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?
Development of the effective distribution channel strategy and management of channels is vital to the business’ success. Thus, companies are forced to move to a more complex channel design. With a rapid Internet development, the number of industries that completely eliminate physical distribution increased, hence creating new challenges for other companies to enter the market (Mohr, Sengupta, & Slater, 2010, p.318). The main purpose of managing supply or value chains is to coordinate and optimize the distribution process. Value chain depicts the stages each product passes within the business so that to increase its added value. The higher added value is gained, the better sustained is a company’s competitive advantage. As it was described in the case, TiVo focuses on all stages of its value chain, starting from developing and producing highly technological equipment to gathering clients’ feedback on the commercials shown during the recorded programs. TiVo’s value chain is shown in the graph below.
Figure 1. TiVo’s value chain
Company as a stakeholder keeps controlling the whole process and hence has an access to the customers’ feedback to be used for the further development of the business. Clients as stakeholders enjoy the original and high quality services, although pricing may be higher than of the other similar products. Suppliers and partners may benefit from cooperation with a high tech company, although they may also loose once company’s revenue drops below the expected level.
For TiVo, describe the six factors that affect customers’ purchase decisions (see Chapter 7, Table 7.1). Which are most salient for TiVo adopters?
For the company to be successful in a high tech market, it has to show how its product fares on the 6 main factors. (Mohr, Sengupta, & Slater, 2010, p.236). (1) Relative advantage – high popularity of the TV shows and thus, high demand for recording more and more information in a high quality makes TiVo’s services one of the most desirable. However, comparatively high costs shift customer’s choice to alternative firms. (2) Compatibility is, perhaps, the most salient factor for the TiVo company, as, basically, client’s habits and wishes motivated the company to develop their services. Moreover, any changes in consumers’ behavior will result in changes of the product. (3) Complexity - unfortunately, TiVo’s recorders are not simple in use, especially for the first time user and support team’s assistance is oftenly required. (4) Trialability – some cable and satellite providers offer TiVo’s recorders for free if their services are purchased. (5) Ability to communicate product benefit is another salient characteristic of the TiVo’s product, as its fame says for itself. TiVo brand name in the US is associated with the whole category of personal video recorders (Mohr, Sengupta, & Slater, 2010, p.489). (6) Observability is tied to the previous factor described, but it also depends on each of the client’s taste and preference.
What are TiVo’s core competencies? Is the company effectively leveraging these in its current strategy?
TiVo possesses itself as a global leader in next-generation television services, which is apparently a truth (“About TiVo”, n.d.). Currently, the company uses the newly adopted cloud technologies, which allow its users to record even more TV programs of a high quality. TiVo previously had obstacles to developing its market share due to comparatively high costs on its equipment. It was also reported that TiVo’s recorders were difficult in use, thus other firms benefited promoting their recorders. However, TiVo's innovative cloud-based Software-as-a-Service allowed the company to increase its market share, as it is reported in the last financial report (Financial Tear Sheet, 2016)
TiVo’s services are available only after subscribing. Thus, it is obvious that company sticks to a subscription-based business model.
Who are the key competitors facing TiVo? Given this competition, what are the pricing implications?
As it was mentioned in the case, TiVo’s main competitors are Comcast, DirecTV, Dish Net- work, Time-Warner Cable, who offer their services for lower prices; which is why TiVo’s sales go down and it is forced to attract new clients (Mohr, Sengupta, & Slater, 2010, p.490).
Does TiVo’s pricing strategy make sense? Why or why not?
Even though TiVo’s pricing seems to be too expensive and hence not attractive for clients, it has its benefits. For example, high cost of the high tech service creates an impression of luxury services. Therefore, clients will be interested in purchasing the TiVo’s subscription so that to enjoy benefits of a ‘luxury’ status. On the other hand, there is a great threat that other companies with lower pricing strategies will occupy the market niche, and TiVo will loose its target audience.
Do you believe that TiVo’s business model is sustainable over the long term? If so, why? If not, why not? If not, what recommendations do you have for this company?
Some economists claim that a business model can be defined as a way in which the company expects to get revenue, thus there is a wide range of different models to be applied (Ovans, 2015). The one, chosen by the TiVo is not as effective as the company’s management expects it to be. Mostly, due to high pricing. Therefore, I would suggest to try a Freemium model, that allows basic services to be used with no charges, while any extra options must be paid for (Ovans, 2015). This will allow to increase the clients base and promote company’s services.
Why has TiVo apparently not been successful in “crossing the chasm”? What will it take for TiVo to penetrate the mass market?
Crossing a chasm is challenging for many companies, especially in a high tech product developing. One of the reasons, why TiVo has not crossed the chasm yet may be due to its limited availability (high pricing and complexity in use), which diminishes its popularity among clients (direct linking to a DVR service). Some changes it technologies (cloud based storage) or pricing may change the situation.
References
Mohr, J., Sengupta, S., and Slater, S. (2010) Marketing of High-Technology Products and Innovations. 3rd ed. Upper Saddle River, NJ: Pearson Education, Inc. ISBN-13: 978-0-13-604996-8
About TiVo (n.d.) Available at: https://www.tivo.com/about
Financial Tear Sheet (2016) Available at: http://investor.tivo.com/Tearsheet.ashx?c=106292
Ovans, A. (2015) What is a Business Model? Haravrd Business Review. Available at: https://hbr.org/2015/01/what-is-a-business-model
