIVO will pay half of the cost to produce the units ($30 million)
The remainder will be paid through a portion of the monthly subscription
$4.60 of each month’s subscription will go to hardware providers

15. Advertising Campaign
$104,341,000 is available in Sales and Marketing budget
63% of budget for promotion and advertising
$30 million for new pricing strategy promotion
$35.5 million for advertising campaign
($65,734,830)

16. Advertising Campaign (continued)
Allocation of Advertising budget
(in millions)
Television $20
Print $8
Sponsor $5
Radio $2
Giveaways $0.5
Total $35.5

17. Budget Sales and Marketing: $66M (same as 2001 S&M budget)
Projected Revenue: assuming 200,000 sold under new pricing plan
TIVO Revenue over three years
36 months x 200,000 x ($ $4.60)
= $146,520,000
Hardware provider portion
36 months x 200,000 x ($4.60)
= $33,120,000
Projected Return on Investment over three years: 488%
We have chosen to use the current sales and marketing budget and have just changed the ways in which we use it. Therefore, we will not influence the current bottom line.
Since our goal is to increase sales by 143%, we project there to be a directly proportional increase in revenue.
Also, since we have retained the same sales and marketing budget we project that the return on investment also be directly proportional to our increase in sales.

18. Reassessing the Market
After the 4 month promotional period is over, we will look at
Unit sales
Number of contracts signed
Compare the two to determine if the contract is effective
If the contract is effective, we will extend it for the remainder of the year and reassess the market again.
If the contract is ineffective, we will discontinue it and look into promotional methods to increase sales.

19. Q & A