Zenith Case summary
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Objective: analyze the case offered and answer the following questions.
Background: Zenith, a well-known electronics corporation in North America market, was facing options regarding high definition television (HDTV), a new technology that offer consumers higher resolution (i.e., sharper pictures) and superior digital stereo sound. The company had to forecast the marketing perspective and deicide what ways could be used to assess consumer preferences for the new product.
1. What factors will determine the success of HDTV?
As the next generation of TV technology, no doubt, HDTV would achieve technical mature in the near future. But is there also a promising market in the near future? What are the determinants of successful commercialization of HDTV? The following analyses may answer these questions:
Market demand: with increasing competition, TV manufacture industry has been experiencing very low profit margin for a long period. The development or profitability of a new product has to be based on a market demand with certain amount. So, market demand forecasting has to be the first consideration for the new product.
The availability of quality HDTV programming: an important factor that may stimulate taking off of HDTV. Unlike other new TV sets, the development of HDTV, in a large extent, depends on the availability of quality HDTV programming with which consumers can enjoy the benefits from watching HDTV. The availability of a variety of HDTV programs would become a main concern after the setup of the three types of standards. Actually, the development of HDTV programs interacts with the development of HDTV.
Consumer’s preferences: another factor regarding the development of HDTV. The target customer segment of HDTV should be performance/features buyers who may very care about the performance, features and styles of the new product, such as picture quality, shape, form, and so on. Identifying their preferences would be helpful for achieving success.
Market positioning and brand image: positioning is what you do to the mind of prospect. A proper market positioning, of course, will lead to expected marketing results. In this case, it seems that Zenith would position its HDTV as the leader in the product category. Zenith would also take advantage of its brand image of “second-to-none” in the marketplace to promote the reliability of the new product.
Pricing strategy: Zenith must set its price in relation to the value delivered and perceived by the customers. Its pricing objective must be maximum market share in order to obtain a better long-run performance.
Consumer-adoption process: another factor that will determine the success of HDTV is whether the consumer-adoption is a relative rapid process. The consumer-adoption process is influenced by many factors beyond the marketer’s control, including consumers’ willingness to try new product, personal influence, and the characteristics of the new product or innovation.
Compatibility: HDTV is not only a kind of innovation itself, but also need innovative programming and broadcasting systems to fit it. This may be a long transfer process that needs the innovation to be better compatible with NTSC, and ensure consumer’s VCRs wouldn’t become obsolete.
2. Can historical data regarding television adoption be used to predict the adoption of HDTV? Explain.
In my opinion, historical data on past consumer electronics innovations (such as TVs, color TVs, or VCRs) could be employed to forecast the growth of HDTV by analogy, because there are similarities between HDTV and these innovations, for instance, the slow growth of color TVs due to slow development of color TV programs during 1960s would be similar to the current situation (scarcity of HDTV programs) that HDTV faces. According to the historical data that color TV experienced, Zenith could assume that HDTV would also experience a slow initial growth. However, there are also some dissimilarities between these two eras that may affect the assumption. For instance, today’s quality improvement in TV sets and in programs would largely differs from that of 30 years ago; the development of HDTV would stimulate quicker responses at the market of HDTV programs because of increasing competition among TV program producers; and there would be a larger market segment because of a large population and grown middle-class. So, my recommendation is that Zenith can use historical data as references for forecasting purpose by analogy, but should do extra researches to revise the results by analogy.
3. What research would you conduct if you were in Zenith’s position?
If I were in Zenith’s position, I would prefer to conduct the following researches that seem to be the key factors determining the success for the innovation and also to be the uncertainty reflecting risks in the marketplace:
Market demand and growth forecasting: Zenith can’t completely rely on historical data to forecast market demand and growth. It must do extra researches to ensure a more accurate estimate for the demand and growth model. The necessary researches should include past data analysis; current demand estimating; future demand estimating; survey of buyer’s intentions; sales forecasting; and gathering of expert’s opinions……
Price test: although HDTV manufacturers may focus mainly on middle-class as their initial target market segment, the industry used to be price sensitive. So, a proper pricing strategy can maximize market share, and stimulate market demand. A price test becomes necessary to help to figure out a suitable price level.
The aspect ratio research: the intentional change in TV aspect ratio (16:9) is a very important issue especially to performances/features buyers who may form the main market segment for HDTV. So their preferences determine their actual purchase behavior, so as to determine Zenith’s market perspective. So the aspect ratio test must be conducted to identify consumer’s preferences.
The availability of quality HDTV programming forecasting: consumers spend money for pursuit ting the perceived values that HDTVs offer via quality HDTV programs. A confident forecasting about the availability of quality HDTV programs would be powerful persuasion to potential purchasers. The forecasting also plays an important role in improving confidence about the forecasting of the market development of the innovation.
4. Do you think that Zenith is particularly well suited for enter the HDTV market based on their reputation?
Yes, image is the way the public perceives the company or its products. From the historical data and recent surveys, we can see that Zenith has good reputation in North America market. We can reason this by following facts: The data in exhibit 5 show that 30.8% of total color TV owners of 1988 who previously owned a color TV set are in favor of the brand of Zenith; The data in exhibit 6 show that 56.6% of Zenith’s color TV set buyers are oriented by its reputation, ranking the top of 5 well-known TV sellers in North America market; The data in exhibit 7 and 8 show that Zenith’s brand is rated as either the most favorable or second most favorable among Zenith, RCA, and Sony by either ordinary buyers or Zenith owners in 1989.
TV manufacturer is a technology-driven business. Quality reliability is an extremely important factor to consider for potential HDTV buyers. Zenith’s excellent brand ranting will give it a relative advantage to enter HDTV market.