Current Scenario

Dana Wheeler, senior vice president of marketing for The Fashion

Channel (TFC)
Preparing recommendations for TFCs 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.
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
isnt broken
Main competitors: Lifetime and CNN
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. TFCs
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.
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.)
Main Sources of Revenue

1) Advertising Revenue Module: Cont.

CPM (Cost Per Thousand)
Audience characteristics: Advertising revenue for an
General competitive trends individual spot = (Households x
Ratings
Ratings)/1,000 x CPM
General Competitive Trends

Main groups of viewers that advertisers were interested in are:

Men of all ages
Women aged between 18-34

TFC Ad Sales team could achieve CPM pricing increase from 25% to
75%.
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
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
Main Competitors
There are two main competitors for TFC in the fashion market.
I. Lifetime
II. CNN
These 2 competitors achieved notable rating vs. TFC
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)

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

Strongly Somewhat Somewhat Strongly

Agree Disagree
Agree Agree Disagree Disagree
Knowing most up to
16% 20% 19% 20% 15% 10%
date trends
Fashion is interesting 15% 12% 15% 24% 19% 15%
Finding best value
14% 25% 20% 20% 15% 6%
clothes
Spending on special
15% 20% 20% 20% 15% 10%
clothes
Watching fashion is
25% 20% 10% 10% 20% 15%
entertaining
TFC favorite channel
15% 10% 20% 16% 16% 23%
on cable
TFC is best place for
9% 21% 28% 20% 12% 10%
fashion information
 Market Research Findings
Compiling previous results into attitudinal
cluster
Index:
Involvement in Size of Cluster Interest in Demographic
Cluster
Fashion (%HH) Fashion on Highlights
TV*
Female: 61%
Highly engaged
Fashionistas 15% 140 Income: >$100k, 30%
in fashion
Age: 18-34, 50%
Participate in
Planners & Female: 52%
fashion on a 35% 110
Shoppers Age: 18-34, 25%
regular basis

Participate in Female: 50%

Situationalists fashion for 30% 105 Children in HH: 45%
specific needs Age: 18-34, 30%

Female: 45%
Basic Disengaged 20% 50
Male: 55%
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)
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) Single segment approach: Fashionistas
3) Two segment approach: Fashionistas and Planner & Shoppers
 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
 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
 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
 Segments Comparison

Scenario 1 Scenario 2 Scenario 3

Increase 20% Decrease 20% Increase 20%
Rating
(1.0 to 1.2) (1.0 to 0.8) (1.0 to 1.2)

Decrease 10% Increase 75% Increase 25%

CPM
($2 to $1.8) ($2 to $3.5) ($2 to $2.5)

Programming Cost No Cost $15,000,000 $20,000,000

 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.
 Ad Revenue Calculator

Current 2007 Base Scenario 1 Scenario 2 Scenario 3

TV HH 110,000,000 110,000,000 110,000,000 110,000,000 110,000,000

Avg. Rating 1.00% 1.00% 1.20% 0.80% 1.20%

Avg. Viewers 1,100,000 1,100,000 1,320,000 880,000 1,320,000

Avg. CPM $2.00 $1.80 $1.80 $3.50 $2.50

Avg. Revenue
$2,200.00 $1,980.00 $2,376.00 $3,080.00 $3,300.00
Ad Minute
Ad.
2,016 2,016 2,016 2,016 2,016
Minutes/Week
Weeks/Year 52 52 52 52 52
Ad
$230,630,400 $207,567,360 $249,080,832 $322,882,560 $345,945,600
Revenue/Year
Incremental
Programming $ - $ - $ - $15,000,000 $20,000,000
Expense
 Estimated Financials (Figures are in Millions)
Current 2007 Base Scenario 1 Scenario 2 Scenario 3
Revenue
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
Expenses
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
Ad Sales
$6.92 $6.23 $7.47 $9.69 $10.38
Commissions
Marketing and
$45.00 $60.00 $60.00 $60.00 $60.00
Advertising
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%
 Scenario: 1
Analysis
Advantages Disadvantages

Compared to 2007 Base, it will generate $40

CNN and Lifetime could continue to penetrate
million more in terms of net income ($94.4 -
the premium CPM segments
$54.6 Million)

No incremental programming expense vs. Did not change the current market strategy so
scenarios $15 and $20 Million 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

Not targeting a specific cluster of segment
marketing all clusters
 Scenario: 2
Analysis
Advantages Disadvantages

Compared to 2007 Base, it will generate $96.8

$15 million cost for new incremental
million more in terms of net income ($151.4 -
programming
$54.6 Million)

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%
Creating special programming for single cluster
Focusing on female between the age of 18 -34.
only, not attracting other segments

Decrease competition with Lifetime since their

Customers' awareness would not change it could
main segment is female between the ages of 18
drive the rating to decrease more
and 34.
 Scenario: 3
Analysis
Advantages Disadvantages

Compared to 2007 Base, it will generate almost

$20 million cost for new incremental
$115 million more in terms of net income
programming
($168.8 - $54.6 Million)

TV Rating increase 20% (1.0 to 1.2)

Targeting only 50% of U.S. TV households
CPM Increase 25% ($2 to $2.5)

Targeting 50% of U.S. TV Households, of which Might decrease loyal customers if they are not
50% female and 25% of them are 18-34 age included in these segments

Different programming offering for both

Could decrease rating in the long-run
"Fashionistas and Shoppers & Planners"
 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
THANK YOU FOR YOUR
ATTENTION
ANY QUESTIONS ?