2. What can TFC do in terms of positioning and programming to draw back viewers that were lost to Lifetime and CNN and
subsequently boost average ratings and CPM by the end of 2007?
TFC Lifetime CNN
Consumer Interest in
Viewing
3.8 4.5 4.3
Awareness 4.1 4.5 4.6
Perceived Value 3.7 4.4 4.1
• TFC’s poor performance relative to that of CNN and Lifetime, in terms of interest
in viewing and perceived value shows that TFC needs strengthening of
programming to offer content that’s appealing to the viewers
• Cable affiliates use average ratings to determine how much to pay for each
network, and also in which package they would include the network in their
consumer offerings. Under-performing networks are under the risk of being
offered in less appealing packages which would result in lower viewership, in
this case The TFC
Recent study on Customer Satisfaction with cable networks
Cable Affiliates POV (Avg. Ratings)
Advertisers POV (CPM)
(between 1-5, with 5 being the highest possible score)
All TV
Viewers
TFC
Lifetime:
Fashion Today
CNN: Fashion
Tonight
Time Period 24x7 24x7 M-F, 9-11 PM
M-F, 8-9 PM
Sat-Sun, 10-11 PM
Male 49% 39% 37% 45%
Female 51% 61% 63% 55%
18-34 years 30% 33% 43% 27%
35-54 years 41% 45% 42% 40%
54-74 years 21% 20% 14% 26%
>75 years 8% 2% 1% 2%
Income over
$100,000
16% 18% 19% 17%
Average
Rating
NA 1.0 3.0 4.0
Average
Households
110M 1.1M 3.3M 4.4M
• 18-34 years old is the most attractive age bracket for advertisers.
Only 33% of TFC viewers are in that age bracket which is 10%
lower than that of Lifetime’s at 43% and with TFC already leading
in the 35-54 years age bracket, it is reason enough for TFC to
focus on targeting 18-24 years age bracket
• TFC’s average ratings are very poor at just 1.0 reaching 1.1M
households, compared to Lifetime and CNN at 3.0 and 4.0,
reaching 3.3M and 4.4M households respectively
Reference: US Census, Business documents, estimates
Losing viewers has led to TFC being less attractive to Advertisers
as well as Cable Affiliates, who are the main customers of the
TFC, affecting TFC’s revenue.
2
3. Segmentation of viewers into meaningful clusters can help TFC understand them better and measure the implications of
targeting specific clusters of viewers.
Even though Advertisers and Cable Affiliates are the 2 main customers
of TFC (source of revenue), the main tool that is used to reach out to
advertisers and cable affiliates are the viewers, the quantity and quality
of which can be controlled by the choices that TFC makes.
TFC Viewers
Advertisers
Cable
Affiliates
Relevant
Content
Shoppers
Revenue $$
Revenue $$
Subscribers
Why are viewers important?
Cluster
Involvement
in Fashion
Size of
Cluster
(% of
HH)
Index:
Interest in
Fashion on
TV (100=All
viewer Avg.)
Demographic
Highlights
Attitude Drivers
Fashionistas
Highly
Engaged
15% 140
Female – 61%
18-34 – 50%
Anticipate trends and stay up to date
Think a lot about fashion
Enjoy shopping
Develop fashion expertise to share
Fashion is entertaining
Planners &
Shoppers
Participate
in fashion
on a regular
basis
35% 110
Female – 53%
18-34 – 25%
Stay up to date
Enjoy shopping
Fashion is practical
Interested in value
Situationalists
Participate
in fashion
for specific
needs
30% 105
Female – 50%
18-34 – 30%
Enjoy shopping for specific needs
Think about fashion for specific
situations
Fashion is both entertaining and practical
Interested in value
Basics Disengaged 20% 50
Female – 45%
Male – 55%
Do not enjoy shopping
Do not spend much time thinking about
what to wear
Interested in value
With the help of a recent consumer research, meant to analyse the attitudes of consumers towards
fashion and TFC, 4 unique groups of viewers were identified as shown in the Table below:
GFE Associates: Analysis of Attitudinal Clusters in US Television households for The Fashion Channel
Segmentation
• TFC should only be interested in targeting people that have an above average interest in
fashion on TV as it will be possible to attract, engage and retain them for a longer period of
time. Also, it comprises of significant number of individuals with favorable demographic
features that adds value to advertisers (Females and 18-34 years of age)
Hence, producing relevant and appealing content is of utmost
importance to TFC as it is the best way to attract, engage and
retain viewers, which can only be achieved through a better
understanding of the viewers.
3
4. Analysis of 3 alternative positioning strategy shows that TFC should focus on Dual-segment approach as it offers the most
optimized mix of viewers that drives increased viewership and advertising pricing.
Target Segments Clusters
Interest &
Involvement in
Fashion
Effect on CPM & Ratings
Financially
Profitable
Single-Segment
Fashionistas High
Ratings: -20%
(from 1.0 to 0.8)
Ad Sales: +75%
(from $2.0 to $3.5)
Net Income
$94,908,407
Margin – 29%
Dual-Segment
Fashionistas
Planners and
Shoppers
Moderate-High
Ratings: +20%
(from 1.0 to 1.2)
Ad Sales: +25% (from
$2.0 to $2.5)
Net Income
$168,867,232
Margin – 39%
Cross-Segment
Fashionistas
Planners and
Shoppers
Situationalists
Moderate
Ratings: +20%
(from 1.0 to 1.2)
Ad Sales: -10%
(from $2.0 to $1.8)
Net Income
$151,496,083
Margin – 37%
• A Positioning Strategy that caters to a specific target
audience will allow TFC to attract a very specific set of viewers
that are valuable for advertisers and will help TFC boost CPM
but will lose average ratings and the support of cable affiliates
due to decreased viewers. More attractive to Advertisers, Less
attractive to Cable affiliates
• A Positioning Strategy that caters to a broad target audience
will allow TFC to increase viewers and average ratings but will
decrease the capability of TFC to offer a specific target group
that is valuable to the advertisers and will lead to a decrease in
CPM. More attractive to Cable affiliates, Less attractive to
Advertisers
Dual-Segment approach consisting of Fashionistas and Planners and
Shoppers not only boost CPM and Avg. Ratings but are also estimated to
generate maximum revenue amongst existing positioning alternatives.
With moderate-high interest in fashion, it will also be possible to attract,
engage and retain these viewers in the long run.
Considering the 3 segments that have above average interest in
fashion on TV, TFC has to position itself in such a way that it
attracts a proper mix of viewers that are valuable enough to
advertisers due to their interest in fashion and also have enough
number of viewers to make TFC valuable to cable affiliates.
Criteria for evaluation
Alternatives
4
5. Considering its core competencies, TFC must invest 20M in programming to create content that is appealing to the target
segments and also an additional 15M in marketing activities to successfully drive high awareness and engagement with TFC.
TFC’s Core Competencies
• Years of experience and deep knowledge that TFC has built
over the years, have given TFC a strong reputation which
gives them the ability to collaborate with the biggest names
in the fashion industry and other popular personalities
• The only network dedicated solely to fashion 24x7 which
gives them the ability to keep their broadcast schedules
flexible (Biggest advantage)
• TFC has experienced constant revenue and profit growth
above the industry average which gives them the ability to
financially support any changes that are required to boost
success
TFC should introduce a talk show with celebrities that would mostly attract a younger
audience and focus the broadcast timings around the same timings as CNN and Lifetime
(between 8-11PM). This would directly put CNN and Lifetime in a position where its
possible for them to lose their viewers
TFC should introduce an interactive show where popular fashion icons offer fashion tips
and asks viewers to send their feedback (in the form of a picture of themselves) to stand
a chance to be featured on the show. This will boost engagement and also inspire young
fashion enthusiasts creating an emotional connect
Having a network dedicated to fashion 24x7, will allow TFC to repeat telecast their
popular shows at different times(suitable to its viewers). This is something CNN and
Lifetime cannot imitate
Knowing that Fashionistas and Planners and Shoppers are highly engaged or regularly
involved in fashion, offering relevant and good content, will offer them a huge edge over
CNN and Lifetime as viewers can switch to TFC for fashion content at any time of the day
compared to CNN and Lifetime that broadcasts fashion content only between 8-11PM
Collaborate with fashion influencers on social media(Bloggers, Vloggers) to increase
awareness about TFC and drive their followers towards TFC on TV. One way to do this
would be to invite these influencers on the aforementioned talk show and let the
influencers promote it on their respective platforms
TFC should also promote themselves on other places where fashion-interested people
are present such as Fashion magazines, fashion events, fashion schools
Exhibit 5: Financials Dual Segment
Scenario 3
Revenue
Ad Sales $345,945,600
Affiliate Fees $81,600,000
Total Revenue $427,545,600
Expenses
Cost of Operations $72,100,000
Cost of Programming $75,000,000
Ad Sales Commissions $10,378,368
Marketing & Advertising $60,000,000
SGA $41,200,000
Total Expense $258,678,368
Net Income $168,867,232
Margin 39%
Financial Feasibility with additional expenses
Recommendations
5
6. Exhibit 4: Ad Revenue Calculator Cross Segment
Scenario 1
Single Segment
Scenario 2
Dual Segment
Scenario 3
Current 2007 Base
TV HH 110,000,000 110,000,000 110,000,000 110,000,000 110,000,000
Average Rating 1.0% 1.0% 1.2% 0.8% 1.2%
Average Viewers (Thousand) 1100 1100 1320 880 1320
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 $0 $0 $15,000,000 $20,000,000
Exhibit 5: Financials 2006 Actual 2007 Base Cross Segment
Scenario 1
Single Segment
Scenario 2
Dual Segment
Scenario 3
Revenue
Ad Sales $230,630,400 $207,567,360 $249,080,832 $322,882,560 $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 $404,482,560 $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 $9,686,477 $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 $252,986,477 $258,678,368
Net Income $93,711,488 $54,640,339 $94,908,407 $151,496,083 $168,867,232
Margin 30% 19% 29% 37% 39%
Appendix : Financial Statements
6
