1. The Fashion Channel
Background
The Fashion Channel (TFC) was a successful cable TV network- and the only network solely dedicated
to fashion, with up-to-date and entertaining features and information broadcast 24 hours per day, 7
days per week. Founded in 1996 it had experienced constant revenue and profit growth. Revenues
for 2006 were forecast at $310.6 MN. The channel was one of the most widely available niche
networks reaching almost 80 MN households. From the beginning its founder Jared Thomas believed
that its marketing message should appeal to as broad as group as possible. The network had chosen
“Fashion for everyone” as its theme for the marketing program.
However in 2006 other networks took note of TFC success and started adding fashion related
programs in their line-ups that prompted Thomas to rethink his approach to marketing. He told his
senior team: “it’s time for us to build a modern brand strategy and secure TFC position as the market
leader”. Still he and his senior leaders felt urge to resist change-“Why break something that isn’t
broken?”
Data Wheeler joined TFC in July 2006 as VP-marketing for TFC. She had strong background in
marketing packaged products as well as in advertising industry. She was now getting ready to
present new segmentation and positioning strategy scheduled next week.
Frazier, VP of advertising sales, had warned in today’s sales forecast meeting that TFC might need to
drop the price for a unit of advertising next year by 10% if the network did not make changes in its
performance. He said both Lifetime and CNN had launched fashion specific programming blocks that
were achieving notable ratings (Exhibit 1). Wheeler knew to hold or increase price it would be crucial
to attract a critical mass of viewers who were interested in the network’s content and were also
attractive to advertisers. She believed she had good market data that would give her insights into
the options for identifying the right segments for TFC. At the same time she knew, if the network
changed its offerings in a way that disappointed too many cable subscribers, it could risk losing its
distribution support.
The popularity of TFC was measured by “ratings” that represented the percentage of TV household
watching on during a measured viewing period. Across the entire schedule TFC average rating was
1.0. With 110 MN TV households in US, this meant on an average 1.1MN were watching TFC. TFC Ad
sales team sold access to these viewers via advertising spots (30 or 60 seconds in length) to
consumer marketers such as cosmetics, cloting designers and Auto manufacturers. There were
usually 6 min of national ad time in each hald hour programming, 24 hrs/day for a total of 2016
min/week. Competition for ad revenue was always fierce across all networks. The strong fashion
programming blocks on Lifetime and CNN represented a double edged competitive challenge.
Revenue Model
The network based ad unit prices on several factors which advertisers also monitored. These
included number of viewers (rating), the audience characterisitics (age, demographics and lifestyle)
and general competitive trend. Prices were expressed as CPM (Cost Per Mille- a roman numeral for
1000). It represented price that advertisers would pay for an impression or moment of viewing.

2. CPM = cost / (target audience / 1,000). Ad revenue/spot=Households X rating / (1000 X CPM). Thus
To determine CPM you divide the cost of advertising by total number of people reached by the
advertisement (in thousands) . If a radio commercial costs $100 and reaches 50,000 people your
CPM would be $2.
Cable affiliate fees which were on track to bring $80 MN were the second revenue source for TFC.
Most US households subscribed to cable through local affiliates of large cable operators such as
Time warner, Cox, Comcast and Cablevisions. Consumers paid monthly fee for basic lineup and
incremental fees for premium channels and on demand programming. TFC was positioned as basic
channel so most consumers received it automaticaaly when they signed up for basic cable service.
TFC received $1/subscriber/year which was at the low end of the industry. It was based on Carriage
and did not vary with change of viewership. The cable operators monitored the customer
satisfaction and could threaten to drop unpopular channels.
Recent Alpha research indicated these figures for on a scale of 1 (low) to 5 (Very high):
Channel
TFC
CNN
Lifetime
consumer interest in viewing
3.8
4.3
4.5
Awareness
4.1
4.6
4.5
Perceived value
3.7
4.1
4.4
Cable operated monitored these data to determine how much to pay for each network. To Dana this
indicated a need for marketing initiatives to improve consumer interest, wareness and perceived
value.
Attitudinal research findings
Wheeler had commissioned a MR from professional Research organization that was completed last
month. The responses are suumarised in Exhibit 2. The researcher also prepared Exhibit 3 compiling
the results into attitudinal clusters.
Dana’s options
Dana felt women in age group of 18-34 would be most interested in TFC programs. As there were
women aged 18-34 in all the clusters, she first considered maintaing a broad apeal to cross segment
Of Fashionistas, Planners & Shoppers and Situationalists. By investing in a major marketing and
adverising campaign a boost of 20% in rating could be expected. However Ad sales was forecasting a
10% drop in CPM to $1.8 if the current audience mix remained the same. There was also the risk that
competition would continue to penetrate the premium segments and further erode TFC pricing
ability.
An alternative to this approach would be to focuss more on the Fashionistas. This segment was
strong in highly valued 18-34 female demographics. It was smallest representing only 15% of
households but it would alsso strengthen the value of the audience to the advertisers. Dana
estimated that this strategy could deliver rating of 0.8. Ad Sales had given her a projection of $3.5
CPM for an audience stronger younger, female oriented Fashionista segment. She estimated that
she would need to spend an additional $ 15 MN per year for programming under this scenario.

3. Dana was also interested in a third alternative scenario that targeted two segments-the fashionistas
and the Shppers/Planners. She estimated that the dual targeting would drive average rating to 1.2
with a potential CPM of $2.5. She estimated that she would need to spend an additional $ 20 MN
per year for programming under this scenario.
Dana knew that her recommendations would have to show how her plan would increase TFC
revenue and also quantify risks if the plan disappointed. She had created spreadsheet to calculate
impact of rating and potential CPM on ad revenue (Exhibit 4) and their financial impact (Exhibit 5).
Exhibit 1: Viewer demographics and Competitor Comaprison
Time period
All TV Viewers
24 x 7
TFC
24 x 7
Lifetime:Fashion Today
M-F 9-11PM
Male
Female
18-34
35-54
54-74
Income > $100K
Average rating
Program profile
49%
51%
30%
41%
21%
16%
NA
All
39%
61%
33%
45%
20%
18%
1.0
Fashion news,
features & info.
37%
63%
43%
42%
14%
19%
3.0
Fashion news and info.
CNN:Fashion Tonight
M-F, 8-9PM
Sat, Sun, 10-11PM
45%
55%
27%
40%
26%
17%
4.0
Fashion news/ features
with celebrity focus
Exhibit:3 Analysis of Attitudinal clusters in US TV household for TFC
Cluster
Involvement in
fashion
Size of cluster
(% HH)
Index: Interest in
Fashion on TV
(100=all viewer
average)
Demographic
highlights
Attitude drivers
Fashionistas
Highly engaged in
fashion
15%
140
Female 61%
Income >
$100K, 30%; 1834,50%
Planners &
Shoppers
Participate in
fashion on a
regular basis
35%
110
Female 53%.
18-34, 25%
Situationalist
Participate in
fashion for
specific needs
30%
105
Female 50%
Children HH
45%, 18-34,
30%
Basics
Disengaged
20%
50
Female 45%
Male 55%
Anticipate trends
stay uptodate
Think a lot about
fashion
Enjoy Shopping
Develop fashion
expertise to share
Fashion is entertaining
stay uptodate
Enjoy Shopping
Fashion is practical
Interest in value
Enjoy shopping for
specific needs
Think about fashipn for
specific situations
Fashion is both
entertaining and
practical
Interested in value
Do not enjoy shopping
Do not spend much time
thinking what to wear
Interested in value
This case has been adapted by Satish Duryodhan from The Fashion Channel Wendy Stahl HBS