Ben Gasparini

MKTG 495

Section 1

In The Fashion Channel case, Dana Wheeler struggles in deciding what new marketing strategy to recommend to the company executives to ward of the threat of new competition that has started to enter the channels turf. As a marketing veteran, Wheeler realizes the benefits of targeting marketing efforts towards specific segments that are most likely to receive the marketing message being conveyed. The current fashion for everyone marketing strategy has been effective in the past, but is likely to lose sustainability as rivalry among The Fashion Channels competitors increases. Wheeler presents three separate scenarios in the case; each involving a different approach with different projections. Considering the projected margins and ease of transition, I would recommend Wheeler to use scenario 1. Scenario 1 requires a medium amount of expenses, but at the same time yields the largest net income as well as margin percentages. This scenario also presents the simplest transition in terms of marketing efforts for The Fashion Channel. The company has already been following a Fashion for Everyone approach, where they have not been targeting specific segments in any way. Scenario 1 allows the company to still appeal to a broad audience, but carefully use market research data to drill down into more accurate cross segments of women (their primary viewer demographic). The segments include: Fashionatas, Planners & Shoppers, and Situationalists, which primarily include women, 18 34 years old, who are moderately to highly engaged in fashion. By identifying and targeting this segment, The Fashion Channel is able to be more efficient in their marketing efforts, creating ads that reach the demographic that is most likely to remain engaged in the channel and its programming. Targeting a specific group like this also adds the attribute of positioning to their marketing mix. Positioning gives all those who are involved in marketing efforts a common direction and ultimately leads to a deeper connection

Ben Gasparini

MKTG 495

Section 1

between the company and the consumer. By understanding what types of consumers they are targeting, they can create programming that creates value for the consumers and builds brand loyalty, in an effort to stifle the competition and create a high barrier to entry. The groups selected in scenario 1 are also among the largest percentage of households according to the attitudinal cluster analysis. These groups represent the majority of viewers that share similar attitudinal trends such as anticipate trends, stay up to date, and Enjoy shopping. They are also a segment that shows explicit interest and involvement in fashion; the type of consumer that is critical to the success of The Fashion Channels programming. By targeting segments such as these, The Fashion Channel can develop a much more lean and effective method of marketing to capture the consumers who are most likely to engage the brand. This means less wasted budgets and more revenue driven in from advertisers who will want to display ads on this channel because of its ability to draw in the most relevant consumers. I think scenario 1 will work best primarily because of its ease of transition and ability to target a broader spectrum of consumers of whom are still carefully selected and targeted based on market research.

Ben Gasparini

MKTG 495

Section 1

Exhibit 4: Ad Revenue Calculator Ad Revenue Calculator Current TV HH Average Rating Average Viewers (Thousand) Average CPM* Average Revenue/Ad Minute** Ad Minutes/Week Weeks/Year Ad Revenue/Year Incremental Programming Expense 110,000,000 1.0% 1100 $2.00 $2,200 2016 52 $230,630,400 2007 Base 110,000,000 1% 1100 2 $2,200 2016 52 $230,630,400 0 Scenario 1 110,000,000 1.2% 1320 $1.80 $2,376 2016 52 $249,080,832 0 Scenario 2 110,000,000 0.8% 880 $3.50 $3,080 2016 52 $322,882,560 15,000,000 Scenario 3 110,000,000 1.2% 1320 $2.50 $3,300 2016 52 $345,945,600 20,000,000

* Revenue/Thousand Viewers ** Calculated by multiplying Average Viewers by Average CPM

2006 Actual Exhibit 5: Financials Revenue Ad Sales Affiliate Fees Total Revenue Expenses Cost of Operations Cost of Programming Ad Sales Commissions Marketing & Advertising SGA Total Expense Net Income Margin $70,000,000 $55,000,000 $6,918,912 $45,000,000 $40,000,000 $216,918,912 $93,711,488 30% $230,630,400 $80,000,000 $310,630,400

2007 Base

Scenario 1

Scenario 2

Scenario 3

$230,630,400 $81,600,000 $312,230,400

$249,080,832 $81,600,000 $330,680,832

$322,882,560 $81,600,000 $404,482,560

$345,945,600 $81,600,000 $427,545,600

$72,100,000 0 6,918,912 60,000,000 $41,200,000 $180,218,912 $132,011,488 42%

$72,100,000 0 7,472,424.96 60,000,000 $41,200,000 $180,772,425 $149,908,407 45%

$72,100,000 70,000,000 9,686,477 60,000,000 $41,200,000 $252,986,477 $151,496,083 37%

$72,100,000 75,000,000 10,378,368 60,000,000 $41,200,000 $258,678,368 $168,867,232 39%