Consumer Behaviour Group 5 Akshay Minhas NMP 02 Mohit NMP 24 Puneet Jaggi NMP 32 Siddharth Kapur NMP 40

The Fashion Channel (TFC), founded in 1996, is a successful cable TV network dedicated to all things related to fashion.
TFC is the only network, focused solely on fashion and fashion

related programming, but still manages to reach almost 80 million US households

Although quite young compared to other TV networks, TFC

has experienced steady growth and in 2006 forecasted its revenue at $310.6 million.
Women between 35 and 54 years were its most avid viewers

 The only competition is from 9-11 pm . The focus for promoting new
programs and attracting advertisers must be in that time slot.
The objective is to increase viewer rating and target right demographics

to increase CPM (Deliver quality audiences as demanded by advertisers.

As indicated in the data 45% of consumers rate TFC as their favorite

channel on cable, 58% consumers rate TFC as best place for fashion information. This data says that there are people who are loyal to brand TFC and all the focus must be applied to retain those and build more.

 The data also indicates that lot of consumers rely on TV programs for
fashion updates for what to wear in parties leisure activities and special occasion. The programs on TFC must attract these consumers.
According to data for attitudinal clusters the focus must be on the female

viewers aged 18-34 who are Fashionistas and Planners and Shoppers. These two category (50% of total) has an above average interest index in fashion.
The focus on these two categories will automatically attract the remaining

Situationalists who also have same needs according to the attitude drivers. As indicated in the competitor comparison the fashion channel lacks the programs with celebrity focus. The lifetime channel attracts 43 % female viewership from the age group of 18-34 (TFC 33% CNN 27%) which indicates that they have some features in their program that attract that age group.

Ad Revenue Calculator Current TV HH Average Rating Avg Viewers (Thousand) Average CPM Avg Revenue/Ad Minute Ad Minutes/Week Weeks/Year Ad Revenue/Year Incremental Prog Expense 110,000,000 1.0% 1100 $2.00 $2,200 2016 52 $230,630,400 2007 Base 1.0% 1100 $1.80 $1,980 2016 52 Scenario 1 Scenario 2 1.2% 1320 $1.80 $2,376 2016 52 0.8% 880 $3.50 $3,080 2016 52 Scenario 3 1.2% 1320 $2.50 $3,300 2016 52 110,000,000 110,000,000 110,000,000 110,000,000

$207,567,360 $249,080,832 $322,882,560 $345,945,600 $ 15,000,000 $ 20,000,000

Exhibit 5: Financials 2006 Actual Revenue Ad Sales Affiliate Fees Total Revenue Insert scenario results from revenue $230,630,400 $207,567,360 $249,080,832 $322,882,560 $345,945,600 calculator $80,000,000 $81,600,000 $81,600,000 $81,600,000 $81,600,000 Grows 2% per year with population 2007 Base Scenario 1 Scenario 2 Scenario 3 Assumptions

$310,630,400 $289,167,360 $330,680,832 $404,482,560 $427,545,600

Expenses Cost of Operations Cost of Programming Ad Sales Commissions Marketing & Advertising SGA Total Expense $70,000,000 $55,000,000 $6,918,912 $45,000,000 $40,000,000 $72,100,000 $72,100,000 $72,100,000 $72,100,000 Grows 3% per year with inflation Add incremental programming expense 3% of ad sales revenue

$ 55,000,000 $ 55,000,000 $ 70,000,000 $ 75,000,000 $6,227,021 $60,000,000 $41,200,000 $7,472,425 $60,000,000 $41,200,000 $9,686,477 $60,000,000 $41,200,000 $10,378,368

$60,000,000 Reflects increased spending of $15M $41,200,000 Growing with inflation 3%

$216,918,912 $234,527,021 $235,772,425 $252,986,477 $258,678,368 Spreadsheet calculates automatically

Net Income

$93,711,488

$54,640,339

$94,908,407 $151,496,083 $168,867,232 Spreadsheet calculates automatically

Strategy Option I: Broad multi segment approach

PROS CONS

-Can Target women aged 18-34 in all clusters -Strategy worked well in past

- 10% drop in CPM to 1.8 - Loss of ratings in premium segment to competition

- 1.0 to 1.2 increase in ratings

- Less expected internal and external reluctance due to minimal changes

- Loss of advertising revenues

- May loose their loyal customers due to lack of focus

Strategy Option II: Focused one segment approach

PROS - Strengthen the value of audience CONS - Most competitive segment

to advertisers as it appeals to a specific segment (Income > 100K)

- Increased CPM up to $ 3.50 - 24x7 network can better serve their needs

- Smallest cluster, less audience - Additional programming costs of $ 15 Mn - Drop in rating from 1.0 to 0.8 - Lack of strategy-company fit (fashion for everyone)

Strategy Option III: Two segment strategic approach Fashionistas & Shoppers/Planners
PROS CONS

- Increase in rating from 1.0 to 1.2 - Growth in CPM to $ 2.50 - Biggest segment

- Higher programming expenses of additional$ 20 Million

- Positioning of network to 2 different segments may be difficult

- Low risk of as the target segment is not too narrow

Strategy Option 1:
It is not viable as this option not only offers the least net income &

revenue

It is disadvantageous as the company would lose premium segment to

competitors.

Strategy Option 2:
Although, offers a higher CPM and its profit margin is only marginally

less than in Strategy Option 3, this segment is too narrow (Smallest of all)
Second all the competitors will target this segment and it will be too

risky to target most competitive segment

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.
If one segment disappoints, TFC can doo better in other. Its not a drastic change to the current strategy and hence less resistance

is expected from supervisors and target audience.