A strategic Analysis on

Customer Responsiveness

Under customer responsiveness Tivo has managed to develop a few strenghts and weaknesses. Though they are not the innovation leader, Tivo has quickly responded to competitors’ innovations and consumer demands. Tivo has focused on providing a high quality reliable service that is easy to use and have teamed up with DirecTV to better provide for these demands. The pricing method that Tivo uses, though higher than some competitors, is also aimed for customer satisfaction. Tivo was the first company in the industry to offer monthly or lifetime plans, thus giving more flexibility to the customer. Customer response time for equipment and services varies. Depending on the shipping method (customers are given three options), it can take from one to ten days for a unit to be sent to the customer. After an hour-long customer service supported installment session, the service is up and running. Service after that is continuous and instantaneous via the Tivo equipment. Recently because of increased competition Tivo has not been able to respond to new customer needs. Many competitors such as Echostar have been offering the monthly service at a lower price. Some competitors have also offered the digital video recorder itself for free if you sign up for the service.

Quality

Tivo had not developed a clear strength in the quality of their product however they have stressed quality in product design and customer service. They offer a new user-friendly interface with such menus as the “To-Do List”, a list that helps users navigate through the Tivo recording process helping to ensure a quality experience for the consumer. In spite of Tivo’s features the performance of the machine doesn’t match up well when compared to ReplayTV’s unit. ReplayTV has higher quality video output due to special video input plugs on the rear console as well as a commercial skip button, which many consumers find appealing. They were also the first to offer networking to enable the customer to watch saved programs in different locations throughout their house; a feature Tivo has now added for an increased fee.

Efficiency

The efficiency building block is hard to analyze. Tivo is attempting to be a stand-alone unit, while other DVR providers in the industry, such as the non-name brand unit linked with EchoStar satellite services, come in conjunction with cable or satellite services. Tivo has clearly not been efficient in producing and selling their stand-alone units, however Tivo has been successful in selling and integrating their software into satellite systems such as Direct TV. The main competitor for the stand-alone market segment, ReplayTV, is a privately held company, thus making the financial records hard to gain access to. Although ROA is not an effective method of rating efficiency, when compared to Echostar, Tivo looked inferior. Tivo had a ROA of –68% compared to Echostar’s –10%. The economies of scale that Echostar can utilize give them a definite advantage when efficiency is considered.

An interesting realization regarding Tivo that evolved from this analysis is that they lack a competitive advantage in any of the four building blocks. They are not the first to innovate; yet they are not the low cost leader. Though they are above average in all categories, they lead none of them. The strength of Tivo lies in the marketing efforts they have undertaken.
Are there any aspects of your company’s strengths and weaknesses that are not captured in the four generic building blocks? What are they? Do they represent additional building blocks of competitive advantage in your company’s industry? How does your company perform in these areas? (Tom Jozinovic)

Tivo has been able to develop a clear strength in mainly in one category: setting the standard. No DVR has differentiated itself in the market due to product design or innovative services, but Tivo has differentiated itself from the competitors in regards to visibility. Through numerous advertisements and promotions Tivo had been able to develop a brand name appeal. Examples include, sponsoring movie premiers such as the “Lord of the Rings” to partnering with large companies such as Direct TV, Dell, and AOL. Marketing and distribution are also strengths for Tivo. They have effectively marketed their product through the companies mentioned above. Tivo’s agreement with Direct TV to develop combination satellite/DVR receivers has allowed Tivo to get into more homes without selling and distributing their stand-alone units.

Tivo has not succeeded in developing a clear distinctive competence; however by using aggressive marketing campaigns Tivo has been able to position themselves as the superior product providers in the digital video recorder industry. Tivo has been trying to build a distinctive competence by building and maintaining its existing relationships as well as maintaining consistent innovation in research and development.

Tivo initially focused on promoting and selling their product as a stand-alone unit. This strategy did not contribute to Tivo’s current strategy in building a distinctive competence, however in 1999 Tivo signed an equity agreement with Direct TV that has revealed a potential for supporting Tivo’s current efforts in building a distinctive competence. Tivo’s early focus on developing relationships with credible companies has allowed Tivo to build on competences. We do not believe luck has contributed to Tivo’s success. Through talented marketing and advertising Tivo has had the ability to attract investors.