1. Executive Summary This is the analysis of ‘The Fashion Channel’, a fashion-oriented programming which is evaluating 3 possible scenarios to be in the top position amongst its competitors. On the basis of the advantages and disadvantages of our analysis Scenario 3 seems to be the marketing strategy which they should focus upon. 2. Marketing Mix
Product 24*7 Fashion Channel Up-to-date and entertaining features and information A channel for masses Niche network
(Pgs. 1,2)
Place Current penetration is 80 million U.S. households subscribed to cable and satellite television
(Pg. 4)
(Pg. 2)
Price Charging CPM of $ 2.00 to the advertisers Subscriber fee averaged $ 1.00 per subscriber per year Subscriber fee was is collected from multisystem operator(MSO)
Promotion “Fashion for everyone ” is the theme of channel It’s most popular series “Look Great on Saturday Night for Under $100” is targeted at masses A 24*7 dedicated fashion channel
(Pgs. 1,2)
3. 5 P’s
Product :
A successful television network dedicated solely to fashion Specialized in updated entertaining features and information broadcast 24 hours per day, 7 days a week So far it was the only TV channel dedicated for the purpose but recently it has been facing competition from upstarts in the fashion segment such as CNN and Lifetime Has experienced steady revenue and profit growth in above the industry average almost since its inception
Niche network, reaching almost 80 million viewers
Price :
Price for Advertisers (in CPM) *:Current (2006): CPM=1.0%
Scenario 1:
CPM = 1.2%
Scenario 2:
CPM = 0.8%
Scenario 3:
CPM = 1.2%
Price for cable operators :
Negotiated subscriber fee = $1.00 per subscriber per year
Place:
US households that subscribed to The Fashion Channel
Promotion:
Initially did not attempt to implement any kind of segmentation in particular
Relied on a broad based marketing strategy described by “Fashion for Everyone”
Wheeler’s plan - to build a strategy for segmentation based on one of the scenarios (see Qualitative Analysis) and employ all the marketing tools – traditional and internet advertising, public relations and promotions.
Physical Distribution:
Provided to viewers through cable affiliate distribution networks such as Comcast, Time Warner, Cablevision, Cox etc.
*CPM = Cost per thousand
4. K Challenges and Opportunities for TFC:
Other networks are adding fashion related programs. TFC’s position as the market leader is in danger (Pg. 2)
Currently, women between 35 and 54 years are its most avid viewers. Advertisers are ready to pay a premium CPM to reach other groups especially men of all ages and women aged 18-34 years. This can achieve CPM price increase from 25% to 75% (Pg. 4)
TFC is positioned as a basic channel and attractiveness to cable affiliates in terms of viewing and perceived value is facing competitive challenges (Pg. 5)
If the TFC underperforms, it could be offered in less appealing packages (Pg. 5)
TFC’s average rating was much lower as compared to other channel’s program (Exhibit 1)
Segmentation and Targeting Strategies for TFC:
As per the data of GFE Associates, the whole population was segmented into four clusters depending on the attitude and involvement in Fashion of the U.S. population (Exhibit 3)
Based on Exhibit 3, the four demographic segments identified were:
1)
Fashionistas:
15% of Population Highly engaged in fashion
Female 61% 18-34 Age 50% High Income Highly Interested in Fashion on TV
2)
Planners & Shoppers:
35% of population Participate regularly Female 53% 18-34 Age 25% Moderately Interested in Fashion on TV
3)
Situationalists:
30% of population
Participates only for Specific needs Female 50% 18-34 Age 30% Moderately Interested in Fashion on TV
4)
Basics:
20% of Population Highly Disengaged Female 45% Male 55% Rarely Interested in Fashion on TV
Targeting:
The two drivers for revenue growth for TFC would be increased viewership and increased advertising pricing (Pg. 4) Advertisers are interested in men of all ages and women aged 18-34(Pg. 4) Challenge is to identify the core group who can be loyal to network and have an emotional connect to TFC (Pg. 5) Most of the male interest occurred in the Basics Cluster and are least likely to be engaged with TFC (Pg. 6) Based on the consumer behavior and attitudes, women aged 18 -34 in all of the clusters should be the target for TFC (Pg. 6)
Qualitative analysis Scenario 1: Benefits:
Major marketing, advertizing campaigns and programming would increase awareness and boost [1] the viewing of the channel by 20% The Average revenue/Ad would be $2,376 which is a 20% increase over the projected 2007 Base year (See Appendix) [1] The $0 incremental expenses will give it a competitive advantage The CPM would decrease by 10% (1.8), when compared with the projected 2007 Base year, due [1] to the mass marketing approach (Projected by Ad Sales ) The implementation of this plan may result in a net income increase of 73.69% [5] (See Appendix)
Challenges:
(
[1]
Broadening the viewer base might not address the current challenge that TFC is facing Lifetime and CNN would also jump into the advertizing bandwagon and pose a greater threat to TFC
Page 6: paragraph 6)
Scenario 2: Benefits:
The targeting of a segmented market that comprises of only 15% of the total cluster size, would [2] reduce the average rating to 0.8 The Average revenue/Ad would be $3,080 which is an increase of 55.67% over the projected 2007 Base year (See Appendix) The incremental expenses of $15,000,000 will help maintain the average revenue/ year of $322,882,560 (See Appendix) This segmentation would strengthen the value of the audience to the advertisers, and would likely [3] increase the CPM to $3.5 [5] The implementation of this plan may increase the net income by 177.26% (See Appendix)
Challenges:
(
[2]
The demographic segmentation would account for only 15% of the households The incremental expenses of programming will be a substantial liability for the channel in the future
Page 6: paragraph 7),
(
[3]
Page 7: paragraph 1)
Scenario 3: Benefits:
[4]
The dual targeting would, overtime, drive average ratings to 1.2 The Average revenue/Ad would be $3,300 which is an increase of 66.67% over the projected 2007 Base year (See Appendix) The incremental expenses of $20,000,000 will help maintain the average revenue/ year of $345,945,600 (See Appendix) The increased size of the target audience (50% of the total cluster) would likely increase the CPM [4] to $2.5 [5] The implementation of this plan may increase the net income by 209% (See Appendix)
Challenges:
As this plan would be implemented over a period, the externalities in the environment may pose a threat There exists a possibility of losing some of TFC’s most loyal consumers by re -positioning the channel towards fashionistas and planners/shoppers.
(
[4]
Page 7: paragraph 2)
(
[5]
as compared to the projected 2007 Base year)
Recommendation:
The benefits outweigh the inherent risks involved in Scenario 3. Fashionistas and planners/shoppers make up about 50% of all US Television Households, and in their specific clusters, the 18-34 female audience market represents 50% and 25% of the cluster respectively (See Appendix). The 39% margin is a good indicator of the profitability of Scenario 3(See Appendix). Therefore, TFC would be able to garner higher TV ratings from this scenario. They will also be able to leverage the ‘premium’ factor associated with this sector to increase the advertizing revenue. Per the analysis, it seems that The Fashion Channel can best increase its revenue by re-positioning the channel towards fashionistas and planners/shoppers. However, as the implementation would happen over time, TFC should scan the environment for externalities and address them effectively.
