THE FASHION

CHANNEL
Case Study
MORTEZA MOGHADDAM
Case Analysis, Solutions & Recommendations
Alyson Kaye
MK-612 (Strategic Marketing Course)

1

Executive Summary

It is recommended that Dana Wheeler should integrate the both segmentation in two
periods of time (starting by three months and following by 12 months) in a way that
firstly, the broad segmentation, which includes targeting the all four groups of viewers,
be implemented and then, she should narrow this segmentation down to target
Fashionista and Planners/Shoppers.

This solution has the benefits of scenario one & three but with fewer disadvantages. It
can guarantee the revenue coming from advertisement and also, decrease the risk of
losing cable affiliate fees. Moreover, it will lead to increase in the awareness. After three
months, targeting of content should be done more specifically for two other consumer
groups. This approach will also increase TV ratings from 1.0% to 1.2%. TFCs average
CPM will be improved. It will also help TFC to increase the market share against other
two competitors and also, clusters are not too specific to lose the rest of viewers
















2

The Fashion Channel
Situation Analysis
The Fashion Channel (TFC) senior vice president of marketing, Dana Wheeler is
about to propose the new segmentation and positioning strategy in the senior
management meeting. The challenges TFC faced at the beginning of 2006 were:
1) New competitors ( CNN and Lifetime) with higher market shares
2) Increasing the revenue through targeting the right market segment

Relevant facts and problems
Advertising Revenue: Frazier, senior vice president of advertising sales, had warned
that TFC might need to drop the price for a unit of advertising next year by 10% or more
if the network did not make some changes in its performance(Stahl, 2). The key would
be targeting the right viewers and offering advertisers an attractive mix of viewers when
compared with what competitors were offering and also not losing the current cable
subscribers with the new offerings. TFC should find the way to increase its revenue from
advertising. According to advertising revenue formula which is:

(Households x Ratings)/ 1,000 x CPM (cost per thousand)

Each ad unit prices can be increased by growth in the number of viewers (ratings).
The ratings can be increased by targeting the right segment which can be done by finding
the exact audiences characteristics (age, demographics, and lifestyle). To achieve higher
ratings, TFC should target men of all ages and women aged 18-34 that have a higher
value of CPM so that the outcome would be the increase in CPM pricing from 25% to
75%. In other words attracting more highly valued viewers will lead to higher revenue in
advertising.
Competitive position: To strengthen its competitive position, the company will spend
$60 million in 2007, %33 more than the spending on promotion, advertising and public
relations in 2006 based on this new strategy. TFC is a cable TV network dedicated solely
to fashion, broadcasting 24/7, with the revenue of $310.6 million in 2006, reaching
almost 80 million U.S households, which is 72% of a total of 110 million households
3

with televisions in the United States. Women between 35 and 54 years old were its most
avid viewers.
According to recent Alpha research study on consumer satisfaction with cable
networks, on a scale of 1 to 5 (with 5 being the highest possible score) the ratings for the
three dominant TV channels in the market are:
Exhibit 1- Alpha Research Study


Therefore, objectives are positioning the TFC as the market leader as well as a secured
future growths in this new competitive dynamics.

Other Considerations
In 2006, TFC not only had a smaller market compared to other two main competitors
but also had a smaller market share. TFC average households was 1.1M which is almost
one third of the Lifetime show with 3.3M and one quarter of the CNN show with 4.4M.
In other words if we apply corresponding percentage of the market share of each of these
channels for females aged 18-34, which is 30% of the 1.1M for TFC, 43% of the 3.3M
for Lifetime and 27% of the 4.4M for CNN, we will reach to the number of households
for each channel which is 330,000 viewers for TFC, 1,419,000 for Lifetime and
1,188,000 for CNN. As we can see, there is a huge gap between the market share of the
targeted demographics between TFC and other two channels in terms of the real number
0 1 2 3 4 5
Average Rating
Attractiveness to cable affiliates
Awareness
Perceived Value
Lifetime
CNN
TFC
4

of targeted viewers. Hence, TFC not only should increase its market, overall average
households, by at least 400%, but also needs to increase the market share of targeted
segment by 430% which is four times of the market share in 2006.
On the other hand if we apply the same analysis to men segment, TFC should compete
with CNN which has 1,980,000 viewers (45% of 4.4M) which is 1,551,00 viewers more
than TFC or in other words 461% of the current TFC viewers. Increasing the market
share in this segment will be harder because TFC programs contents are totally different
from CNN which is a news channel rather than a dedicated 24/7 solely fashion program
channel.

Solutions
Broad-Based Marketing
Developing a multi-segment strategy, and appealing to Fashionistas, Planners &
Shoppers and Situationalists segments.
Pros: Considering the 2007 base numbers, the broad-based marketing scenario will
lead to almost $40M more in net income ($94.9M vs. $54.6M). Unlike the other two
scenarios, the broad-based marketing scenario does not require an incremental
programming expense so the costs will be 15M less.
Cons: The broad-based marketing scenario will lead to a higher net income
comparing to the 2007 base, but less CPM. Also, there is no guarantee that other two
competitors will not continue to penetrate the premium CPM groups because TFC would
not target a specific audience under this scenario. This will cause TFCs CPM revenue to
decrease even further. This scenario also will not reflect the differentiation from what
TFCs positioning was before and after the implementation of this plan. Positioning the
TFC as a high quality fashion TV channel versus CNN, a high quality news TV channel,
requires emphasis on the contents of TFC programs and reaching the targeted viewers.

Fashionistas Segmentation
Focusing more on Fashinistas instead of a broad, multi-segment approach
Pros: Considering the 2007 base numbers, the Fishionistas scenario will lead to
almost $100M more in net income ($151.4M vs. $54.6M). This approach will also
5

increase TV ratings from 1.0% to 1.2%. TFCs average CPM will be improved from
$2.00 to $3.50 because of targeting a premium CPM group. Also this will help to increase
the value of the audience to advertisers because 50% of Fashionistas are females between
the age of 18 and 34. Fashionista segmentation can also help TFC to increase the market
share against Lifetime, which currently is 43% of the 3.3M, for females aged between 18
and 34.
Cons: The Fashionista segmentation scenario will lead to a 0.2% decrease in TV
ratings for TFC. Comparing to the base, TFC should spend $15M more on incremental
programming to re-position its programming. The size of this cluster, the Fashionistas, is
the smallest size among the four segments and it may lead to decrease in the number of
viewers for other three groups and also will not help to increase the consumer interest,
awareness, and perceived value and may cause the decrease in ratings. Focusing
specifically on the Fashionistas will not attract the new customers in other groups who
dont have a high interests and needs in fashion and hence, will lead to either losing the
current customers or giving up the segments to the competitors.

Targeting Fashionista and Planners/Shoppers
Pros: Considering the 2007 base numbers, dual targeting scenario will lead to almost
$114M more in net income ($168M vs. $54M). This approach will also increase TV
ratings from 1.0% to 1.2%. TFCs average CPM will be improved from $2.00 to $2.50.
Also this targeting will help to increase the market to almost half of households that are
made up of 50% and 25% females aged 18-34 and the value of the audience to advertisers
will be increased. It also helps TFC to increase the market share against other two
competitors and clusters are not too specific to lose the rest of viewers.
Cons: Dual segmentation will require TFC to spend $20M more on incremental
programming to re-position its programming and as a result, will have a higher costs.

Recommendations:
Of the three scenarios considered by Dana Wheeler, the third is the most likely to
meet the needs of TFC but it is recommended that Dana Wheeler should integrate this
approach with the first one by suggesting the time frame for implementation of both
6

scenarios in a time frame of 15 months instead of 12 months: 3-months frame of doing
the broad segmentation and 12-months of doing the dual segmentation. By this approach
Dana Wheeler recommendation can have the better results because the first three month
will not require an incremental programming expense and can compensate the decrease in
CPM as soon as TFC start the second 12-months approach. Although the second
approach will require $20M an incremental programming expense, it will compensate
this cost by a higher revenue and net income of $114M.
Implementation of the both segmentation together will lead to targeting the broad
viewers and decrease the risk of losing the current customers. Integrating both
approaches will enable TFC to compete with two other competitors by targeting of
content to all four groups in the first 3-months. If this happens, it will lead to increase in
the awareness and after three months targeting of content should be done more
specifically for two other consumer groups identified by GFE: the Fashionistas, which
contains the greatest concentration of the highly valued 18-34 female demographic, and
the Planners and Shoppers. This solution has the benefits of scenario one & three but
fewer disadvantages. It can guarantee the revenue coming from advertisement and also
decrease the risk of losing cable affiliate fees.
Possible disadvantage in this case would be the dynamics of the market. Two main
competitors would not stop trying to have a higher market edge in terms of market share
while TFC is trying to expand its market and increase its market share. In other words,
TFC should face this challenge that if it has a growth in segmented market and market
expansion at the same time, other competitors will try to do the same thing or at least try
not to lose their current market segment.
In order to increase the quality of contents and as a result, having a higher customer
satisfaction and attracting the Basic and Situationalist groups, it is recommended to
devote the same range of daily hours, at least 1 hour per day, to Fashion news in politics
and politicians to compete with CNN and Lifetime
In sum, this recommendation requires considering the both quality and the time for
each goal. The higher quality will lead to higher customer satisfaction which in return
will lead to higher customer retention and hence, higher customer loyalty. Increasing the
size of the market and market share without considering the quality of the product and the
7

time of process will lead to both losing the competitive advantage and giving up the
current market to competitors. Higher quality in this case can be defined by higher
consumer interest, awareness, and perceived value. This will never happen unless TFC
has a plan for improving quality of its program contents while it increases the quantity of
the market segment. On the other hand, if this case does not happens, TFC will also lose
the affiliate fees revenue which is again neglected in this process. It is not recommended
to separate the both revenue models from each other in this case because somehow they
are internally related to each other and they are not totally independent.

Exhibit 2:
Ad
Revenue
Calculator
Ad Revenue
Calculator
Current 2007 Base Scenario 1 Scenario 2 Scenario 3
TV HH 110,000,000 110,000,000 110,000,000 110,000,000 110,000,000
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
Ad
Revenue/Year $230,630,400 $207,567,360 $249,080,832 $322,882,560 $345,945,600
Incremental
Programming
Expense $ - $ -
$
15,000,000
$
20,000,000






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