TiVo Case Study
Draw a supply chain (or value net) that traces the various stakeholders involved in the TiVo value chain and their respective interactions. From this, what insights do you get about the relative value that each stakeholder adds in this process?
TiVo struggles with finding ways to decrease the overall cost of customer acquisition. Costly components and services to assist customers with set-up combined with marketing costs to educate potential customers on the value and benefits of their products leads TiVo to finding ways to increase revenue while decreasing costs. One way TiVo has found to address this while also working with stakeholders is to provide a new kind of advertising to partners so as to not only offer a Business-to-Consumer product, but also a Business-to-Business service. TiVo also uses retailers to sell the DVR boxes. In an effort to decrease the customer acquisition, TiVo decreased marketing expenditures making their retailers an even more important partner in the supply chain. Consumers can compare products and learn more from retail associates and get recommendations. “Earlier this year, the company abandoned ubiquity as an objective and decided to concentrate on one retailer: "Best Buy gets more velocity," says Keast. "And we both have incentives to make things work." TiVo promotes Best Buy on its Web site and on the service, and Best Buy promotes TiVo in its stores. Best Buy salespeople get special training in how to use TiVo. They also get discounts on purchasing a TiVo set, (Fast Company, 2002).” Costs of the boxes dramatically affect the front end costs for TiVo. Working with manufacturers, engineers and suppliers of components, software and raw materials to decrease the costs through innovation would allow TiVo to lower overall costs and make the business more profitable. TiVo continues to try to streamline the internal design of a TiVo box and to reduce the number of components that go into it. "We're always trying to use fewer chips and get the size of the power supply down. Our big goal is to have a disk drive with a single chip, and we're headed in that direction. (Fast Company, 2002)"
For TiVo, describe the six factors that affect customers’ purchase decisions. What are more salient for TiVo adopters? First, consumers must want the service and perceive a value to it. “Most people aren't really itching to change their viewing habits -- even if there's no doubt that new habits would vastly improve their experience, (Fast Company, 2002). "There's tremendous inertia associated with watching TV," explains Brodie Keast, a TiVo senior vice president who spent 10 years in product marketing at Apple. "There's no other human behavior that's as entrenched. We've been watching TV the same way our whole lives." (Fast Company, 2002) Secondly, the cost is a factor. In addition to expensive units, users must also pay a monthly subscription fee on top of their cable costs. Competition from cable and satellite providers offer some of the services TiVo does with no additional set up costs and a lower monthly subscription rate. Another factor is the ease of use. “It took customers an average of six phone calls to Technical Support just to install the product correctly,” (Mohr, Sengupta & Slater, 2010, p 489). As a highly disruptive technology, the learning curve for users is extremely high and other than the hardcore early adopters, it’s been difficult for TiVo to educate the masses of the benefits of the product and services. The simplification of the product, which will lessen the relative costs, is an extremely salient factor for TiVo. The easier it is to use, the more likely the same fanaticism seen by devoted TiVors will spread to the rest of the mass market. Compatibility is another factor and concern. How will TiVo fit within the technology currently being used? TiVo allows users much more flexibility than other DVR services, including ability to stream...
References: Kirsner, Scott (July 31, 2002). “Can TiVo Go Prime Time?”. Fast Company, retrieved from http://www.fastcompany.com/magazine/61/tivo.html
McConnell, Ben (December 9, 2003). “More on How to Ignore Your Best Customers, the TiVo Way”. MarketingProfs Website, retrieved from
Mohr, J., Sengupta, S. & Slater, S. (2010) Marketing of high-technology products and innovations (3rd ed.). Upper Saddle River, NJ: Pearson Prentice Hall.
Whitmore, Sam (July 6, 2004). “What TiVo Teaches Us.” Forbes, retrieved from http://www.forbes.com/2004/07/06/0707whitmore.html
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