Case study Analysis: The Fashion Channel

Introduction:
The Fashion Channel which is a successful cable TV network
and which had been started by two entrepreneurs in 1996,
with up to date and entertainment features and information
broadcast 247 which was related to fashion only.
The channel was actually dedicated to fashion only and its
main audience were women of 35-54 age group. Earlier TFCs
tagline was Fashion for Everyone In 2006 TFC has earned
the revenue of $310.6 Mn out of which their target was to
earn a profit of $230 Mn only through advertisement. Till
2006 TFC was the market leader in fashion related programs
and one of its more popular series in 2005 had been Look
Great on Saturday Night for Under $100.
In 2006 TFC has realized that some of the other channels like
CNN and Lifetime are following the footsteps of TFC and also
they are telecasting the programs related to the fashion
world, which were now started to become more popular in
comparison to the programs of TFC. These channels were
giving competition to the TFC directly by taking the share of
its ad revenue; these channels were giving a double edged
competition to TFC.
Norm Frazier, senior vice president of advertising sale,
advised that in order to increase the TFCs ad revenues either
TFC has to decrease its ad pricing by 10% or to increase its
viewership by improving the quality n contents of the
programs.
There were around 110 Mn households in USA with cable
network and TFCs average rating was around 1.0, this meant
that on average 1,100,000 people were watching at any point
in time. Advertising slots were divided in two slots i.e. of 30
seconds and 60 seconds and There were usually six minutes
of national ad time in each half hour of programming, 24
hours per day for a total of 2,016 minutes per week. The
network based ad unit prices on several factors, which
advertisers also monitored, including the number of viewers ,
the audiences characteristics i.e. age, demographics, and
lifestyle, and general competitive trends. Prices were
expressed as CPM (cost per thousand), which represented the
price that an advertiser would pay for an advertisement.
There were two main source of generating revenue for TFC
and that was one by ad revenue and another was through
cable affiliation fee. Most U.S. households subscribed to cable
television through local affiliates of a large cable multi-system
operator, multi-system operators (MSO) would sign multi-
year contracts with networks that specified the fee the
network would receive for each household that received the
channel. The local affiliates of that MSO marketed and
distributed the service to consumers in all the local markets
for which they held a franchise.
There were mainly two kinds of channel were existing and
that was premium channel or basic channel and TFC was a
basic channel so most consumers received it automatically
when they signed up for basic cable service.

Competitive threats:
CNN and Lifetime were the two biggest threats for the TFC
because there ratings were also higher in comparison to TFC.
TFC has rating of 1.0 throughout whereas CNN had the rating
of 3.3 and Lifetime had 4.4. The study showed that TFC was
facing additional competitive challenges in its attractiveness
to cable affiliates. On a scale of 1 to 5, TFC had achieved a
3.8 rating on consumer interest in viewing, while the two
competitors with new fashion programming had scored
higher: CNN had scored 4.3 and Lifetime a 4.5 On awareness,
TFC had scored 4.1 while CNN scored 4.6 and Lifetime a 4.5.
On perceived value TFC was at 3.7, CNN 4.1 and Lifetime 4.4.
This was resulting on their ad revenues also that was the
main reason why higher officials of TFC were concerned that
others were taking away their market share of ad revenues.
The reason they were found was that they had not
segmented their market they were doing it without any
detailed segmentation, branding, or positioning strategy.
Now they were thinking to do a proper market segmentation
so that they could approach to the right customer with the
appropriate information and message. TFC needs to identify
the customer groups that are most worth the effort to pursue.
Fr that they use market research not only for demographic
data but also to study consumer behavior and attitudeshow
viewers use the network, what they value, and what needs
they have.
For this market research they hired a research company
called GFE associates, The researchers had asked a national
panel of consumers more than 100 questions about their
attitudes toward fashion and TFC as a way to understand the
needs that the network served. GFE associates then
constructed profiles for clusters of consumers who had
common attitudes and needs. The report suggested four
unique groups of viewers: Fashionistas, Planners &
Shoppers, Situationalists, and Basics.
Now according to the result of this survey , Dana proposed
three proposals in front of the CEO, Jared Thomas and
then they tried to find out the most suitable option out of
these three. These scenarios were like
Scenario1:
Develop a multi-segment strategy, and focus on Fashionistas,
Planners & Shoppers and Situation lists between the women
aged 18 to 34.
Advantages:
Through implementing various marketing tools on new target
segment, the rating will increase from 1.0 to 1.2, leading to
the increase in average viewers.
Disadvantages:
Since there is no real change in viewers type and
programming, the CPM will drop by 10% or more and
competitors will continue taking its market share.

Scenario2:
Focus on the Fashionistas segment and spend $15 million
on programming. (Single segment concentration)
Advantages:
This segment shows the highest interest in fashion and is
strong in high valued 18-34 female demographics, which will
deliver a CPM boost. With $15million on content improvement,
it will attract more target consumers.
Disadvantages:
Fashionistas is the smallest segment in four clusters. It is
risky if only target at this group and the average viewers will
decrease as well. It also needs additional expense to change
the programming which will bring upset to subscribers and
employees.

Scenario3:
Target at both Fashionistas and Shoppers & Planners clusters
and spend$20 million on programming. (Product
specialization)
Advantages:
Dual-targeting will ensure the average viewers and rating. It
is expected that rating will grow to 1.2 while CPM will come
to $2.5.
Disadvantages:
There is additional $20 million should be draw from the net
income.

Recommendations:
After carefully looking at the advantages and disadvantages
of the three options, It is recommended that Scenario3 is
the best solution for Dana. First, the Fashionistas has
superior interest in fashion while the Planners & Shoppers has
the largest cluster size. The combination of them will exert
TFCs potential (professional and full-time) into full play to
compete with both fashion-oriented and regular programming.
Second, the Planners & Shoppers will improve the rating, in
order to attract more ad buyers and at the same time, the
Fashionistas will enhance the CPM to gain more ad revenue .
Also if we calculate it in revenue term the we find from the ad
revenue calculator (Exihibit 4) the total ad revenue from
scenario1 scenario2 and scenario3 are $249080832,
$322882560 and $322882560 so from here it is clear that
Scenario 3 gives the more revenue and also from Exihibit 5
Net income in case of scenario3 is $283867232 i.e. more
than the other two options, so from here also we can derive a
conclusion that scenario 3 is the best suitable option for the
TFC. Targeting at two valued groups i.e. Fashionistas and
Planners & shoppers and then take the product specialization
strategy to satisfy both segments is the best solution to this
problem. It will create more revenues, make TFC get back
market shares quickly, and maintain TFCs leading status.