THE FASHION CHANNEL CASE - SECTION 3 GROUP 1

PROBLEM STATEMENT

 The Fashion Channel (TFC) was a successful and the only cable TV network dedicated
entirely to fashion. The channel broadcasted fashion content 24*7. Additionally, it had generated
revenue and profit growth above the industry average constantly since 1996.

 In recent years, there were two other competitors gradually making progress in the fashion
network segment.

 TFC now has to revamp its segmentation and positioning to deal with the threats and increase
its viewership across various demographics to generate higher revenues.

The below Case Analysis mentions the various avenues that TFC can follow to achieve its
targets.

Business Environment Analysis: P.E.S.T.E.L. 

Economical
U.S. consumer advertisers spent $20 billion to get the spot in the network.
Competition for ads was fierce across all networks due to several hundred cable networks.
Dynamic ad market due to the fixed supply of advertising on traditional television.
Ad prices remained volatile because of new advertising campaigns which required television network support.
Network subscriber fee towards cable affiliates depended on viewerships and appeal of the network.
Networks whose audiences were older or had low family incomes had lower advertising rates.
Advertising agencies used sophisticated methods (surveys and optimizer programs) to determine network viewerships and decide the advertising
prices.

Socio – Cultural
1.Most US households subscribe to cable television through MSO.
2.People are more inclined to follow the latest fashion trends (courtesy: GFE survey-Exhibit -2)
3.Number of viewers, audiences' characteristics, and general competitive trends motivated the ad unit prices
4.Consumer behavior and attitudes influenced the advertising on Television networks.

Technological 
Extensive use of Analytics to analyze specific consumer patterns from the clustered data set.
Competitor Analysis

 Competitors are: - Lifetime and CNN

 Lifetime is taking away lots of ads buys as they are attracting younger female
demographics
 CNN programs offer male-centric fashion, attracting 45% of total male viewership, which
could be sold in premium CPM
 CNN offers celebrity-focused program content, which helps them attract, more viewers
 Ratings of Networks out of 5 on different aspects based on Alpha research study on
consumer satisfying:

  Rating
Criteria TFC Lifetime CNN
Consumer Interest on
Viewing 3.8 4.5 4.3
Awareness Value 4.1 4.5 4.6
Perceived Value 3.7 4.4 4.1

 CNN and Lifetime have higher household penetrations at 3.3M and 4.4M, respectively,
because these were generic channels with few hours of dedicated telecast towards
fashion content. Whereas; TFC is a 24*7 fashion network
 With CNN and Lifestyle, advertisers were looking at ratings and channel demographics.
With TFC, they were keen on program content
 If the strong fashion programming blocks on Lifetime and CNN are successful, then there
would be more networks that would skim more viewers and ad dollars from TFC

Consumer analysis

 According to the GFE Survey, the consumers were classified into four categories. Those
were; Fashionistas, Planners & Shoppers, Situationists, and Basics. These categories
influenced the degree of interest in fashion.
 People’s attitudes towards fashion influenced the way networks served. Additionally,
these networks have the opportunity to grow by attracting high valued viewers.
 There is a premium CPM for men of all age groups and women aged 18-34.
 Women in the age group of 35-54 were the most avid viewers of TFC.
 Networks were worried about viewers’ fickleness.
 U.S. households subscribed to cable and satellite television majorly through MSO.
 Although a niche network, TFC had a reach of almost 80 million households in the U.S.

Current Segmentation

Demographic

 Most avid viewers of TFC were women aged between 35 years and 54 years
 TFC marketers believed that the network should appeal to as broad a
group as possible
Issues

TFC has the following issues which it needs to address: -

 Find a new Segmentation and Positioning Strategy

 Increase Viewership/Ratings.
 Strengthen competitive position in the fashion network.
 Have to keep performing better than competitors, else could lose appealing
advertising packages which would, in turn, decrease the revenue.
 Threat of new entrants based on the newfound glory of Lifetime and CNN in the
Fashion network.
 Could risk losing its distribution support if the new offerings are not in line with the
expectations of the cable subscribers.

Solutions

 Analysis Based on the Exhibits Provided

2006 Scenario Scenario Scenario

  Actual 2007 Base 1 2 3

Revenue ($MM)

Ad sales 230.63 207.57 249.08 322.88 345.95

Affiliate fees 80.00 81.60 81.60 81.60 81.60

Total revenue 310.63 289.17 330.68 404.48 427.55

Expenses ($ MM)

Cost of
70.00 72.10 72.10 72.10 72.10
operations

Cost of
55.00 55.00 55.00 70.00 75.00
programming

Ad sales
6.92 6.23 7.47 9.69 10.38
commissions

Marketing &
45.00 60.00 60.00 60.00 60.00
Advertising

SGA 40.00 41.20 41.20 41.20 41.20

Total expense 216.92 234.53 235.77 252.99 258.68

Net income
93.71 54.64 94.91 151.50 168.87
($MM)

Margin (%) 30.17 18.90 28.70 37.45 39.50

 Scenario Based Segmentation Approach

 Scenario 1- Targeting wider Demography Segmentation

Maintain broad appeal to multiple clusters: Fashionistas, Planners & Shoppers, and Situationists.

Investment requirements: 60 million USD on marketing/advertising and programming.

Expectations: Rating: 1.2 and CPM = $ 1.80

Benefits:

a. Covers 80% of the total customer base

b. No incremental costs for programming

Drawbacks:

a. A broad mix causes a 10% drop in CPM.

b. Competitors would reach elite segments and decrease TFC’s pricing options.

Margin estimated: 28.70% - lowest when compared to all scenarios.

 Scenario 2- Targeting a Single Demographic and Psychographic Segment

Focus more on the Fashionista segment in the premium 18-34 female demographics.

Investment requirements: 60 million USD on marketing/advertising and 15 million USD on new

programming.

Expectations: Rating: 0.8 and CPM: $3.50.

Benefits:

a. Dedicatedly target women aged 18-34, providing more value to advertisers.

 b. Targeted programming and marketing would be easy

Drawbacks:

a. Only 15% of the entire market it covered.

Margin estimated: 37.45% - niche segment, higher risks involved for not meeting target
CPM.

 Scenario 3- Targeting Explicit Demographic and Psychographic Segment

Fashionistas and Shoppers / Planners as the focal point.

Investment requirements: 60 million USD on marketing/advertising and 20 million USD on new

programming.

Expectations: Rating: 1.20 and CPM: $2.50.

Benefits:

a. Covers 50% of total cluster, including women aged 18-34 who enjoy shopping
and stay up to date in fashion.
b. They share multiple attitude drivers hence similar content can be designed to
target all.

Drawbacks:

a. Customer perception and reach to TFC needs to be improved to ensure CPM is

recognized.

Margin estimated: 39.50% - most realistic pricing and rating forecasts. Higher budget
allocation on program content can be used to develop specific programs on value in
fashion, current trends and occasion-oriented fashion.

Therefore, from the analysis above, it would be best for Dana Wheeler to present Scenario 3 for
the TFC’s new strategy on segmentation.

Segmentation Process

 Need-Based Segmentation:
As found above in Scenario 3, for TFC to maximize its profitability needs, it needs to
target audiences in the 18-34 years, particularly females.

 Segment Identification:
According to the GFE survey, four different segments were identified:

i. Basics
ii. Fashionistas
iii. Shoppers and Planners
iv. Situationists
 Segment Attractiveness:
The Fashionistas and Shoppers & Planners segment were more lucrative to achieve
more benefits.

 Segment Profitability:
Targeting the above-mentioned segments will give a profit margin of around 39 % to
TFC.

 Segment Positioning:
Targeting households having audiences in the demography of 18-34 years female with
affluent lifestyle will lead to more viewership and, in turn, lead to maximum revenue with
higher CPM

 Segment Acid Test:

After having identified the above details, it would be beneficial for TFC to observe and
evaluate the approaches mentioned above nationally and see how these are being
received by the intended audiences.

 Market Mixed Strategy:

After the acid test, TFC would understand its new acceptability from the intended
audiences in terms of increased viewership.
If targets are met, TFC would be in a position to renegotiate with ad agencies for better
rates, which would, as a result, increase the revenue aspects.