How to Market a Revolution
Every so often, an innovative product fails to achieve widespread adoption because companies don’t connect the dots for consumers.
It
has been 15 years since the DVR (digital video recorder) debuted to
much fanfare at the Consumer Electronics Show in Las Vegas. It was
instantly hailed as a revolutionary innovation, a paradigm shift like
none yet seen in the half-century-old TV industry. If adopted widely,
it had the potential to transform TV audiences from passive
channel-surfers into programmers of highly personalised experiences,
through its ability to record and play back analogue TV signals.
Having
captured the attention of the industry, DVR soon went on to capture
the public imagination by giving it a brand to latch onto: TiVo.
After blanketing the airwaves with commercials featuring an
empowering slogan (“TiVo: TV your way”) and a
mass-market-friendly logo, the brand became a household word. With
the public apparently ready to make the technological leap, DVR
seemed poised to break through in a big way. Technology market
research firm Forrester predicted that by 2005, more than half of
American households would have DVR.
A decade and a half on, reality has yet to catch up with these initial predictions. At the end of 2012, DVR had penetrated 41 percent of TV-owning households in the U.S.; current predictions have the technology achieving 48 percent penetration by the end of 2017. During the second quarter of 2013, “time-shifted” viewing (i.e. DVR or video-on-demand use) accounted for only 8.6 percent of total viewing hours in the U.S., according to Nielsen statistics.
So
where did the sector fall short?
Assuming initial estimations of
DVR’s potential had some truth to them – and the rave reviews of
early adopters suggest they did – why has its market penetration
lagged behind such comparatively dull products as DVD and Blu-Ray
players? The lessons here apply to all companies that have
accomplished, or seek to accomplish, possibly market-upending tech
breakthroughs.
“Mousetrap
Marketing”
As
the developer of the first commercially available DVR, TiVo fell
victim to classic “mousetrap marketing” assumptions, as in the
aphorism often ascribed to the 19th-century American writer Ralph
Waldo Emerson: “If you build a better mousetrap, people will beat a
path to your door.”
The
mousetrap mindset clearly drove TiVo’s mass-market approach in its
early days. The firm spent heavily to reach as wide an audience as
possible, with blind faith that getting the word out about this great
new product was all the strategic focus needed. TiVo’s 30-second TV
spots left audiences with plenty of excited questions, but few
concrete answers. For those, they would mainly have to head to
electronics stores, the Internet being a less robust resource at the
turn of the millennium than today.
As
potential customers neared the point of purchase – brick-and-mortar
stores – TiVo’s friendly brand message fell away, replaced by
whatever message salespeople believed would sell the product. Not
investing in education for salespeople was a key error, but perhaps
TiVo never should have sought to sell millions right out of the gate.
Being more focused about target customer and distribution would have
allowed for more control over the sales process, as well as given
TiVo time to tinker with its marketing message and help viewers ease
into the changes it was aiming to introduce. Believing the early hype
about itself, the company overestimated the average consumer’s
ability and willingness to buy into the DVR revolution.
Identity
Crisis
TiVo
emerged at a particularly rocky crossroads period for the tech and
media industries: Analysts agreed that TV’s conversion from
analogue to digital was inevitable, if not imminent; the Internet had
pushed through to mainstream consciousness, but the extent of its
impact was not yet fully felt. In the absence of a coherent marketing
message, TiVo’s growth was severely hindered by the uncertainties
of the moment. Where DVR stood in relation to VHS was of particular
concern for customers. From a marketing perspective, there was a
Catch-22: Positioning TiVo as a beefed-up VCR (as many salespeople
did) risked underselling its coolest features, but pushing the
advanced features such as commercial-skipping might have overwhelmed
and intimidated consumers.
TiVo’s
messaging was muddied further by the company’s stated bid to become
“the operating system for your TV set”. Like an Internet service
provider such as AOL, TiVo required users to pay for subscriptions on
top of buying a device – so was TiVo a gadget or a service? And
which household fixture was it designed to replace: the VCR or the
computer or both? Without a firm grasp on the value created by the
new technology, consumers had no trouble performing a cost-benefit
analysis, with an unfortunate outcome for TiVo.
The
high price point didn’t help matters either. The first TiVo devices
cost US$499, not including an annual subscription fee of US$99. Then
as now, TiVo encouraged “lifetime subscriptions”, which do not
cover, as one might assume, the lifetime of the consumer – but
rather the lifespan of the TiVo device. Given the technological
uncertainty of the time, it’s not hard to see why likely buyers
stayed away in droves.
TiVo
Today
Even
TiVo’s sole unequivocal triumph – its brand ubiquity – wound up
working against it as rival manufacturers inked deals with pay TV
operators and became serious competitors. Without a clearly
established category with points-of-parity (i.e., features that are
shared by all category members) and points-of-differences (i.e.,
features that allow you to stand out) the brand name entered common
usage as a term for any DVR, causing a TiVo executive to complain,
“People will know we talked about TiVo and think they have TiVo,
[but will have] a generic product that isn’t even ours.”
But
the good news for the firm is that, thanks to its own partnerships
with cable TV providers around the world, TiVo is in more homes than
ever before – about 4.8 million, a far cry from the sorts of
numbers bruited in the early days. And the company is trying mightily
to regain its innovation mojo with its latest line of Roamio hybrid
set-top boxes that can stream content to mobile devices. Just as in
1999, TiVo has a daunting marketing challenge on its hands.
Advice
for Innovators
To
avoid repeating past mistakes, TiVo, and by extension all ambitious
innovators, should remember the three key obstacles to innovation
adoption: the understanding
gap, attractiveness gap,
and behaviour
change gap.
Failing to bridge any one of these can lead to a fatal disconnect
between company and consumer, no matter how great or beneficial the
product. Bridging the gaps means finding clear, compelling answers to
the following questions:
- Understanding gap: What is it? What is it for?
- Does it naturally fall into existing categories?
- Attractiveness gap: What does it give/take away?
- Is it easy to see or experience the value?
- Behaviour change gap: What do I need to change?
- How much change is required to get these benefits?
- Who has to change?
Innovative
products do not create the conditions for their adoption in the
market; rather, market change is a process that must be managed. The
contrast between TiVo and Netflix is illuminating. TiVo was more
ground-breaking and visionary than Netflix, but the latter much
better managed to keep the three obstacles low. Even when an
innovation is truly revolutionary, it should not be marketed as such.
Market your revolution in carefully delineated stages, always with
reference to what the consumer is already familiar with. Points of
reference are just as important in product design: The face that a
product presents to the world should always be recognisable. TiVo got
the customers’ attention, Netflix got the customers’ business.
Failure
to manage the change process was a main cause of the eventual DVR
letdown. Unable to bridge the critical gaps for consumers on its own,
TiVo could gain adopters only through (often economically
unfavourable) deals with cable and satellite operators, its
ostensible competitors. You could say that DVR was caught by its own
mousetrap.
Markus Christen, INSEAD Associate Professor of Marketing, and Benjamin Kessler, Web Editor http://knowledge.insead.edu/entrepreneurship-innovation/how-to-market-a-revolution-3598#HCAtzfFsPAfwTSFr.99
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