The New Strategy of Price and Product - Case Study Example

Product & Pricing (Marketing Management) Introduction Conceptually, TiVo is a well-thought out innovation of the modern age which utilizes internet technologies to manipulate live television programming according to customer's preferences. The project has the potentials of dominating the market if marketed effectively since it seems to be the first-mover. However, despite dissipating figures, TiVo is capable of turning into a viable and profitable project in future even though it chooses to align with DirectTV. Ansoff's Growth Matrix: TiVo management made good use of Ansoff's growth model by applying New Markets Strategy involving market development and diversification. TiVo managements, now spearheading a brand new sector of entertainment industry, did a lot on market development which involves marketing existing products, in this case services in new markets. In some degree product development was used but on a limited scale. Perhaps a lot of work on research and development made both market development and diversification attainable. Also in the area of diversification of TiVo services, there were a few brand names to take care of different sets of customers which new market strategy of Ansoff's growth model seeks to explain. More so, 0.04% penetration rate is abysmally low largely due to lack of awareness on the part of customers. A very good indicator, current quarterly subscribers of 14,000, needs to be sustained while means are to be devised through appropriate marketing channels to increase this number in the near future. Product Life Cycle Concerning product life cycle, one is of the belief that TiVo is still in its introduction stage - infancy probably heading to growth stage. A period of one year or thereabout cannot be safely considered to be in full growth or maturity or have dominating influence on the market. The net loss increasing progressively as shown on exhibit 3 tends to suggest that management must remodel and refocus its strategies in order to remain profitable. Frankly speaking, since the project is still in introduction stage, it will make economic sense if they could focus on TiVo's long-term prospects. Market Attractiveness As said earlier, TiVo has a cutting-edge technology that can impact greatly the entertainment industry if professional inputs are sought on most policy decisions. The market is really vast but the problems TiVo has include inability to relay what it can offer the public and tendency for the very marketers (including columnist) hired to promote the services end up confusing and dispelling customers. Also the model adopted by the co-founders and management are imperfect, this reflects in pricing policy, branding and marketing techniques. TiVo is highly innovative by featuring qualities like pause, fast-forward, rewind, play and record. Conventional TV can not boost of these qualities let alone recording in basic, medium, high and best modes. Important point about this innovative strength is that for TiVo to sell there is need to reach out to customers and let them understand TiVo's value proposition. New Product Development Process New product development process seems to be lacking or non-existent; diversification, an integral component of Ansoff's Growth Matrix requires that products or services be branded (segmented) to satisfy different customers. Differentiating TiVo's service from recording with different prices is one but inadequate service segmentation. Management should think of bundling different services into TiVo like gaming. A close study of customer's preferences for programmes can be another big clue. Brand Positioning Furthermore, TiVo branding has a huge price differential between the two main recording services defeating the whole essence of branding. Charging $499 for a black box for a 14-hour recording and $999 for the same black box and 30 hours of recording is disproportionately high. To make TiVo more attractive, more brands need to be created perhaps to keep competitors at bay even when partnering with DirectTV. Recommendations on TiVo Positioning To overcome these problem of TiVo positioning, one recommend vast-based audience marketing channels by creating varieties of marketing techniques like sport education, cops, kids and even more because all are steps in the right direction. Also, TiVo services should be diversified to cater for different sets of customers. Being afraid to spend for advertising is like trying to reap where one did not sow. With enough spending on shows, demonstrations, advertising etc can result in huge sales as well as luring potential advertisers to place ads in TiVo, inadvertently more revenue will now be generated to offset some costs. Pricing Strategy of TiVo Pricing in Context Actually new products and services that surface into market after series of research and development normally are greeted with phenomenal prices due to enormous investment made by the investors or company. These prices are reduced drastically when some amount of money invested are recouped, sometimes there are exceptions however. Under pricing in context, one believes that price range of $499 and $999 with additional charges of $9.95, $99 and $199 for a month, a year and lifetime respectively prove to be expensive. In bringing up TiVo, the founders did not start everything from scratch; they borrowed ideas from internet world and conventional television streaming, and as such the prices could have been moderate. Since the company realized that the pricing of TiVo services was high, a realistic pricing strategy should be followed to arrive at customer-friendly and market-oriented prices. Factors like prices of close substitutes, average income of targeted customers, spending pattern in entertainment sector, and behaviour of competitors, among others should be considered. Marketing and Pricing Objectives Business marketing and pricing objectives of TiVo were not clearly spelt out at the onset. Marketing campaign using 'Network Executive' was seen as a drift to the rich members of the public probably to get more money from any sales that arise therefrom. Another point worthy of note is, having got TiVo to be distributed via Best Buy, Circuit City, and Sears; the management virtually relaxed marketing the TiVo, may be they assume that a customer can walk into these stores and decide to subscribe to TiVo services where he/she has not heard or been informed of. Equally, pricing policy was taken arbitrarily without recourse to how that will affect the market and ultimately the services to be sold. As pioneer live TV hitting the market, one is of the opinion that it should have started with low prices to observe how the market will react, not minding initial losses. These low prices themselves are another means of letting the public know something tangible is entering the market; then after sometime the prices be reviewed accordingly. Another strategy used by one of the salespersons was highly commendable, "Our demo unit is not hooked to TiVo, but you need the subscription, and I always recommend buyers to go for the $200 lifetime subscription. These things are here to stay. When buyers are in doubt, I tell them to take it home and return it if they don't like it. Very few people return these boxes after trying them." Here, the salesman shows that the company is not really interested in the money the customer pays but the ultimate satisfaction they are to derive from subscribing to TiVo. Pricing objectives should have been reviewed before competitors started to surface. Most people did not see the different between owing normal TV sets and TiVo, this should have informed management of appropriate prices to set. Factors Influencing Prices First and foremost, the amount of resources investing in research and development largely determined how much TiVo services were priced. Having so much in bringing to fore TiVo, founders and management hope to get all their investment back as soon as possible, but it did not work out that way given the magnitude of net losses accumulated over the short period of time. Another factor was that since television, internet etc came and was accepted by the masses without hesitations; this may have been construed to be another landmark innovation (though it is) by commanding steady demand over time. TiVo seemed to be startled by entry of competitors, without proper market survey to see how market leadership revolves; management hurriedly went on with downward price review to retain or bring in more customers1. Another influence on the price which affects also the profitability of TiVo is skipping commercials while watching the live TV. Companies wishing to place on TiVo became reluctant to do so because if targeted audience can not watch ads how would the companies get the necessary impact they were looking for Recommendation on pricing The case study clearly shows that TiVo has agreed to partner with DirectTV to have a wonderful bundle. Irrespective of who is in the market, the duo should work out acceptable prices for their brands lower than what TiVo is currently charging. This can be maintained until a good size of the market is captured then upward review of prices can be considered. The more quality programming TiVo and DirectTV present to its subscribers the more profit the will make because trust is developed. They should not worry about other competitors because there are always market leaders, TiVo and DirectTV can happen to be one. Read More