Group-10

Abhishek Kumar Singh 2014PGP008

Bharathi Balachandran 2014PGP079
Jitin 2014PGP147
Rikki Das 2014PGP302
Santosh Chechi 2011IPM091
Swati Rathod 2014PGP393
Pande Varun 2014PGP244



The Fashion Channel






Situation Analysis
The fashion channel (TFC)
A cable TV network dedicated to solely to fashion, with up-to-date information broadcast 24 hours
per day, 7 days per week. Its revenue forecasted at $310.6 million for 2006, covers around 80 million
U.S. households. The competition in market has increased by the entry of CNN and lifetime in
fashion segment. Therefore, Dana wheeler, the senior vice president of Marketing, has found three
strategies to overcome the present situation.
The three strategies are:
1. Multi-segment approach
2. One segment approach
3. Two segment approach

SWOT Analysis:






Strenghts
broadcast 24/7 per day
dedicated to only fashion
content
operating in niche market
attractive for advertiser
(low fees etc.)

weakness
no proper segmentation ,
branding or positioning
strategies
resistance to change

Opportunities
better segmentation
targeting viewers of
various age groups

Threats
New entrants like CNN ,
lifetime
can be considered less
attractive to cable affiliates

ANALYSIS OF 3 STRATEGIES
1. MULTI SEGMENT APPROACH
The advertisements could appeal to all the main segments i.e. Fashionistas, Planners and
Shoppers and Situationalists.
ADVANTAGES
Awareness and viewing of the channel is expected to grow up.
This approach is expected to deliver a rating boost of 20%
This approach would be in line with its motto Fashion For Everyone
DISADVANTAGES
A forecast of 10% dip in CPM
Competition may penetrate the premium segments
It may adversely affect TFCs pricing ability
There can be a lack of focus in this approach


2. ONE SEGMENT APPROACH
This approach would be to focus more on the Fashionistas which is the most highly valued
segment in female demographics
ADVANTAGES
This would strengthen the value of audience
This approach wold be more appealing to the advertisers, thus increasing the CPM
to $3.50
DISADVANTAGES
The size of the segment was very small i.e. only 15% of the households. Thus, it
could decrease the viewership.
The rating would thus have a 20% dip to 0.8
New programming to be introduced to attract and retain this segment. This would
cost the company $15 million dollar per year
Deflect from its mission of Fashion for Everyone.

3. TWO SEGMENT APPROACH
This approach would bet focus on the two main segments of the market i.e. on Fashionistas
and the Shoppers/Planners/
ADVANTAGES
Average rating over time would increase to 1.20
CPM would also increase to $2.50
Better viewership as compared to Strategy 2 as the segment is not as narrow
Still somewhat in line with its mission Fashion for everyone.
DISADVANTAGES
Additional cost of $20 million per year





QUANTITATIVE ANALYSIS
EXHIBIT 4: AD REVENUE CALCULATOR
CURRENT 2007BASE 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% 1.20% 0.8% 1.20%
AVERAGE VIEWERS
(in thousands)
1100 1100 1320 880 1320
AVERAGE CPM 2.0 1.80 1.80 3.50 2.50
AVERAGE
REVENUE/AD
MINUTE
2200 1980 2376 3080 3300
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
PROGRAMING
EXPENSE
0 0 0 15,000,000 20,000,000

TFC Estimated Financials for 2006 and 2007

2006 2007 SCENARIO 1 SCENARIO 2 SCENARIO 3
REVENUE
Ad Sales 230,630,400 207,567,360 249,080,832 322,882,560 345,945,600
Affiliate Fees 80,000,000 81,600,000 81,600,000 81,600,000 81,600,000
Total Revenue 310,630,400 289,167,360 330,680,832 404,482,560 427,545,600

EXPENSES
Cost of
Operations
70,000,000 72,100,000 72,100,000 72,100,000 72,100,000
Cost of
Programming
55,000,000 55,000,000 55,000,000 70,000,000 75,000,000
Ad Sales
Commission
6,918,912 6,227,021 7,472,425 9,686,477 10,378,368
Marketing and
Advertising
45,000,000 60,000,000 60,000,000 60,000,000 60,000,000
SGA 40,000,000 41,200,000 41,200,000 41,200,000 41,200,000
Total Expense 216,918,912 234,527,021 235,772,425 252,986,477 258,678,368

Net Income 93,711,488 54,640,339 94,908,407 151,496,083 168,867,232
Margin 30.16 18.89 28.70 37.45 39.49



Decision Analysis
1. Strategy Option of two segment approach i.e. 3
rd
scenario has the highest Net Income and
the highest Gross Margin in spite of the expenses.
2. The expected net income of Scenario 3 is 80% higher than the current year.
3. Scenario 2 also has a promising expected Gross Margin at 37.45%
4. Strategy 1 can be discarded as it gives the least net income as well as net profit. In order to
remain in the competitive market and retain the audience, it is better to keep aside this
option.
5. Strategy 2 can be kept as an option as it has comparatively high gross margin and net
income than the current year as well as Scenario 1. But the viewership in this case is very
low.
6. Strategy 3 is one of the best options out of the three as in spite of highest incremental
programing expense it has the highest net income and gross margin. It has decent
viewership as it targets more than one segment.