Case Scenario

Dana Wheeler - Senior Vice President Of The

Fashion Channel (TFC)
Recommendations for TFC's new segmentation
and positioning strategy
Strengthen Competitive Position
Rethink approach to marketing
Presenting to CEO Jared Thomas at senior
management meeting
Prepare analysis and propose strategy

Background
Only

successful cable TV network dedicated solely to

fashion 24 X 7
Constant revenue and profit growth above industry
average since beginning in 1996.
Revenues for 2006 forecast at $310.6 million.
Most widely available niche networks reaching out to
80 million households.
Mostly viewed by women between 35 and 54 years of age
according to annual demographic survey.
Theme for marketing programs - Fashion for Everyone
concept of mass marketing.
Realized competition from other networks adding fashion
programs in their line-ups, which prompted management to
hire an experienced marketer.

TFC ADVERTISING Revenue Model

Average

present rating of 1.0, which meant

average 1% household out of 110 million US
households watch Fashion Channel at any
point of time.
Revenue from advertising $230.6 million out
of $20 billion that all US consumer
advertisers spend cumulatively on TV
advertising.

TFC CABLE AFFILIATE FEES

Cable

affiliate fees was $80 million targeted

for 2006.
Negotiated subscriber fee was averaged at
$1.00 per cable network subscriber on the
basis of carriage, which was at the lower end
of the industry range.

Competition

Lifetime and CNN started hosting fashion programs targeting

young women and men respectively, both capable of being sold at
premium CPM (Cost per thousand).

Personal telephonic survey of 800 households yielded the

following ratings (in a scale of 5):

Consumer interest in viewing

TFC 3.8
Lifetime 4.5
CNN 4.3

Awareness
TFC 4.1
Lifetime 4.5
CNN 4.6

Perceived value
TFC 3.7
Lifetime 4.4
CNN 4.1

ATTITUDINAL RESEARCH
FINDINGS
GFE

Associates conducted research with 100

questions on a panel of consumers about
their attitudes towards fashion and TFC.
Used sophisticated statistical correlation
program to analyze answers.
Reports suggested 4 unique groups
Fashionistas, Planners and Shoppers,
Situationalists, and Basics.
Most of the males in the Basics group.
Women were distributed in all groups.

Strategy Option I: Broad multi

Segment Approach
Pros

Cons

Reduced risk as
approach is consistent
with company mission
(Fashion for everyone)
and past strategic
approaches
No additional
programming costs
1.0 to 1.2 increase in
ratings
Less expected internal
and external reluctance
due to minimal changes

10% drop in CPM to 1.8

Continued loss of
market share due to
strong competition
Loss of advertising
revenues
No strategic
improvement or
development, lack of
focus

Strategy Option II: Focused one Segment

Approach

Pros

Cons

Strengthen the value

of audience to
advertisers as it appeals
to a specific segment
(Income > 100K)
Increased CPM up to $
3.50
High focus, unique
niche strategy

Most competitive
segment
Risk to lose loyal
audience
Smallest cluster, less
audience
Additional
programming costs of $
15 Million
Drop in rating from 1.0
to 0.8
Lack of strategycompany fit (fashion for
everyone)

Strategy Option III: Two segment

Strategic Approach
Pros
Increase in rating from
1.0 to 1.2
Growth in CPM to $
2.50
Low Risk as focus is
not as narrow as in
strategy option 2
Companys past
mission is still feasible
to retain, i.e. fashion for
everyone

Cons
Higher programming
expenses of additional
$20 Million

Quantitative Analysis of three

Strategy Options

According to the Ad Revenue

Calculations
Strategy

Option 3 offers the highest revenue

prospects per year. In case this strategy is
selected, revenues are expected to increase by
more than 50% in comparison to the current year.
Though Expenses for Strategy Option 3 are the
highest (Exhibit 5) it offers the highest profit
margin (39%) too.
The expected net income when choosing Strategy
Option 3 is 80% higher as in the year 2006 and
77.9 % higher as in Strategy Option 1.
Strategy Option 2 is expected to be almost as
successful as Strategy Option 3 with a profit
margin of 37%.

Decision Making Conclusion

Strategy

Option 1 is not viable as this option not only offers

the least net income & revenue, it is disadvantageous as the
company would lose audience, awareness and reputation to its
main competitors.
Strategy Option 2, although, offers a higher CPM and its profit
margin is only marginally less than in Strategy Option 3, the
concept is entirely too risky. While advertisers might favour
this narrow target market, supervisors and the broad audience
would be hard to convince as it alters the current concept
completely.
Strategy Option 3 seems to be the most fitting long-term
strategic option Dana can suggest to her supervisors. Although
this strategy does not offer the highest CPM, it generates the
highest profit margin and net income. Strategy Option 3 is not
a drastic change to the current strategy and hence less
resistance is expected from supervisors and target audience.