CASE: THE FASHION CHANNEL

GROUP 8 MEMBERS:
ANUJ CHANDA – 19A1HP114
SAURAV KUMAR – 19A1HP110
ARUN NATH R – 19A2HP468
S RAHUL – 19A2HP421
SWAPNIL JOARDAR – 19A1HP003
SOUMILI DAS – 19A2HP419
 SUMMARY
The Fashion Channel (TFC) was the first TV network and the only successful network
dedicated solely to fashion. It was founded in the year 1996 and broadcasted 24 hours per
day, 7 days per week. TFC was a niche network reaching to almost 80 million U.S.
households, which appealed to women between the age group of 35 to 54 years.
The channel was marketed with a message “Fashion for Everyone” to achieve high
viewership ratings. The main sources of revenue for TFC were its Advertisement Revenue
Model and Cable Affiliate Fees. TFC had shown a steady growth rate till the year of 2006.
In the beginning of 2006, TFC faced competition from new networks like Lifetime and CNN,
which affected the ad revenue of TFC. The leadership at TFC realized that it needed a
change in their approach to marketing by developing a modern brand strategy to secure
their position as the market leader. But simultaneously, they were apprehensive to change
as TFC had been highly successful to date without any detailed segmentation, branding, or
positioning strategy.
The senior vice president of marketing at TFC, Dana Wheeler was given the task to prepare
an analysis about the new strategy based on different scenarios under various conditions.

ANSWER - 1

From Exhibit 1 we can deduce that:

The total viewers (adults over 18 years of age) of The Fashion Channel are 39% male and
61% female with an average rating(% TV households watching on average during measured
viewing period) of 1.0, at 1.1 million average households, running at 24 hours per day, 7
days a week unlike any other channel or its new competitors.
From Exhibit 1&3 we can segment the total consumers into clusters (% Households):
1) Fashionistas - 15%
2) Planners and shoppers - 35%
3) Situationalists - 30%
4) Basics - 20%
From Exhibit 3, we can comment on the interest in Fashion on TV for the clusters from the
index (100=All viewer average) given below:
1) Fashionistas - 140
2) Planners and shoppers - 110
3) Situationalists - 105
4) Basics - 50
From the clusters it is noticed that the majority of interested consumers are females
between the age group of 18-34.
It is also noticed that the Basics cluster which mainly consisted of men are not interested in
fashion, hence it would be unwise to pursue additional male viewers.
From the Exhibit 2, Dana Wheeler can segment the marketing situation into 3 scenarios:
1) Broad/Cross segment: Will include fashionistas, planners & shoppers and
situationists with ratings boost of 20%, pushing the ratings from 1 to 1.2, but the
CPM will drop by 10% i.e. it will become $1.80. So average viewers (in ‘000) will be
1.2% of 110 million i.e. 1320.
2) Single segment approach: This will focus mainly on fashionistas, which consisted of
61% females, out of which 50% were between the age range of 18 to 34. This
scenario will deliver a rating of 0.8 at an average CPM of $3.50. But there would also
be an additional of $15million expenditure for programming, thus there would be an
average viewership of 880,000 yielding 3080 CPM at the rate of $3.5.
3) Two segment approach: This approach will target fashionistas and
Shoppers/Planners and increase the average rating to 1.2 and CPM at $2.5; thus
average viewers(in ‘000) are 1320 yielding 3300 CPM at $2.5.
Thus, from the given data the exhibit 4 has been completed below and total ad-revenue
has been calculated under all the 3 scenarios.

Revenue Calculator as per Exhibit 4:

Ad Revenue Calculator
Current Segment 1 Segment 2 Segment 3
TV HH 110000000 110000000 110000000 110000000
Average rating 1% 1.2% 0.8% 1.2%
Average Viewers (in 1100 1320 880 1320
‘000)
Average CPM $2 $1.8 $3.5 $2.5
Average Revenue/Ad $2200 $2376 $3080 $3300
minute
Ad minutes/week 2016 2016 2016 2016
Yearly Ad revenue $230630400 $249080832 $322882560 $345945600
Incremental 15,000,000 20,000,000
Programming Expense

Note: Yearly revenue = Average CPM * Average viewers * 2016 * 52 (weeks)

ANSWER - 2
Recommendations to the leadership at TFC:
On Calculating the revenues using the Ad Revenue Calculator in different scenarios (from
Exhibit 4), we can calculate the estimated financials in the different scenarios in the
spreadsheet available in Exhibit 5:

Estimated Income in different scenarios (Data has been taken from Exhibit 5)
Actual Segment 1 Segment 2 Segment 3
Revenues:
Ad Sales 230630400 249080832 322882560 345945600
Cable fees 80000000 81600000 81600000 81600000
Total: 310630400 330680832 404482560 427545600
Expenses:
Cost of 70000000 72100000 72100000 72100000
Operations
Programming 55000000 55000000 70000000 75000000
Cost
Ad Commission 6918912 7472425 9684677 10378368
Marketing 45000000 60000000 60000000 60000000
SGA 40000000 41200000 41200000 41200000
Total Expense 216918912 235772425 252986477 258678368
Net Income 93711488 94908407 151496083 168867232
Profit Margin 30% 28.70% 37.45% 39.49%

From the above statements we can easily see that Scenario 3 i.e. the two-segment
approach is the most profitable as it gives a 39.49 % profit on total revenue.
Although there is an occurrence of $20 million expenditure in implementing this scenario,
this approach is worth taking the risk.