Jeffrey Florence

The Fashion Channel: Case Write-Up

Decision to Be Made

The management team for The Fashion Channel (TFC) must decide which customer
segment(s) or ―cluster‖ they should target in their new marketing strategy and how they should
position TFC to ultimately increase company revenue. When deciding their marketing strategy,
TFC must consider how they can increase their share of the market (ratings) versus the
increasingly competitive fashion programming on CNN and Lifetime, and if they can maintain or
increase TFC’s satisfaction level among the Large Multi-System Operators. According to Dana
Wheeler, senior vice president of marketing for TFC, ―the two key levers to drive revenue
growth would be (1) increased viewership (ratings), and (2) increased advertising pricing.‖
Therefore, the scenario that The Fashion Channel will implement must increase TV ratings and
advertising revenue.

Relevant Facts

Ratings
One of the most important goals of The Fashion Channel’s new marketing plan was to
improve their average rating compared to similar programming on CNN and Lifetime.
According to Exhibit 1, TFC’s average rating was 1.0 (1.1 million households), while CNN and
Lifetime enjoyed average ratings of 4.0 (4.4 million households) and 3.0 (3.3 million
households) respectively. A major difference between The Fashion Channel and the other two
networks is the time period of their programming. The main purpose of TFC is fashion and
therefore programs around fashion 24 hours a day, 7 days a week. CNN and Lifetime, however,
serve a larger purpose than fashion, and therefore only present programs dedicated to fashion
Monday through Friday from 9-11pm (Lifetime) and Monday through Friday from 8-9pm and
Saturday to Sunday from 10-11pm (CNN). Because they are not devoted to a specific niche,
CNN and Lifetime have the opportunity to capture a larger audience that may have never looked
for fashion programming if it weren’t for Fashion Today and Fashion Tonight.

Advertising Revenue
The Fashion Channel also implemented their new marketing plan to bolster their
advertising revenue. According to the case study, advertisers would ―pay a premium CPM to
reach certain groups; in 2006, these were men of all ages and women aged 18-34.‖ Compared to
CNN and Lifetime, TFC is currently in an undesirable position in terms of consumer
demographics. CNN boasted the best percentage of the male audience at 45% (TFC – 39%)
while Lifetime captured the best percentage of the 18-34 female audience at 43% (TFC – 33%).
Consumer interest, awareness, and perceived value of The Fashion Channel could be indirectly
affecting their advertising revenue. According to an Alpha research study, TFC is below average
on many important categories. They received a rating of 3.8 for consumer interest in viewing, a
4.1 on awareness, and a 3.7 on perceived value. CNN and Lifetime outscored TFC by at least .4
points on each question. This could be another consequence of programming for a very specific
niche market. Regardless of their market, ―the ad buyers (are) most interested in buying ratings
and demographics,‖ so if The Fashion Channel wants to increase advertising revenue, they must
find a way to penetrate the certain premium CPM groups.
 Alternative Courses of Action

Broad-Based Marketing

Pros:
Compared to the 2007 base numbers, the broad-based marketing scenario delivers almost
$40 million more in terms of net income ($94.9 million vs. $54.6 million). Also, compared to
the other two scenarios, the broad-based marketing scenario does not require an incremental
programming expense that costs the other two scenarios at least $15 million to implement. There
are women aged 18 to 34 in all four clusters, so TFC would be marketing to 100% of all 18 to 34
year-olds. Also, because TFC would be investing in a major marketing campaign across all
clusters, awareness and viewing of The Fashion Channel would go up.

Cons:
Although the broad-based marketing scenario produces a higher net income than the 2007
base, the CPM is still $0.20 lower than the current CPM. This $0.20 decrease would take place
because TFC’s current target audience would not provide enough maintain the $1.00 CPM.
Also, because The Fashion Channel would not target a specific audience under this scenario,
TFC would run the risk that their competitors could continue to penetrate the premium CPM
groups—causing TFC’s CPM revenue to decrease even further. There would also be a lack of
differentiation from what The Fashion Channel’s positioning was before and after the
implementation of this scenario. TFC would still struggle to compete with Lifetime and CNN
without changing the programming offered by the channel.

“Fashionista” Segmentation

Pros:
Compared to the 2007 base numbers, the fashionista segmentation scenario produces
almost $100 million more in terms of net income ($151.4 million vs. $54.6 million). The
fashionista segmentation scenario also improved TV ratings from 1.0% to 1.2%. Because this
scenario targets a premium CPM group, TFC’s average CPM would increase from $2.00 to
$3.50. Targeting the fashionista segment would strengthen the value of the audience to
advertisers because 50% of fashionistas are females between the age of 18 and 34. Targeting the
fashionista segment could also help TFC compete against Lifetime, which currently boasts the
largest share of female audience members between the age of 18 and 34.

Cons:
The fashionista segmentation scenario results in a 0.2% decrease in TV ratings for TFC.
Also, because TFC would re-position its programming, this scenario requires a $15 million
incremental programming expense to cover the new programming. The fashionista cluster is
also the smallest of the four clusters, which could lead to a decrease in viewers from the other
clusters. And, although TFC would be able to differentiate its programming from its current
competition, the fashionista segment may be too specific that the programming does not attract
new consumers and therefore fail to compete with other channels that offer programming for a
broader segment. Also, because this scenario targets the smallest cluster, TFC awareness by
consumers would not change, and their TV ratings might decrease even more.

2
“Fashionista” plus “Planners/Shoppers” Segmentation

Pros:
Compared to the 2007 base numbers, the fashionista plus planners/shoppers segmentation
scenario yields almost $115 million more in terms of net income ($168.8 million vs. $54.6
million). Also, this scenario improves TV ratings from 1.0% to 1.2% and average CPM from
$2.00 to $2.50. Targeting fashionistas and planners/shoppers, TFC will market to 50% of US
TV households and advertise to clusters that are made up of 50% and 25% females ages 18-34
respectively. If TFC can target these two segments effectively, they will help increase
advertising revenue by increasing the number proportion of females ages 18-34 audience
members. With this new re-positioning, The Fashion Channel could differentiate its
programming from its current and future competition by producing programs specific to the
fashionista and planner/shopper consumer audience. Their offering would be differentiated
enough to reach their target audience without being too specific that it neglects the majority of
consumers.

Cons:
Although the fashionista plus planners/shoppers segmentation scenario produces
desirable numbers in terms of TV ratings and CPM, this scenario requires a $20 million
incremental programming expense to account for re-positioned programming. Under this
scenario, TFC would only be targeting about 50% of US TV households that make up the
fashionistas and planners/shoppers. This could lead to a decrease in their loyal viewers and
might negatively affect their TV ratings.

Decision and Rationale

The Fashion Channel should position their new marketing plan towards fashionistas plus
planners/shoppers. The risk involved with this scenario is tremendous. TFC jeopardizes losing
some of their most loyal consumers by re-positioning the channel towards fashionistas and the
planners/shoppers. This scenario also calls for a $20 million incremental programming expense
that could truly set the company up for disaster. If it weren’t for the implied benefits of this
scenario, this would seem like a foolish decision. However, the benefits truly do seem to
outweigh the risks in this scenario. 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, and in their specific clusters, the 18-34 female audience market
represents 50% and 25% of the cluster respectively. Therefore, TFC should not only garner
higher TV ratings from this scenario, but they should also increase advertising revenue because
of the increase of the premium CPM that the 18-34 female audience market should bring in. The
third scenario is more favorable than the second scenario, which did not include
planners/shoppers in the new marketing plan. Although the data shows that both scenarios result
in substantial increases in net income, if TFC neglected the planners/shoppers, they would be
neglecting a cluster that makes up 35% of all US Television Households and consists of 25% 18-
34 female audience members. Altogether, The Fashion Channel gives itself the best chance to
increase viewership and advertising revenue by re-positioning the channel toward fashionistas
and planners/shoppers.

3
 Plan for Implementation

The Fashion Channel faces some important challenges with the implementation of this
new marketing plan. One of the more difficult challenges for TFC is trying to keep their loyal
consumers while attracting the new fashionistas and planners/shoppers. The new marketing plan
must focus on capturing a majority of the 18-34 female audience market without neglecting their
other female audience segments. Although the 18-34 female audience is important because of
the premium CPM benefits, if TFC neglects their older market, which currently makes up almost
67% of their total audience, they could certainly lose more than they gain. TFC should analyze
the loyal consumers’ favorite programs and make sure to keep these programs when they begin
their new marketing plan.

Also, their $20 million incremental programming expense seems quite daunting. The
Fashion Channel should look at Lifetime and their Fashion Today program to gain a better
understanding of how they market to their 18-34 year-old female audience. During their
weekday program, Lifetime is able to capture an audience composed of 43% females from age
18-34. If TFC can understand how to better market to 18-34 year-old females, they will be in a
very advantageous position to capture a large share of the market.

Lastly, TFC must find other ways to improve consumer interest, awareness, and
perceived value of The Fashion Channel. Now that CNN and Lifetime were able to produce
successful fashion programs, other networks will most likely try to produce their own fashion
program. TFC must continually find ways to improve consumer interest, awareness, and
perceived value. Whether a channel decides to produce a fashion program or a channel is
created that broadcasts fashion 24 hours a day, 7 days a week, TFC must be aware of its
competition and be ready to differentiate and re-position in order to earn the best TV ratings and
capture the most market share.