Dana Wheeler is preparing recommendations for The Fashion Channel's new segmentation and positioning strategy to strengthen its competitive position against main rivals Lifetime and CNN. Three scenarios are suggested: 1) Targeting multiple segments including Fashionistas, Planners & Shoppers and Situationalists with a 20% rating increase but 10% CPM decrease. 2) Targeting just Fashionistas with a 20% rating decrease but 75% CPM increase and $15M in new programming. 3) Targeting Fashionistas and Planners & Shoppers with a 20% rating increase and 25% CPM increase requiring $20M in new programming. Scenario 3 is estimated to generate the highest net income of $168.8M

1. The Fashion Channel
Presented by:
Shiva Chegini
Fatima Zahira Mazlan
Xing Fei Fei
Ammar Al Tayara

2. Current Scenario

Dana Wheeler, senior vice president of marketing for The Fashion
Channel (TFC)

Preparing recommendations for TFC’s new Segmentation &
Positioning Strategy

Strengthen competitive position (spending $60 million)

Attracting new customers with new marketing and advertising
approaches

Focusing on revenue stream for TFC when presenting to CEO Jared
Thomas at senior management meeting.

3. About The Fashion Channel

Founded in 1996 as the first TV cable network devoted only to fashion (24/7)

Constant revenue and profit growth above the industry average since the
beginning

$310.6 millions as revenue were forecasted for 2006

Niche networks reaching almost 80 million U.S. household

Women between 35 and 54 years are most avid viewers

No details about viewers in general and no attempt to focus on any segment

TFC marketing massage “Fashion for Everyone” trying to achieve highest
viewership numbers

Some of board members felt that no need to change. “break something that
isn’t broken”

Main competitors: Lifetime and CNN

4. Main Sources of Revenue
Generally TFC had two main sources of revenues:
1)
Advertising Revenue model:

Target to achieve $230.6 million of revenues generated by advertising.

The adverting business model was based on “Rating” (the % of TV
households watching on average during measured viewing period.)

TFC average rating 1.0; with 110 million TV households in U.S. TFC’s
average was 1,100,000 viewers at any point of time.

These viewers can be reached via advertising spots (30 or 60 seconds in
length.) Total of ads time during one week is 2,016 minutes

Consumers spent about $20 billion buying spots on cable networks

The competition for ad revenue was always fierce among all networks,
since there were several hundred cable networks competing for viewers.

5. Main Sources of Revenue
1)
Advertising Revenue model: Cont.

TFC should focus on their ratings and demographics, because the ad
buyers are interested in them and not interested in specific programming
subjects.

Lifetime and CNN offered strong fashion programming blocks “not
dedicated fashion channels,” which represented a double-edged
competitive challenge

If Lifetime and CNN were successful that would attract more networks to
copy their concept.

The advertising pricing is expressed as CPM (Cost Per thousand.)

6. Main Sources of Revenue
1)
Advertising Revenue Module: Cont.

CPM (Cost Per Thousand)

Audience characteristics:


Ratings


General competitive trends
General Competitive Trends
Main groups of viewers that advertisers were interested in are:

Men of all ages


Advertising revenue for an
individual spot = (Households x
Ratings)/1,000 x CPM
Women aged between 18-34
TFC Ad Sales team could achieve CPM pricing increase from 25% to
75%.

7. Main Sources of Revenue
2)
Cable Affiliate Fees:

Cable affiliate fee revenue stream were expected to generate $80 million in
2006

Most of U.S. households subscribed to cable television through local affiliates,
by paying monthly fee for a basic channels and paying extra fee for premium
channels

TFC was positioned as a basic channel so most consumers received
automatically.

Large Multi-System Operators (MSO) are interested in signing multi-year
contracts with networks that specify the fee of the network upon customer
subscription

8. Main Sources of Revenue
2)
Cable Affiliate Fees:

TFC negotiated average fee of $1.00 per subscriber per year

TFC should maintain their viewership to maintain their fee

TFC was at the low end of the industry range, because of their niche
network

9. Main Competitors

There are two main competitors for TFC in the fashion market.
I.
II.

Lifetime
CNN
These 2 competitors achieved notable rating vs. TFC

10. Main Competitors

Both competitors had launched fashion-specific programming blocks

Lifetime attracting younger female demographics

CNN attracting all men segments

Wheeler had to react against these new programs, so she focused on previous
research study on customer satisfaction.

This study showed that TFC was facing competitive challenges in its
attractiveness to cable affiliates.
TFC
CNN
Lifetime
Interest in viewing
3.8
4.3
4.5
Awareness
4.1
4.6
4.5
Perceived Value
3.7
4.1
4.4


The scale used from 1 to 5 (5 is highest possible score)

11. Main Competitors

The previous data was used to by cable operators to determine how much to
pay for each network

If network underperformed the average, they will risk being offered in less
appealing packages, which will eventually reduce the number of households.

12. SWOT Analysis for TFC to obtain new
segmentation and positioning strategy
STRENGTHS
WEAKNESSES
TFC was the only dedicated network to
fashion 24/7
Most of the management unwilling to change
to new strategies
CEO wants the change with $60 million in
budget
Using generalization market strategy
“Fashion for Everyone”
Dana Wheeler with good experience in
advertising
Bad position vs. competitors “Low average
rating & Low number of HH”
OPPORTUNITIES
THREATS
Finding loyal untargeted segment
Lifetime & CNN with new programs
attracting more and more viewers
Ability to increase rating and Households
rating, and increasing profit
Viewers may not like new programs, which
may lead to drop of TFC out of main cable
operators

13. Main Problems to Solve for TFC
o
Improving competitive position vs. Lifetime and CNN
o
Changing marketing strategies, opportunity for growth
o
The need to increase rating vs. competitors
o
Increasing charges from Ad buyers by improving market position
strategy

14. Market Research Findings

Wheeler was interested in the most recent consumer research reports,
which are mainly 2 reports.
1.
Highlights of a national consumer field study

Which is a list of questions about consumers attitudes toward fashion and TFC.
2.
Compiling previous results into attitudinal cluster

They run the previous answers through a statistical correlation program to analyze
patterns in the way consumers answered.

The report suggested 4 unique groups of viewers: Fashionistas, Planners & Shoppers,
Situationalists, and Basics

Segments were varied in size (among the total participants of households.)

15. Market Research Findings
Highlights of a national consumer field study
Strongly
Agree
Agree
Somewhat Somewhat
Strongly
Disagree
Agree
Disagree
Disagree
Knowing most up to
date trends
16%
20%
19%
20%
15%
10%
Fashion is interesting
15%
12%
15%
24%
19%
15%
Finding best value
clothes
14%
25%
20%
20%
15%
6%
Spending on special
clothes
15%
20%
20%
20%
15%
10%
Watching fashion is
entertaining
25%
20%
10%
10%
20%
15%
TFC favorite channel
on cable
15%
10%
20%
16%
16%
23%
TFC is best place for
fashion information
9%
21%
28%
20%
12%
10%

16. Market Research Findings
Compiling previous results into attitudinal
cluster
Size of Cluster
(%HH)
Index:
Interest in
Fashion on
TV*
Demographic
Highlights
Cluster
Involvement in
Fashion
Fashionistas
Highly engaged
in fashion
15%
140
Female: 61%
Income: >$100k, 30%
Age: 18-34, 50%
Planners &
Shoppers
Participate in
fashion on a
regular basis
35%
110
Female: 52%
Age: 18-34, 25%
Situationalists
Participate in
fashion for
specific needs
30%
105
Female: 50%
Children in HH: 45%
Age: 18-34, 30%
Basic
Disengaged
20%
50
Female: 45%
Male: 55%

17. Suggested Solutions

According to the previous market research findings Wheeler found
several possible multi-cluster schemes, each of these solutions should
be judged according to the following three questions:
1.
How the scheme would impact the quantity of viewers? (Rating)
2.
What the CPM advertising revenue potential would be? (CPM)
3.
How TFC could be different from current and future competition?
(Competitive Advantage)

18. Suggested Solutions

After analyzing the previous results from researches Wheeler found that
(Basic Cluster) is all men, so it would be unwise to target more men viewers,
instead TFC should focus its segmentation and positioning on women,
particularly between the ages 18-to-34.

Since that segment (women aged 18 to 34) were included in all of the
clusters, she found three segments that should be targeted.
1)
Board appeal to a cross segment of: Fashionistas, Planner & Shoppers and
Situationalists.
2)
3)
Single segment approach: Fashionistas
Two segment approach: Fashionistas and Planner & Shoppers

19. Segment 1
Fashionistas, Planner & Shoppers and Situationalists

Cross-Segment: Fashionistas, Planner & Shoppers, and Situationalists

All segments include women aged between 18-34

Awareness and viewing and will increase rating 20%

Ad sales forecasted to decrease 10% in CPM to $1.80

This strategy will not change audience mix so the competitive risk will
not be eliminated

No additional cost for new programming

20. Segment 2:
Single segment approach: Fashionistas

Focus on single target segment: Fashionistas. “Aggressive Approach”

This represent 15% from total households

Dropping the rating 20% to 0.8

strengthen the value of the audience to advertisers which will lead to
an increase in the CPM to $3.50.

Investing in new programming costing additional $15 million

21. Segment 3
Fashionistas and Planner & Shoppers

Dual targeting segment: Fashionistas and Planner & Shoppers

Driving rating to 1.2

Increasing CPM Ad price to $2.50

Investing in new programming costing additional $20 million

22. Segments Comparison
Scenario 1
Scenario 2
Scenario 3
Rating
Increase 20%
(1.0 to 1.2)
Decrease 20%
(1.0 to 0.8)
Increase 20%
(1.0 to 1.2)
CPM
Decrease 10%
($2 to $1.8)
Increase 75%
($2 to $3.5)
Increase 25%
($2 to $2.5)
Programming Cost
No Cost
$15,000,000
$20,000,000

23. Financial Analysis

Wheeler knew that her recommendations should show how her plan would
increase TFC revenue and also quantify risks if the plan was unsuccessful.

She created a revenue calculator spreadsheet to calculate the impact of
Ratings and CPM increases on potential TFC Ad revenues.

Also conducted a Financial Calculator, to see what different impacts these
segments have on the net income of TFC.

The next slides will show the calculations and impacts of each scenario.

24. Ad Revenue Calculator
Current
TV HH
Avg. Rating
Avg. Viewers
Avg. CPM
Avg. Revenue
Ad Minute
Ad.
Minutes/Week
2007 Base
Scenario 1
Scenario 2
Scenario 3
110,000,000
110,000,000
110,000,000
110,000,000
110,000,000
1.00%
1.00%
1.20%
0.80%
1.20%
1,100,000
1,100,000
1,320,000
880,000
1,320,000
$2.00
$1.80
$1.80
$3.50
$2.50
$2,200.00
$1,980.00
$2,376.00
$3,080.00
$3,300.00
2,016
2,016
2,016
2,016
2,016
52
52
52
52
52
Weeks/Year
Ad
$230,630,400 $207,567,360 $249,080,832 $322,882,560 $345,945,600
Revenue/Year
Incremental
$ $ $ $15,000,000
$20,000,000
Programming
Expense

25. Estimated Financials (Figures are in Millions)
Current
2007 Base
Scenario 1
Scenario 2
Scenario 3
Ad. Sales
$230.63
$207.57
$249.08
$322.88
$345.95
Affiliate Fees
$80.00
$81.60
$81.60
$81.60
$81.60
Total Revenue
$310.63
$289.17
$330.68
$404.48
$427.55
Cost of Operations
$70.00
$ 72.10
$72.10
$72.10
$72.10
Cost of Programming
$55.00
$55.00
$55.00
$70.00
$75.00
$6.92
$6.23
$7.47
$9.69
$10.38
$45.00
$60.00
$60.00
$60.00
$60.00
SGA
$40.00
$41.20
$41.20
$41.20
$41.20
Total Expenses
$216.92
$234.53
$235.77
$252.99
$258.68
Net Income
$93.71
$54.64
$94.91
$ 151.50
$168.87
Margin
30%
19%
29%
37%
39%
Revenue
Expenses
Ad Sales
Commissions
Marketing and
Advertising

26. Scenario: 1
Analysis
Advantages
Disadvantages
Compared to 2007 Base, it will generate $40
million more in terms of net income ($94.4 $54.6 Million)
CNN and Lifetime could continue to penetrate
the premium CPM segments
No incremental programming expense vs.
scenarios $15 and $20 Million
Did not change the current market strategy so
not improving the current position
Reaching 100% of all 18 to 34 year-olds female
Harder to compete vs. CNN and Lifetime
TV Rating increase 20%
CPM decrease 10%
Awareness will increase since they are
marketing all clusters
Not targeting a specific cluster of segment

27. Scenario: 2
Analysis
Advantages
Disadvantages
Compared to 2007 Base, it will generate $96.8
million more in terms of net income ($151.4 $54.6 Million)
$15 million cost for new incremental
programming
CPM Increase 75% ($2 to $3.5)
20% decrease in TV ratings
Strengthen the value of the audience
Targeting small percentage of HH only 15%
Focusing on female between the age of 18 -34.
Creating special programming for single cluster
only, not attracting other segments
Decrease competition with Lifetime since their
main segment is female between the ages of 18
and 34.
Customers' awareness would not change it could
drive the rating to decrease more

28. Scenario: 3
Analysis
Advantages
Disadvantages
Compared to 2007 Base, it will generate almost
$115 million more in terms of net income
($168.8 - $54.6 Million)
$20 million cost for new incremental
programming
TV Rating increase 20% (1.0 to 1.2)
CPM Increase 25% ($2 to $2.5)
Targeting only 50% of U.S. TV households
Targeting 50% of U.S. TV Households, of which
50% female and 25% of them are 18-34 age
Might decrease loyal customers if they are not
included in these segments
Different programming offering for both
"Fashionistas and Shoppers & Planners"
Could decrease rating in the long-run

29. Recommendation and Decision:
Scenario: 3

According to the previous studies and after analyzing market and
financial information we suggest the TFC should apply Scenario 3,
which is: Targeting two segments in the market (Fashionistas and
Planner & Shopper)

This will generate the largest financial return compared to the other
scenarios, also will generate the highest margin

Not Generalized targeting all the market, Not Risky targeting only one
segment

Focusing on specified segments, which will increase the awareness
and improve the competitive position vs. CNN and Lifetime

Improving TFC image with cable operators

30. THANK YOU FOR YOUR
ATTENTION
ANY QUESTIONS ?