Fashion Channel

Major Issues: 1. TFC losing its market share after the entry of competition in its segment( CNN, Lifetime) 2. Decline in the viewership percentage 3. No clear branding and positioning strategy 4. No detailed demographic data of the viewers 5. Greater awareness among advertisers / clients regarding Ad placements 6. Threat of falling into the category of unpopular channels 7. Low on brand awareness, perceived value and interest viewing. Analysis for resolving the issues: Scenario 1- Broad appeal In this scenario the audience mix remains the same, we boost ratings through a m ajor marketing and advertising campaign, but the CPM drops 10% from $2.00 to $1. 80. The clear benefit to this strategy is a larger audience. The downside is no clea r advantage in terms of sustainable audience growth. Fully 50% of t his broader audience is either disengaged altogether or shopping for specific needs. While marketing and advertising campaign may encourage these audiences to tune i n, they are not apt to remain steady viewers. Scenario 2 Fashionistas This strategy would focus on a smaller portion of the audience, but one that is very valuable to advertisers. While we would be able to charge higher CPM and in crease total revenue, the audience would shrink. We might also risk affiliate su pport with programming changes that impact customer satisfaction negatively. Scenario 3 Fashionistas and Shoppers/Planners This option allows us to target two key audience segments which are present 50% of the total viewership. We are projecting that this strategy will drive ratings up to a 1.2 share over time. Both segments- fashionistas and planners/ shoppers - deliver the young female audience ( women 18-34) many of the advertisers seek to reach in which case they will be able to charge a premium CPM, $2.50 (25% hig her than the current rates). Our research supports the notion that these audien ce segments will remain loyal viewers. So if we look at the exhibit 5, TFC s estimated financials for 2006-7, we see that the overall margin is the highest for scenario 3 when compared with the other t wo scenarios. Cost of production and revenue is also the most viable in scenario 3. Recommendations and inferences on the major issues: 1. Focus on new target audience in the age group of 18- 36 2. To develop an integrated positioning strategy 3. To use different marketing tools to create brand awareness like internet m arketing, public relations, promotions. 4. To increase advertising pricing and viewership 5. Need more variety in fashion content (Programming) targeting the target au dience. 6. These programs need to be aligned with the prime time slots to capture max imum viewership. +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ 1. - How would you interpret the consumer and market data if you were Dana Wheel er? From its launch in 1996 until recently, The Fashion Channel (TFC) had a great su ccess because of their broad audience. TFC had no significant competition in ter ms of the fashion-specific content it offered until CNN and lifetime made notic

ed TFC´s success so they lunch specific fashion programs for specific fashion tast e so now consumers have choice instead of a broad fashion repertory. The population does not have the same tastes, views and opinions regarding fashi on and TFC cannot satisfy all those fashion segments. So now TFC has the opportu nity instead of generalizing their programing they can focus at meeting the need s of one segment to gain loyalty. To do so, TFC has to know their market and who their viewers are. TFC meets the needs of women between 35-54 years old with a 39%-61% split in favour of women; with 33% of viewers aged 18-34 and 45% aged 35-54. A survey of consumers by GFE Associates identifies four groups that make up potential viewers: Fashionistas (the fashion devoted, who comprise 15% of those surveyed); Planners and Shoppers (enjoyers of fashion, 35%); Situationalists (occasionally interested in fashion for specific purposes, 30%) and Basics (generally uninterested in fashion, 20%) . The research indicates that male consumers tend to be part of the Basics gro up, while 61% of Fashionistas are women. The market that TFC should aim to is women aged 35-54 since their are the bigges t part of the market. 2.

The three targeting scenarios: Financial Impact Analysis

The following Ad Revenue Calculater shows the three different scenarios that seem possible for Dana. It calculates the Ad Revenue per year each scenario. It is im portant to use not only the pros and cons of each scenario but also look at the financial impact of each possibility. Even though the calculation is the first a pproach to decide on one of the scenarios, in the end the decision will be made by both; Financial Impact Analysis and Pro/ Con Analysis. Exhibits 4 and 5 estim ate the numbers per year of Ad revenue, Net Income and Margin of TFC. It needs t o mentioned that this estimation of Dana can only be a reliable source to the de cision making process if there are no bigger changes in the overall business of TFC and if there are no other unexpected expenses and costs in the future. In ad dition she would need the support from the board of executives in order to be ab le to spend the incremental programming expenses in scenario 2 and 3. [pic] [pic] According to this calculation and looking at the numbers from a financial standp oint you would have to consider scenario 3 to be the best option for TFC. On the one hand the expenses for scenario 3 are the highest ($20.000.000) but it will generate the highest profit margin (39%) and highest net income, approximately 8 0% higher than in the current year. 3. - The three targeting scenarios: Factual Analysis This part provides a factual Pros & Cons Analysis in order to determine if the con clusion from the financial impact analysis is right. After understanding every s cenario in detail the pro and con tables for each scenario will evaluate if the financial analysis can be supported or not. Scenario 1

Broad approach

|Pros |Cons | | Fashion for everyone strategy stays; therefore no extensive a new approach; ignoring market developments | |changes necessary | | |Increase in the average rating: 20%

|Not developing

|No focus: Fashion for everyone strategy stays |Less risk due to minimal changes |Decrease in CPM by 20%; Long term disadvantage possible |Short term success possible | |

| |

After analyzing the pros and cons for the first scenario there has to be mention ed that there are facts against this scenario that cannot be ignored. Staying wi th the same strategy does not need to be a bad decision but ignoring market deve lopments in addition to the decrease in CPM should not be the first possibility to turn to for Dana. Scenario 2: Niche approach |Pros |Cons | |Increasing CPM to 3,5 |Less audience when choosing a niche strategy | |Focus on a niche with a promising strategy |Rating falls from 1,0 to 0,8 | |Choosing ONE specific group of customers: Higher ad revenue |Does not f | it to Fashion for everyone ( loosing loyal customers | |Strong competitors for the chosen target grou p | The second scenario has the big advantage of increasing the CPM by 250% and puts its focus on a niche audience that is able to generate more net income and bett er profit margins for TFC. The strongest fact against scenario 2 on the other ha nd is that Dana would give the strategy of TFC up completely. That way it is pos sible to loose customers and part of their brand image in the business due to th e fact that there is no consistency in their marketing activities. Scenario 3: Dual approach |Pros |Cons | |CPM increases to 2,5 and rating from 1,0 to 1,2 uld make them loose some audience in the short term |Moderate focus: Less risk than scenario 2 st programming expenses | Fashion for everyone is still applicable

|Changes co | |Highe | | |

Finally the third, most expensive scenario turns towards a more focused approach that will still retain TFC´s Fashion for everyone strategy. The high investment cos ts of $20 Million will generate the highest net income and the highest profit ma rgin for TFC. There still is some short-term risk that cannot be ignored but wit h respect to the market development this third option could be favorable for Dan a. 4. If you were Dana Wheeler, which would you recommend and why?

After analyzing the three Scenarios, Dana Wheeler should decide for the third sc enario because it is the best long-term strategy. The Fashion Channel should the refore position their new marketing plan towards fashionistas and planners/shopp ers. Nevertheless Dana and her team can not disregard the enormous risks that co me along with scenario 3. Firstly, the organization will lose some of their most loyal customers by re-positioning the channel towards fashionistas and the plan ners/shoppers. Secondly, this scenario also calls for a $20 million incremental programming expense that could truly set the company up for disaster. But although Scenario 3 has not the highest CPM, it offers the highest profit ma rgin and the highest net income. Besides the increase in average rating, average CPM, and almost 40% margin, this scenario puts The Fashion Channel in the most opportune situation. According to Exhibit 3, fashionistas and planners/shoppers make up about 50% of all US television households. In their specific clusters, t he 18-34 female audience market represents 50% and 25% of the cluster respective ly. The CPM of the second scenario is indeed higher and the profit margin only 2 per cent smaller than the third, however concept 2 is much more risky. Therefore it would be hard to convince the audience and the supervisors to decide for scenari o 2. Dana should definitely decide against scenario 1. Looking at Exhibit 5, the firs t scenario has the lowest profit margin and the lowest net income of all the thr ee solutions. Therefore the Fashion Channel would sooner or later lose awareness , audience and reputation to its main competitors. Finally it only remains to say that scenario 3 is the most fitting one that woul d not force a drastic change to the current strategy and retain TFC`s customer v alue, satisfaction and loyalty. 5. Dana is fitting the role of change agent in the organization. How would she m anage the discussion and meeting to be the most effective in leading the group t o make the right decision? First of all, Dana needs the total acceptance and support of all supervisors and all employees. Therefore she must convince all of them by arguing for strategy 3. This could be difficult because supervisors always have the tendency to avoid changes and show reluctance to new approaches. She has to be completely convinc ing. She also has to be objective. Therefore she must not only point out all adv antages but also the disadvantages. Furthermore she should show all 5 exhibits t o make the people understand why she would recommend scenario 3. Under no circum stances she should not hide any facts of her data-sheet and has to be absolutely honest. To achieve involvement, Dana could build up little Teams that work on Scenario 3 . Obviously, all employees could be part of creating the new concepts. It is imp ortant to know the opinion of a lot of different employees of different division s. As two different segments are target, Dana is advised to approach both segments and the different age groups separately in order to avoid mixed messages or conf usion however considering not stepping out the overall integrated marketing mess age. Fashionistas aged 18-34 for example, are most likely to not have time durin g the week because of their job. The programming should therefore focus on this segment during the weekend or at night. During the week, for example on the late afternoons, Planners and Shoppers, the age group 35-54, should be focused upon. Of course it takes some time to implement this strategy. Nevertheless, with a co ordinated teamwork they will be able to establish the scenario and lead TFC into a promising future in terms of net income, profit margin, customer value and lo yalty.