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Case Analysis I
September 12, 2011
Company and Market Data Analysis b. Decision Recommendation .The Fashion Channel 2 Case Analysis I Index I. Introduction and Background Analysis a. II. Scenario Analysis III. IV.
So far. new entrants in the fashion segment like CNN and Lifetime have increased competition and threatened market share. Dana Wheeler. Although this cluster only accounts for 15% of the accessible households. and Situationalists. Since its founding in 1996. To convince management of the strategic change she developed three scenarios: a broad multi segment approach. TCF relied on its competitive advantage as the only exclusive fashion so occupying a niche market. and a two segment strategic approach. The second scenario identified offers a narrow strategic approach exclusively focusing on Fashionistas. Strategies and advertising were not based on actual research but on supposed knowledge and assumptions of the market and the demand. has been chosen to develop a new brand strategy. Regardless of which scenario will be chosen. The final approach described narrows down segments and includes only Fashionistas and Shoppers & Planners. Planners & Shoppers. above average growth both in audience and revenue. the senior vice president of marketing. . Introduction and Background The Fashion Channel is a 24/7 cable TV network which exclusively serves a fashion interested audience. a focused one segment approach. TCF has experienced a steady. Although TCF is still the only pure fashion channel. Because of this. Although it was quite popular among its viewers the competition was able to gain remarkable numbers and satisfaction rates recently. The first strategy option provided involves continuing on the company’s current marketing approach with special focus on women aged 18-34.The Fashion Channel 3 Case Analysis I I. it is most valuable to advertisers. The target clusters involve Fashionistas. reputation and awareness in order to stay competitive and profitable. TCF is in need to actively defend and increase their current market share.
Strength TCF is the only exclusive TV network dedicated to fashion with a 24x7 and 7 days a week broadcasting. A new focused advertising strategy as well as successful segmentation will improve the situation. As the company does not perform any customer segmentation. Low customer awareness. Furthermore. Company and Market Data Analysis Conducting a SWOT analysis as base for selecting the appropriate strategy. more concrete conclusions about the company’s internal & external environment can be drawn. the channel is accessible for all cable customers as TFC. Analysis a. most valuable consumer groups will bring huge profits. Due to the large number of subscribers and the comparable low advertising fee it is attractive for advertisers. Furthermore. Weaknesses TCF’s market research is poor. In order to sustain in this environment. According to the SWOT analysis. Threats Today TCF faces various threats due to increased competition. TCF’s competitive advantage will not be sustainable as already other fashion blogs from broader networks erode its market share and show higher audience awareness. advertisers are not able to attract a particular target group or cluster. interest and perceived awareness in comparison to the competition is one of result. reluctance to drastic changes is prevalent in the company and hinders them so far from developments. In the case that TCF becomes even less attractive. competition and advertising clients. Identifying the prime. also it is operating in a niche market. Targeting the viewers of certain clusters and age groups will increase advertising revenue and profit margin. as it does not consider its customers. the company has to . lack of reputation and awareness resulting in loss of market share.The Fashion Channel 4 Case Analysis I II. Opportunities TCF’s strength offers certain opportunities. cable operators will consider offering the network in less appealing packages thereby losing its broad audience. advertising revenues and audience. resulting in less than expected ad revenues.
TCF still has room for growth. These results should be taken in consideration when creating the new programs. special TV programs on current fashion. In order to improve the current situation. as CNN focuses more on the 35-54 agers. Only 30% of the interviewees strongly agree or agree with the statement that TFC is the best place on TV for fashion information. value deals. the national consumer survey offer various hints what consumers are looking for and what should be taken in TCF’s future programming considerations. this survey reflects the lack of reputation and awareness already established before. The consumers who like fashion are most interested in information about fashion trends. TFC does not offer any unique programming feature to distinguish from the fashion blocks of CNN or Lifetime who only dedicated limited broadcasting periods to fashion. . the market and customer data provide vital information. A closer look at the prime segment of those aged 18-34 shows that Lifetime already established a high market share. increase reputation and awareness as well as attract more advertising revenues. Hereby. TCF has to take the risk of losing certain customers as only a change can secure future success. Additionally.The Fashion Channel 5 Case Analysis I develop and renew its strategy and introduce a segmentation approach. Considering the competitive data. targeting more profitable consumer and age groups. This information already disproves the current strategy and leads to a segmentation strategy as the only option. In contrast the competitors’ average ratings are 3 to 4 times as high. The survey shows that fashion is not a topic for a broad audience as only half of the interviewees shows interest or likes to shop. entertainment and special event clothing. However. Reviewing Dana’s data.
covers wide range of population Cons 10% drop in CPM to 1.5 High focus. unique niche strategy Cons Most competitive segment Risk to lose loyal audience Smallest cluster. this approach would be a drastic change in the current overall strategy. less audience Additional programming costs of 15 Million Drop in rating from 1. however in the long-term it will not be profitable as it leads to a drop in CPM. scope. In the short-term Dana might be able to promote this strategic approach as revenue and ratings rise. As it focuses solely on Fashionistas opposed to a broad audience it would be easier to establish a true market niche and build a reputation as the true fashion channel.0 to 0. The company would stay closely with its current strategy while ignoring customer and advertisers demand as well as competitive threat.0 to 1.8 Continued loss of market share due to strong competition Loss of advertising revenues No strategic improvement or development. lack of focus Lack of customized services as all viewers are treated the same Scenario 1 reflects the “easy way” with low expected reluctance from audience and supervisors.8 Lack of strategy-company fit (fashion for everyone) Reluctance from supervisors and audience Opposed to scenario 1. It would further help to distinguish the company from its competitors who take . Scenario 2: Focused approach Pros Highest value for advertisers as it appeals to a specific segment Increased CPM up to 3. and density.The Fashion Channel 6 Case Analysis I b.2 increase in ratings Less expected internal and external reluctance due to minimal changes Easy to obtain economies of scale. Scenario Analysis Based on this data Dana’s segmentation approaches are evaluated and pros and cons developed: Scenario 1: Broad multi segment approach Pros Reduced risk as approach is consistent with company mission (Fashion for everyone) and past strategic approaches No additional programming costs 1.
8% 1.000 1.980 2016 2016 52 52 $230.000.000 110.0% 1100 1100 $2.0 to 0.000.000 .300 2016 2016 52 52 $322.000 110.000. However.000.600 $15.80 $2.00 $1.2 880 1320 $3.000 $20. a rating drop from 1. and additional programming cost $15.360 $0 Scenario 1 110. Although strategic changes would be made. Scenario 3: Two segment approach Pros Increase in rating from 1. it is important to conduct a financial impact study of each scenario to support the decision.200 $1.2 as well as a boost in CPM to $2.50. Exhibit 4: Ad Revenue Calculator TV HH Average Rating Average Viewers (Thousand) Average CPM Average Revenue/Ad Minute Ad Minutes/Week Weeks/Year Ad Revenue/Year Incremental Programming Expense Current 2007 Base 110.832 $0 Scenario 2 Scenario 3 110.080. The change would lead to 20% growth in ratings. Although.50 $3.000. The focus on the Fashionistas-Cluster which is highly valued by advertisers is expected to increase the CPM to $3.000.000 0.000.400 $207.630.80 $2.000 per year compose additional financial hurtles.0% 1.000 1. Dana will have a hard time selling this approach to her supervisor as it offers high risk and demands the openness to reinvent the channel.567.20% 1320 $1.50 $2.8.0 to 1.882. targeting the two most relevant segments without going too broad.080 $3.The Fashion Channel 7 Case Analysis I a more mainstream approach.50 Leveraged risk as focus is not as narrow as in option 2 Transition and development of strategy instead of radical change as opposed to option 2 Company’s past mission is still feasible to retain Cons Higher programming expenses of additional 20 Million The third scenario seems to be a compromise between scenario 1 and 2. A 20% loss of viewers. the channel would still be able to maintain its mission.945.000.000.000.0 to 1.560 $345.50.376 2016 52 $249. However the increase in revenue comes with additional cost of $20. from 1. the factual scenario analysis of each strategic option already leads to a favorable strategic approach.2 Growth in CPM to 2.
918.560 Scenario 3 $345.912 $45.882.425 $60.368 $60.167.488 30% $72.986.080.560 $81.232 37% 39% According to the Ad Revenue Calculations.600 $70.100.100.000.083 $168.000 $55.The Fashion Channel 8 Case Analysis I Exhibit 5: Financials 2006 Actual Revenue Ad Sales Affiliate Fees Total Revenue Expenses Cost of Operations Cost of Programming Ad Sales Commissions Marketing & Advertising SGA Total Expense Net Income Margin $230. The expected net income when choosing scenario 3 furthermore is 80% higher as in the current year and 78% higher as in scenario 1.000 $70.000.772.000.000 $6.100.378.000.100.686.482.600.477 $60.000.000 $7.000 $41.630.000 $252.912 $93.630.200.000 $234.021 $60.339 19% $72.000 $40.000.867.000 $41.678.400 $80.000 $41.600.000 $10.908.200.000 $330.000 $258.360 $81.545.425 $94.000.000.000 $235.407 29% $72.021 $54.832 Scenario 2 $322.496.360 Scenario 1 $249.000 $41.711. revenues are expected to increase by 50% in comparison to the current year. Although the expenses for Scenario 3 are the highest (Exhibit 5)¸ it offers the highest profit margin (39%).000 $6.600.000 $188.8.131.520. Scenario 2 is expected similar successful as scenario 3 with a profit margin of 37%.000 $75.000 $9.000 $310. Scenario 3 offers the highest revenue prospects per year.680.368 $151.477 $72.640.000.000.600 $81.000 $216.945.000. .000 $55.472.400 2007 Base $207.000 $404.832 $81. In case this strategy is selected.000.200.000 $427.918.000 $289.567.527.000.
Scenario 1 is out of question as Dana would not be able to initiate the needed change. it convinces with the highest profit margin and net income. supervisors and the broad audience would be hard to convince as it alters the current concept completely. awareness and reputation to its main competitors.The Fashion Channel 9 Case Analysis I III. Decision In regard to the different analysis conducted. less resistance from supervisors and audience is expected. While advertisers might favor this narrow target market. This option not only offers the least beneficiary financial data. the concept is entirely too risky. Although Scenario 2 offers a higher CPM and its profit margin is only marginally less than in scenario 3. . it allows the company to segment with leveraged risk as the strategy is not as narrow as in scenario 2 and not as broad as in scenario 1. Furthermore. Although this strategy does not offer the highest CPM. As it is not a drastic change to the current strategy. scenario 3 is the most fitting long-term strategic option Dana can suggest to her supervisors. it is disadvantageous as the company would lose audience.
Dana knows that the supervisors have the tendency to avoid changes and show reluctance to new approaches. resistance of the people involved. the commitment. as well as a lack of resources will lead to a failure. technicians etc. Fashionistas aged 18-34. the programming should focus on them during the weekend or at night time. program writers. Hereby all employees can be involved while capturing valuable input from sales people. III. Objective analysis. only broadcasts fashion blocks on weekdays. Lifetime. Weekends are especially interesting as their main competitor in this segment. II. Considering the implementation of an integrated marketing approach. advantages and disadvantages of each possible outcome as well as potential financial outcomes have to be presented in order to initiate a discussion and come to one coherent conclusion. The programming should be based on the attitude drivers The internalization of the integrated marketing message is another advantage of the described involvement and joint . Dana has to become a change agent and the leader of the strategic change. will be highly involved in their profession during the week. it needs the full commitment and support from both the supervisors and employees. she has to be absolutely convincing and in charge of the discussion. Dana may set up mixed project teams working on suggestion to bring scenario 3 alive. Recommendations In order to put scenario 3 into action it is recommended that Dana follow certain steps to ensure its success: I. development. As two different segments are target. Although the third option might not be as drastic as scenario 3. involvement and support of the whole team is indispensable to transport the coherent message to the customers. Dana is advised to approach both segments and the different age groups separately in order to avoid mixed messages or confusion however considering not stepping out the overall integrated marketing message. In order to achieve commitment and involvement. As the prime cluster.The Fashion Channel 10 Case Analysis I IV. Lack of commitment.
keep track of new changes and demand. measure awareness and reputation and conduct continuous market research. . This action will help to quickly adapt the strategy in case the audience or the advertisers do not respond as predicted. Finally. Planners and Shoppers. it is recommended that Dana keeps track of the implementation process. In order to ensure the success of this strategy implementation. profit and customer objectives and continuously watch as well as measures the progress. establish SMART sales. Dana is advised to stay in close contact with the audience and advertisers.The Fashion Channel 11 Case Analysis I established in the survey. where the age group 35-54 is more predominant can be mainly target during the day or late afternoons. V. IV.
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