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Case Analysis:

Zenith MR for
HDTV

Industry Analysis
Mature and highly competitive
Key Players: Thomson (22%), Zenith (12%), Philips
(11%), Sony (6%)
New products see high initial adoption then gradually
slows down as it matures (exhibit 2 analogy with
Color TV, VCR & Cable)
High Volume & Low Margin Sales ($)

9000000
8000000
7000000
6000000
5000000
Sales ($)
4000000
3000000
2000000
1000000
0
19701972197419761978198019821984198619881990

Zeniths position in the


industry
Category

Rank 1

Zeniths Rank

Repurchased

RCA

Reputation

Zenith

Latest Features

Sony

Familiarity

Zenith

Less Expensive

Zenith

Recognition

Zenith

Overall Brand
Rating

Zenith

Zenith purchase decision influenced by past


experience more
Sony leads in performance and features
RCA leads in price

Market Potential by 20 th
Century for HDTV
No of
Households

Total TV Industry
HDTV Industry
Penetration

No of Households No of Households
(1999)
(2000)
Price

101 mn

10.12 mn

25 mn
$1108

Unit Price of HDTV


Total Cost

$ 1.02 bn

$ 27.7 bn

Calculations

Households
with TV

1992

1993

1994

1995

Color TV
Cable

1997

1998

92100000 93393750 94687500 95981250972750009856875099862500

Forecast %
TV
Households

1996

1999

2000

1011562510245000
0
0

10

21.4

32.8

44.2

55.6

67

72.4

77.8

13.8

20.6

27.4

34.2

41

47.6

10

11

12

13.6

Household
Forecast

TV
Households

3223500

6115875 14147250 173346002566095029143275377646003547252544233575

Color TV

1842000

1893750

4734375

8511037. 11527612
2280131225964887
1548022518672750
5
.5
.5
.5

Cable

1842000

1893750

4734375

2944125 5810625 4046250 6938625 5200125 8733075

What Should Bruce Huber Do?


Propose to adopt Aspect Ratio study, Secondary Research
& Focus Group research in 1990
Innovators & Qualitative Research, WP7 research and
Dealer Research could be pursued in 1991
Preference test in 1992
Post launch Consumer Awareness survey in 1994
Launch a pilot project and develop HDTV prototypes to
learn consumer responses through actual trial before
launching actual model
Collaborate with the Japanese to develop the HDTV
prototypes and working models
saving R&D Cost estimated around $50 million with $ 10
million already invested in 1991
Savings spent on improving marketing expenditure and
even helping the WP7 implement HDTV testing standard
with sole sponsorship

Scenarios defined
Pessimistic Scenario
HDTV broadcast issues are resolved
HDTV sets are readily available
Quality HDTV programming is not available
Consumers do not see the benefit in paying higher price
Sales will suffer and HDTV would only be able to penetrate 3-4
% of US households. It would be a mix of the early penetration
pattern of colour TVs and projection TV.
Most likely Scenario
Sales are slow initially
Sales pick-up after as good HDTV quality programmers are
available
Consumers slowly become willing to invest in a HDTV
Sales would follow the pattern of the colour TV with slow initial

Scenarios continued
Optimistic Scenario
Broadcast Standards are readily adopted.
TV stations invest in new equipment and HDTV
shows are available.
HDTV sets are readily available.
Consumers think the superior sound and picture
quality is worth the higher price.

Alternatives for Zeniths MR


Marketing Research

Estimated Research
Cost

Launch Time

Focus Group

$30,000

Few Months

HDTV Consumer
Research (WP7)

$10,00,000

Few Months
(subject to
availability of
funds)

Aspect Ratio Study

$125,000

Few Months

Dealer Research

$70,000

Immediately

Secondary Research

$100,000

Immediately

HDTV Innovators &


Qualitative
Research on Early
Adoption

$50,000-$70000

Next Year i.e. 1991

HDTV/NTSC TV
Preference Test

$75,000

Around 1992

Consumer
Awareness (Halo
Effect) Survey

$100,000

1994/95

Zeniths Marketing Budget for


1990
Head

% of total budget

Amount
(Total = $500,000)

Syndicated Data

32

$160,000

Color TV Research

18

$90,000

HDTV Aspect Ratio


Study

25

$125,000

VCR Research

$40,000

Advertising Research

$35,000

Miscellaneous

10

$50,000

Tentative Research Plan for 1990


Assumption: $500,000
allocated for MR
consecutively for 1991 &
1992
Estimated
Budget
Research Cost
Allocation

Research
Head

Tentative
Launch time

Aspect Ratio
Study

1990

$125,000

As per
marketing
budget of 1990

Secondary
Research

1990

$100,000

As per
marketing
budget
allocated to
Syndicated Data
in 1990

Focus Group

1990

$30,000

Misc. Budget
1990 ($50,000)

Proposed Marketing Budget for


1991
Head

% of total budget

Amount
(Total = $500,000)

WP7
Research( Instead of
Syndicated
Research)

40

$200,000

Innovators &
Qualitative Research

12

$60,000

Color TV Research

18

$90,000

VCR Research

$40,000

Advertising Research

$40,000

Dealer Research

14

$70,000

Assumption: WP7 Cost of $ 1mn divided equally among


the top 5 players.

Other Initiatives
Preference test can be conducted in 1992 @ 15% of the total marketing
budget allocated last year
Consumer Awareness survey can be launched in 1994 @ 20% of the total
marketing budget (reference: 1991/92 budget)
Internet flourishing in US by 1990 s and usage of internet to
create HDTV awareness could give Zenith the first mover
advantage in internet marketing
Launch a pilot project and develop HDTV prototypes to learn
consumer responses through actual trial before launching actual
model
Collaborate with the Japanese to develop the HDTV prototypes
and working models
saving R&D Cost estimated around $50 million with $ 10
million already invested in 1991
Savings spent on improving marketing expenditure and even
helping the WP7 implement HDTV testing standard with sole
sponsorship

Should Zenith undertake the Aspect Ratio


Study?
No, Zenith should not undertake the Aspect Ratio
study as a tool for marketing research
Pros: The Aspect Ratio study could indicate
customer aspect ratio preferences,
determine preferences at different prices,
changing preferences with program content &
changing preferences with diagonal size variances

Cons:
Customers wont have the experience of HDTV resolution
which might undermine the product benefit
Large screen color TVs are already proliferating HDTV as
wider TV only might be seen as a variant of the same and
not new innovation

Alternative Research
Design
Develop a pilot project and manufacture HDTV
prototypes to test customer preferences
Collaboration with the Japanese can speed up
the process and lower R&D costs
Customers can get real feel of the HDTV which
would help in its rapid adoption
To be adopted by end of 1991
saving R&D Cost estimated around $50 million
with $ 10 million already invested in 1991
Savings spent on improving marketing
expenditure and even helping the WP7 implement
HDTV testing standard with sole sponsorship

Analogy to previous innovations Assessing HDTV


Market Potential
Innovation

CAGR

Penetration

Growth Period

Color TV

11%

74%

10 years

VCR

36%

66%

5 Years

New products adding value to viewer experiences are


adopted rapidly
Sales of Large Screen Color TV between 24-28 % till 1989,
considerable share for large screen
Past Experience, Price & Product features crucial elements
in understanding consumer behavior

Role of MR for CD innovations


Identify the product fitment to the consumers preferences
Identify the perception of the market segment targeted towards new
innovative and value adding products
Identify the consumer needs that the new product would serve
Determine market readiness for the innovation at that particular time
Determine the add-on features that might be added to stimulate buyers
Determine the price differential preferences of the consumers
Determine the features and attributes customers are willing to pay
extra for
Determine the overall acceptance of the consumers
Educate the customers about a new product that is about to enter the
market

MR feedback useful in strategy


formulation for HDTV introduction
Research
HDTV Consumer Research
Aspect Ratio Study

Dealer Research

Usefulness
Clarifies mis-c0nceptions on HDTV
acceptance
Determine Consumer Aspect Ratio
preferences & corresponding changes
with price, program & diagonal sizes to
design the product accordingly
Determine the extend to which a dealer
can influence buyer behavior and push
the product

Secondary Research

Estimate market size and growth

Qualitative Research

Explore benefits that customers seek in


HDTV

Preference test

Determine Optimal pricing and volume


parameters

Halo Effect Survey


Analogy with existing products

Determine Customer Awareness of HDTV


Growth potential

Thank You !!!