Section B (Group 8)

The Fashion Channel

Context : Dana Wheeler is a senior vice president of marketing for the Fashion Channel is
reviewing her recommendations for TFC’s new segmentation and position strategy.
This should help the company to strengthen its competitive position among the other new
competitors like CNN etc.

Company position:
• Founded in 1996 by 2 entrepreneurs
• Constant Revenue and profit growth above the industry average
• Niche Network reaching ~80 Million U.S. Households.
• Main competitors : CNN and Lifetime

Problem Statement: Targeting of Customer Segments to increase TFC revenue.

1) By 2006 Competitors started adding fashion related programming in their line-ups.

2) To Build a modern brand strategy and secure Fashion Channel’s position as market
leader.
3) To attract critical mass of viewers and advertisers with the network’s content
4) Wheeler’s Plan : To reach the target consumers by
• Strategy for segmentation
• Use marketing tools like Traditional and internet advertising , public relations and
promotions

Segmentation scenarios :

1. Focusing on Fashionistas, Planners & Shoppers and Situationalists

• Pros: Through implementing various marketing tools on new target segment, the
rating will increase from 1.0 to 1.2, leading to the increase in average viewers.
• Cons :Since there is no real change in viewers’ type and programming, the CPM will
drop by 10% or more and competitors will continue taking its market share.

2. Focus on the Fashionistas segment and spend $15 million on programming.

• Pros: It will attract more target consumers because of highest interest in fashion
which will give a high CPM boost.
• Cons : Fashionistas is the smallest segment in four clusters. It is risky if only target at
this group and the average viewers will decrease as well. Also, extra expenses for
subscribers.

3. Target at both Fashionistas and Shoppers & Planners clusters

• Pros: Rating will grow to 1.2 while CPM will come to $2.5.
• Cons: Extra amount to be deducted from the net income.
 2007 Scenario Scenario
Ad Revenue Calculator Current Base 1 2 Scenario 3
110,000, 110,000, 110,000, 110,000,
TV HH 000 000 000 000 110,000,000
Average Rating 1.0% 1.0% 1.2% 0.8% 1.2%
Average Viewers
(Thousand) 1100 1100 1320 880 1320
Average CPM* $2.00 $1.80 $1.80 $3.50 $2.50
Average Revenue/Ad
Minute** $2,200 $1,980 $2,376 $3,080 $3,300
Ad Minutes/Week 2016 2016 2016 2016 2016
Weeks/Year 52 52 52 52 52
$230,630 $207,567 $249,080 $322,882
Ad Revenue/Year ,400 ,360 ,832 ,560 $345,945,600

Recommendations :

1. Dana Wheeler should not follow the previous strategy, because -

a. Not adopting the segmentation approach yields a poor profitability (margin of 19%).
b. The National Consumer Survey suggests that the programming of the Fashion Channel
needs improvement (less than 30% people supporting the claim of quality program in q
5 and 21)
c. The net margin may further suffer if the downward price adjustment is more than 10%,

2. She should follow scenario 3 because :

• This targets two segments in the market i.e. Fashionistas and Planner &
Shopper
• Highest Revenue of all scenarios as found in ad revenue calculator
($345,945,600)
• Best option to increase competitive position with competitors like CNN .
• Less Risk among all scenarios