The Fashion Channel - A case Analysis
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Transcript of The Fashion Channel - A case Analysis
Presented byDevanandLavanyaSrivatsSurya
Uthra RavichandranYamini
Yogeshwaran
Case Analysis
• Dana Wheeler, Senior VP of marketing for TFC has developed three strategies to mark her
presentation to the company’s leaders.
• The Co. needed to strengthen its competitive position and would be raising $15Mn over
2006 spending of $45Mn for advertising, promotion and public relations.
• Widely available niche networks reaching 80Mn US HH.
• Most avid viewers – women of age 35-54
• Popular series “Look great on Saturday Night Under $100”
• No detailed segmentation, positioning or branding strategy
• Lifetime and CNN had launched specific fashion programs whose ratings were higher than
that of TFC.
Position of TFC More no. of viewers
Lesser no. of viewers
Fashion audience
Nonspecific audience
TFC
Lifetime
CNN
Sources of Revenue Advertising revenue
$230.6 Mn for the year 2006
6 mins of ad time for every half and hour, 24 hrs per day for a total 2016 mins per week
Price was expressed in CPM for which an advertiser would pay.
Cable affiliate revenue
$80Mn for the year 2006
Positioned as basic channel hence available for basic cable services
MSO would sign multi year contracts with the network
Subscriber fee averaged $1 per subscriber per year
Alpha research studyTFC CNN Lifetime
Consumer interest 3.8 4.3 4.5
Awareness 4.1 4.6 4.5
Perceived value 3.7 4.1 4.4
Problems of TFC
• Rivalry in the market – fashion programs by CNN and Lifetime
• The average rating for consumer interest, awareness and perceived value is much
lesser than that of CNN and Lifetime.
• No targeting strategy – with 24/7 only fashion channel they survived.
• Decrease of revenue from cable affiliates and advertisers
• TFC needs more than just its “Always on, fashion for everyone” strategy to retain its
desired position.
Objectives of TFC
• Improve their average rating compared to similar programming on CNN and Lifetime.
(Increase viewership ratings)
• If The Fashion Channel wants to increase advertising revenue, they must find a way to
enter into the certain premium CPM groups. (Increase advertising pricing)
• Segment and target the female audiences who were of 18-34 years of age.
Demographic and Attitudinal cluster data analysis For scenario 1:
• Broad multicast strategy – cross segment of fashionistas, planners & shoppers
and situationalists. Women aged between 18 to 34 is more .
• Total TV households = 110 million
• Fashionistas = 15% i.e., 16.5 million TV households
• Planners & shoppers = 35% i.e., 38.5 million TV households
• Situationalists = 30% i.e., 33 million TV households.
• Therefore there are totally 88 million TV households in this category.
• Fashionistas- 140 > 100, planners & shoppers- 110>100, situationalists-
105>100.
For scenario 2• Multi-segment approach- focus more on fashionistas. It was highly valued 18 to 34
female demographic.
• Here , there is only 16.5 million TV households.
• Here only fashionistas i.e., 140>100
For scenario 3• Dual targeting- fashionistas and shoppers & planners.
• 55 million TV households
• Fashionistas- 140 > 100, planners & shoppers- 110>100
Uses:
• TFC generally scored above the midpoint and these data suggested it was lagging
two key networks that were offering competitive programming
• It also helped to design the strategies based on the size of cluster and the index.
Criteria to evaluate targeting options
Cross segment Multi-segment Dual segment
Rating 1.2 0.8 1.2
CPM $1.8 $3.5 $2.5
Promotion cost Same as current year
$15Mn $20Mn
Demographic (18-34 W)
Present in all three
Higher number Mediocre population of viewers
PROS CONS
Strategy 1 – Crossover segmentation
Fashionistas+
Planners & Shoppers+
Situationalists
i. Boost ratings to 20% (1.0 to 1.2)ii. No additional promotional
expenseiii. Size of the cluster 80%iv. Margin 29%
I. CPM is same as predicted for 2007 - $1.80
II. This type of segment approach may eventually fail
III. CPM decrease
Strategy 2 – Multi segmentation
“FASHIONISTAS”
i. Strong in highly valued 18-34 female demographic
ii. Strengthen the value of audience to advertisers
iii. High increase in CPM $3.5iv. Margin 37%
I. Covers only 15% of householdsII. Rating drops to 0.8III. Additional programming cost
of $15MnIV. Size of the cluster 15%
PROS CONS
Strategy 3 – Dual targeting
Fashionistas
+
Shoppers/Planners
i. Rating would increase to 1.2ii. Increase in CPM to $2.50iii. Balance on two segmentsiv. Margin 39%v. Size of the cluster 50%
I. Incremental expense for promotion - $20Mn
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% 1.00% 1.2% 0.8% 1.2%
Average Viewers (Thousand) 1100 1,100 1,320 880 1,320
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
2006 Actual 2007 Base Scenario 1 Scenario 2 Scenario 3
Financials
Revenue
Ad Sales $230,630,400 $207,567,360 $249,080,832 $322,822,560 $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 $404,422,560 $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 Commissions $6,918,912 $6,227,021 $7,472,425 $9,684,677 $10,378,368
Marketing & 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 $252,984,677 $258,678,368
Net Income $93,711,488 $54,640,339 $94,908,407 $151,437,883 $168,867,232
Margin 30% 19% 29% 37% 39%
Financial analysis for 2006 and forecasted 2007
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
Ad Sales Total Revenue Net Income
2006 2007
Most suitable option:
• After analyzing the case and its financial implications and pros and cons of applying each of the strategies, we
think that TFC should apply strategy 3, a dual segmentation of Fashionistas and Shoppers/Planners.
• This strategy acquires half of the females of age group 18-34
• It gives a greatest margin of 39% and a net income higher than the other two plans
• Not concentrating on only one segment and also helps viewers to buy the fashion they need; also tells us where
to buy and what to buy.
• This will increase the awareness among the people and keeps up a healthy competition vs. CNN and lifetime