GROUP 5

THE FASHION CHANNEL

Sources of revenue

TFC has multiple sources of revenue, first being Advertisement revenue model, in which the target is to achieve
$230.6 million. This model is based on rating which is percent of viewers who watch on average during measured
viewing period which was around 1,100,000 viewers at any point of time. The total of add time DURING one week
is 2016 minutes. Competition for add revenue is fierce among all networks as consumers spent around $20 billion
buying spots on cable network. Hence, TFC should focus on ratings and demographics. And the advertising revenue
calculated for individual spot = (Households x rating)/1,000 x CPM Women aged between 18-34. TFC ad sales team
has achieved CPM pricing increase from 25% to 75%.

Second being, Cable affiliate fee revenue stream which was expected to generate $80 million in 2006. Most of
households subscribed to cable tv through local operators, by paying monthly fee for a basic channel and paying
extra fee for premium channels. TFC was a basic channel so most consumers received automatically. Large Multi-
System Operators (MSO) signed multi-year contracts with network. TFC set their average fee as $1.00 per customer
per year.

Major Competitors

TFC had two significant competitors in the fashion market:

Lifetime & CNN (These two competitors achieved notable rating in comparison to TFC). Both competitors had
launched fashion-specific programming blocks. Lifetime attracted younger women and CNN intended to draw all
men.

Wheeler had to react against these new programs, so she focused on research study already done on customer
satisfaction which depicted that TFC was facing challenges in establishing its attractiveness to cable affiliated
customers. The study data was used by cable network operators to calculate money to be paid to each Channel. If
a channel didn’t perform well (below average), they would be included in less attractive packages, in turn reducing
the viewership.

Market Research Analysis:

Approach 1: Combine Segment Approach 2: Multi-Segment Approach 3: Target two segment-

Fashionistas, Planners & “Fashionistas” the fashionistas and the
Shoppers and Situationists shoppers/planners
Pros: Pros: Pros:
• Investing in • Highly valued Segment • Balance increase in CPM and
advertisement might deliver a • Increase in CPM projection. rating over time.
rating boost (from current 1.0 • It can cover the 50% of the
to 1.2) cluster.
• All the combination had
18-34 age women.
• It can cover wide
customer base around 80%

Cons: Cons: Cons:

• Risk of penetration in
the market by competitors that
can erode pricing ability.
• Decrease in CPM by
10%.
• It might lead to drop in • Need to spend additional
viewership. programming cost.
• It can cover less customer
base around 15%.
• Need to spend additional
programming cost.
 GROUP 5
Segmentation

• Dana wheeler, based on her analysis of her research, believed that targeting more male audience would
not work for her brand.
• Instead, TFC should focus more on the female segment of age 18-34
• Not adopting the segmentation approach yields low profitability (margin of 19%).

Financial Analysis

Recommendations

• It should apply to strategy 3 which is a dual segmentation as it is focusing on not only in 1

segment but also helping the viewers to make a purchase of the fashion they need. It will
help in increase in awareness and will also promote a healthy competition with CNN and
lifetime.
• It also helps to focus on the current fashion and gives best value. Also, the pricing can be
justified, and the profitability is the highest.
• It should also focus on investing in digital video advertising and thereafter the ads can be
targeted demographic wise.
• Strong networking through other fashion websites and bloggers to help drive traffic.